How to prepare for your parents' retirement

Avoid the pitfalls of the "sandwich generation"

When Eileen Crehan thinks about her parents' retirement plans, she worries.

The 27-year-old PhD candidate, like many young adults, knows that her parents' future finances aren't only a source of concern for them — they directly impact her life as well.

"They are careful spenders and savers, but they hit some bad luck when the mortgage broker industry tanked and some medical issues came up suddenly and they have been recovering since," Crehan says. "This is a major source of stress but it's also a motivator. Part of my goal in going to grad school is to be able to get a job where I will have some financial wiggle room to help them out."

Crehan, who knows her parents aren't in a place financially where they'll be able to retire on their own, has been thinking about this issue for a few years, and says that "part of me is just really sad … because they most likely will not get to retire when they thought they would."

For many of us with aging parents, their retirement may not even be on our radar. Who can think about someone else's retirement plans when we're busy enough trying to keep our own heads above water?

But as time rolls on and we start to get our own finances in order, we might start to worry about our parents' financial future. After they've done so much for us, how, exactly, can we help?

Start a conversation
Crehan is lucky that her parents have been willing to talk about their situation fairly freely, and they "do talk specific numbers about some things, like mortgage and salary," she says. But for many families, money is emotional and off-limits.

Scott Word, a lawyer from Virginia who specializes in estate planning, suggests using a third party to introduce the subject of retirement and planning with your parents — it can be easier, he says, to tell them about a friend who had to go through a lot of trouble to get his finances in order because his parents hadn't made sure everything was accurate and up-to-date. "Often," Word says, "parents do want to share and tell the children what they've set up."

Review beneficiary information
Also essential is making sure that your parents have all of their paperwork in order, and that their children either have copies of that paperwork or know someone who does. Word says that one of the things he often sees mistakes with are beneficiary designations — that is, making sure you've told your retirement account holder or life insurance company who will get your money after your death.

It can be easy to fill this information out when setting up an account and forget about updating it as time passes. This information should be reviewed yearly, and ideally, your parents should be reviewing it with a lawyer. Check with your parents to find out if you're their beneficiary, and if so, make sure you have the account information you need, or know the contact information of the lawyer who does.

When it comes to selecting a beneficiary and managing accounts, Word is quick to point out that all families are different. While not many clients meet with their children, he has noticed that some children bring their parents in to review beneficiary and asset allocation as their parents get older.

There are key questions anyone should ask when deciding whom to make a beneficiary or whom to put in charge of financial choices (should a parent be unable to make them for themselves). These include:

* Does she or he have the necessary financial experience and judgment?

* If there are two or more children, will feelings be hurt by selecting just one?

* Can the responsibility be shared among children (all or some)?

Make sure you have access to their information
Nicole Francis, a Financial Adviser at Hudson Advisory Group in New York City, recommends keeping important information on hand, including account information, phone numbers of relevant contacts (like a trusted financial planner or lawyer), and any legal paperwork your parents are willing to share. For a comprehensive list of materials your parents should ideally have on hand (and share with you, if they're willing), she recommends the aptly named website Get Your Sh** Together. If your parents don't want to share important documentation with you, make sure you have the names and contact information of someone who does have that information, like a lawyer.

Consider getting expert help
Details on the full sum your parents may have saved aren't particularly helpful, Francis says, because, not knowing their spending habits or being able to predict their expenses, you don't know how long that money will last. "The first year of retirement is an experiment," says Francis. "You're figuring out how you'll spend your money." For instance, how will being home all day affect the way your parents spend money? Are your parents relocating? There might be living costs associated with a new location that they don't yet know about. For questions like these, it's a good idea to make sure your parents are meeting with someone who can help them with financial specifics, rather than your feeling personally responsible to make sense of your parents' retirement assets.

Put your finances first
Francis says that children in this situation are part of the "sandwich generation" — young people who are supporting both parents and young families of their own. While it might be tempting to put aside money for your parents as they age, she explains, "there's no way that you can save $250 a month and say, 'That's for Mom and Dad.' It's not feasible."

Francis suggests that those children concerned about their parents are better off planning as best they can for their own lives and including their welfare in your decisions. If you're buying a house, for instance, you might want to think about having a place for your parents to live with you as well. If you have siblings, you might want to discuss how you might sell your parents' home or assets later on in life to help them financially.

Of course, not all children have parents who are so forthcoming about their finances or plans, or perhaps, like Crehan, have parents who won't have the income needed to retire. While her parents have never specifically asked for financial assistance, she's always considered it a given that she'd help. "I think this was just something that was a part of how I was raised to think about family," she says. "We help each other out."

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