Retirement Planning Tips: When Family Members Ask for Help

Portrait of senior woman head to head with her adult granddaughter
Portrait of senior woman head to head with her adult granddaughter

Forty is the new 30, 80 is the new 60. It's great that we are living longer, but the financial challenge of living longer may mean not only planning for extended retirement years, but also caring for an aging parent or adult child in ways that can take a solid bite out of any well-laid financial plans.

A recent study showed that one in five Americans are providing monetary support to a family member -- either a parent, an adult child or both in some instances. One in five might not sound like a lot, but this support is adding up to a $630 billion chunk out of American budgets each year. That's not to mention the missed days of work and emotional stress that supporting family members can bring. We love our families and we will do what we can to support them. But how to help support them and not feel financially overburdened or resentful, that is the challenge we need to overcome. It's not easy because the discussion is often taboo.

Despite the sacrifice, for many of us, second-guessing the impulse to help is not the question. Figuring out how to plan for our family members, as well as ourselves, is. But yet we don't talk about it.

When is the last time you talked about finances? Conversations about financial support most often happen when a family member needs help, not before, and only one in five Americans reports discussing generational money obligations with a financial professional. With older and younger generations, these conversations can be hard, no doubt. But it's better to talk now, than get hit with an unexpected financial request later.

If you're ready to talk (or even if you're not ready), here are some tips to have honest, productive conversations with your parent or child and keep your sanity and (hopefully savings) intact:

Make it a date. Once you've decided to have the conversation, you may be experiencing some trepidation or nerves and that's understandable. If you're having trouble getting started, put a date on your calendar and circle it in red. Prepare for it like you would a business meeting, and outline your thoughts beforehand. A little advance preparation can go along way, especially if you expect the conversation to get heated. By collecting your thoughts and feelings ahead of time, you'll be better equipped to de-escalate and refocus the conversation if necessary.

Be clear. Money conversations can be fraught with tension, especially if the message about financial support is "no" or "not anymore." And there are probably things you think are better left unsaid. But don't take the easy way out here. This is not the time for "maybes" or "we'll see" or "perhaps." Be strong and clear, so to avoid slipping into a situation where you're contributing more than you feel comfortable with for longer than you'd like to.

With kids, ask:
  • What will they be financially responsible for (this includes any debt)?

  • What are you willing to help out with and for exactly how long?
  • What is their plan for getting out on their own?
  • How are they saving and investing for their future?
  • What is their timeframe for financial independence?
  • With parents, ask:
    • What are their plans for retirement (living on their own, down sizing, moving in with you, residential care)?

  • What is in place in terms of estate planning, insurance policies and retirement savings?
  • Do they have enough invested to drawdown retirement accounts or a plan to generate income that will support their lifestyle and if not, what do they expect they'll need from you?
  • What are their late-in-life and end-of-life wishes, including specific medical directives?
  • Get support. Take care not to gang up or encourage family and friends to take sides, but do make sure you have the necessary emotional support to conduct the conversation and follow through with your convictions. Parent-child bonds are incredibly strong, so these conversations can bring out a lot of emotions for those involved -- relief, resentment, pride, guilt, fear and more.

    If you're helping or planning to help a mother, father or both, consider your siblings if you have any. Perhaps there is no need for all the pressure to be on your shoulders. Make it a family effort, as much as possible, to rally help all around.

    And if you have an existing relationship with a registered investment advisor or a financial planner, talk to them about your situation. They deal with money every day, and often hear about the family dynamics that can go with it. They can provide helpful advice as you think about ways to approach a loved one.

    Don't neglect your own financial future. Taking care of aging parents or a child, especially if you're getting close to your own retirement, can be an expensive setback personally, as well as financially. If you're Gen X or a Boomer, consider this: Kids can always try to take out student loans, but there's no loan you can take out for retirement. If you're a millennial, consider this: Time is on your side, so even if you're helping mom or dad, set aside $10 or $100 each month and watch it add up over time. Keep your own financial situation front-of-mind. It's not selfish... it's smart.

    Tomorrow begins today -- so talk and plan together now to make the best financial decisions for you and your family. You won't regret taking the first step. It could just keep your retirement on track.

    TD Ameritrade, Inc., member FINRA/SIPC. Stock investing is subject to risks, including risk of loss. Commentary provided for educational purposes only. Past performance of a security, strategy, or index is no guarantee of future results or investment success.