The self-employed are not alone. In fact, this lack of retirement planning is a crisis that most Americans are facing. The Fed’s 2018 Report on the Economic Well-Being of U.S. Households found that 25% of U.S. adults have no retirement savings. In addition, just 36% percent of non-retired adults say their retirement savings are on track. With this in mind, Nasdaq’s recent article asks “Do Your Parents Know How to Plan Retirement?”
It might, therefore, be time to ask your parents if they have a plan for their retirement. The faster you know about this, the sooner you can address this problem, so they can actually enjoy their Golden Years without burdening your family.
First, remember that Social Security is expected to be depleted by 2035, so that may need to be part of the planning. Social Security also only provides a similar standard of living for those in the lowest quartile of income earners in the U.S. Thus, unless their household is earning less than $30,000 a year, your parents will need to look to personal savings to keep their current standard of living in retirement.
Added to this is the fact that Medicare won’t cover assisted living, so that’s another topic in your discussion about your parents’ retirement planning. Here is a list of questions you might want your parents to answer:
- What are your retirement plans and are you on the right path?
- What are your sources of retirement income?
- Do you have debt?
- What insurance do you have (life, long-term care, Medicare)?
- If you were unable to live in your current location, where would you want to live?
You should also talk to your siblings and spouse, so everyone is on the same page. Then, ask your parents if they’d be willing to share documents, like bank accounts, wills and trusts. Other information includes the following:
- Health and long-term care insurance policies
- Investments, pensions and details on Social Security
- Estate planning documents, such as a durable power of attorney, a health care proxy and a living will; and
- Mortgage and other outstanding debts.
With this information, you can help them create a budget to maximize their savings for retirement.
As you are helping your parents, be sure you are not putting your own retirement planning in jeopardy. Take care of your priorities and build your own savings. Then, if you’re comfortable and have the means, you can assist them financially.
Reference: Nasdaq (Dec. 29, 2020) “Do Your Parents Know How to Plan Retirement?”