Pattie Lovett-Reid: How to handle retired parents without savings
It may be time to have “the conversation”.
Remember when you thought chatting with your children about the birds and the bees was going to be a tough conversation? I’m here to tell you talking to your parents about funding their retirement takes having the “chat" to a whole new level.
This conversation may in fact be the more difficult conversation for a number of reasons.
Your parents likely grew up in a generation where the belief was ingrained in them that it was in poor taste to ever discuss sex, politics, religion or money. It was considered to be inappropriate to ask someone what their salary was, whether they received a bonus, and how much debt they may be carrying.
And you would certainly never ask your parents if they had enough saved for retirement. The social stigma around money was largely negative. If you have money you shouldn’t brag about it and if you don’t have money you certainly don’t want anyone to know about it. The subject of money was simply taboo.
Yet what do you do if you suspect your parents are struggling financially and are reluctant to ask for your help?
Start with bite-size conversations.
Step 1: Try to be understanding and non-judgmental. This isn’t the time to point fingers or blame. Defence mechanisms will kick in if you talk about how much they travelled, dined out, or how they may have refused to live below their means. It can be just as challenging if a parent was laid off or -- through no fault of their own --became ill and unable to work. The point is, it doesn’t matter why they may not have saved for retirement, what matters is they are struggling. It would be much more beneficial and even healthier to discuss financial goals, financial setbacks and current money habits. If you are considering helping your parents financially, the goal should be to “help" and not exert power.
Step 2: Begin by working through their income statement and offer up alternatives to free up cash flow. By understanding how much money they have coming in and knowing exactly what they are spending their money on will bring to light areas of vulnerability. You won’t know the extent of the assistance your parents need until you know the numbers. This is also a golden opportunity to ensure they are taking advantage of all the government support programs such as the Guaranteed Income Supplement as well as, tax breaks and deductions for seniors. Provincially there are also programs in place that could help low-income families with medical expenses and financial aid to help stay in their homes for longer.
Step 3: When your parents are in a difficult financial situation all potential solutions have to be considered. Those options could include downsizing, exploring the suitability of a reverse mortgage, renting versus owning, or even moving in with one of the children either on a temporary or permanent basis. I have seen cases where children, who can afford to, have bought their parents' home. However, taxes, utilities and maintenance were covered off by the parents. In other cases, children have offered up money on a monthly basis for groceries or paid expenses when there was a shortfall. Each situation is going to be different; however, the extent to which financial aid is provided has to be specific. You don’t want to lecture them about their spending habits while at the same time you can’t be expected to funnel money to them to be spent as they wish. In other words, you don’t want to throw good money after bad money.
Step 4: Set boundaries. How much are you willing to help out financially and how much can you afford to help out? If your parents are in need it could be a delicate conversation with your partner or spouse so being open, honest and transparent will be key.
Step 5: Now is the time for your parents to establish new financial goals. Try to broker your parents into the conversation. Ask what is going well and where they feel they need some help? Be kind. Asking you for help is likely far more difficult than you realized. Some have found it beneficial to bring in a mediator to help facilitate the process.
And what if your parents are struggling but you can’t afford to help or simply don’t feel that it’s your responsibility?
Help doesn’t only mean financial aid. You can help your parents by being empathic, help them to problem solve or even point them in the direction of financial or insolvency experts.
Not everyone in the family can afford to assist financially. Some siblings may elect to contribute more while others may opt to help out with physical chores. It is about having an open conversation and family members helping to the extent that they can in the areas they can. The reality is it still may not be enough.
If your parents haven’t saved at all and the family simply can’t help sadly it will be a day of reckoning for your parents who will have to rely on government benefits, a downsizing of lifestyle and compromises they likely didn’t plan on. Some will consider taking in a roommate, selling their home, work part-time and many – if their health supports it -- may never retire in order to maintain some sort of income stream.
No one likes to see a family member struggle financially when you know you could help. However, the onus isn’t just on you. Your parents have to get to the point where they too take ownership of their situation. There is only so much you can and should do. This situation likely didn’t happen overnight and it is unlikely it will get resolved overnight. Patience will be key.