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Help with parents retirement

Chris Farrell Aug 30, 2010

Question: I have a question about retirement – not for me, but for my parents. My dad has been incredibly generous with his money to each of us kids, helping us out when times were tough. My last semester in school, I was unemployed, and my parents helped me out a lot during that time and as I started my new job. My two younger sisters have also relied on my parents heavily for financial aid.

I owe them about $7000, and have started paying them back about $100 per month. My dad casually mentioned they’ve used a lot of their retirement to help us out and I am worried they aren’t going to have enough money saved in another 15 years when they are ready to retire. (His response when I asked: “You kids are our retirement.” and “It’s only money.”) Is there a way for me to invest this money for them so they have it down the road? Can I open a retirement account in their name? I want to see them as well cared for as I was. Thanks! Rachel, Denver, CO

Answer: I think your parents may be typical these days. The cost of college is so high and so many young adults have had trouble getting their careers launched that many parents have wanted to help out. Your Dad is probably right when he says that the kids are part of the retirement plan. It isn’t all bad, either. To some extent it’s a closing of the circle:

To some extent it’s a closing of the circle: They helped out their children when the kids were young adults and now their middle-aged children will help them out when they’re in retirement. I like how you’re thinking about this..

I have a couple of practical suggestions. First, I would continue to pay back the loan.

I wouldn’t try to open up a retirement account for them (you can’t anyway). Instead, I would make sure that you’re building up your savings. You should be doing that anyway. But it’s a way of recognizing that some day you may tap a portion of your savings to help them out financially.

My last suggestion is the most difficult: Talk to your parents about retirement. And get your siblings involved. There is still a lot of time ahead if your parents have 15 years to go before they leave the workforce. Nevertheless, as they age it becomes increasingly important for family members to discuss and learn about their finances, their estate plans, and their desires for the last stage of life.

The advantage of starting the conversation early is that there is less pressure on everyone and more time to get comfortable with the topic.

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