Kids Help Cash-Strapped Retired Parents

A recent article in the Wall Street Journal stated that more aging Americans are doing something they never imagined, turning to family for financial aid.  Some are even asking children for a place to live.  I recently appeared on FOX9 news to discuss this worrisome trend and how one can avoid needing to depend on their children in retirement.

The Wall Street Journal article shared the following statistics:

• 39% of adults with parents who are age 65 or older report giving their parents financial aid in the past year. (September Pew Research Center survey)
• One in 25 unemployed adults (ages 55 or older) report moving in with family or friends to save money.  (Rutgers Dec. 2010 survey)

For the parents who are expected to be the financial providers for life, this is a hard reality.  For the adult children who are trying to finance college tuitions for their children and now also need to support their parents financially, this can be very stressful.

So why are more parents looking to their adult children for financial support?  The Wall Street Journal article concludes that the typical American household with a retirement savings account is reaching retirement age with too little to maintain its standard of living, even including Social Security.   These families give a variety of reasons for their financial state:  nation’s rocky economy, mismanaged funds, medical bills and loss of jobs.  Although more younger people are currently unemployed, older people often stay jobless longer because they have a harder time finding a job.

How can families avoid using up their retirement savings? 

• Make a retirement plan.  A plan should focus on your goal and desires and include investments, taxes and income planning. 
• Start planning early.  Don’t wait until you’re in your 60s to begin planning for retirement.
• Personalize your retirement plan. Your plan won’t look like your neighbor’s or your best friend’s plan; they likely don’t have the same financial situation as you.
• Work with a financial professional that is plan focused, not product based.  
• Stay out of debt.  Stay on budget.  Have an emergency reserve (three to six months of your monthly salary in savings) in case there is a job loss or some surprise expenses. 
• Understand social security elections.  It is important couples understand when and how to elect social security.  I find many of my clients are missing out on social security benefits because they don’t understand the system correctly and don’t know how to coordinate benefits between a husband and wife.

More tips for a secure retirement can be seen in my recent interview on FOX9 (KMSP) news.