Back when most of our folks entered the workforce, many companies offered pensions (though plenty didn’t) provided that you stayed on board for a certain number of years. But when the economy tanked in 2008, many long-term employees our parents’ age lost their jobs and a portion of their retirement benefits.
The promise of Social Security benefits has also been a factor in folks approaching retirement neglecting to save on their own. While it’s true that Social Security probably won’t run out in the near future, even the maximum benefit is not enough for most people to live on — hence the need for a separate source of income during retirement.
Unfortunately, those approaching the end of their working years don’t seem to be up to speed on the importance of putting money aside for retirement. According to a recent Bankrate poll, a whopping 36 percent of Americans are neglecting to save for retirement, and of those surveyed, over 25 percent of those aged 50 to 64 have yet to start putting money into retirement accounts. Furthermore, the average American aged 55 to 64 has just $103,000 saved up for retirement — which may seem like a lot, but it’s not.
If you’re worried about your parents’ financial health in retirement, it’s time to sit them down for a talk. Here’s how to do it:
Ease into the conversation. Money can be an awkward thing for parents to discuss with their children. Rather than catch them off guard, give them a heads-up about the pending conversation.
Ask questions, but don’t press for specifics. Your parents may not want to reveal how much they do or don’t have saved for retirement. You don’t need to talk numbers, but you can — and should — try to get a sense of whether they’re actually saving enough.
Bring data to make your case. If you want your parents to take retirement savings seriously, you’ll need to present them with some numbers to convey the importance of ramping up their 401(k) or IRA contributions. For example, a 65-year-old couple retiring in 2014 needed $220,000 on average to cover medical expenses throughout retirement. Do some research to help your parents see the light.
Offer to help. If your parents aren’t financially savvy and you know a thing or two about investing, it never hurts to give them some guidance. Perhaps their portfolio isn’t properly balanced; or maybe they’re missing out on key tax savings. Don’t be afraid to show off your knowledge if it can work to their benefit.
Be respectful. Just as you didn’t like it when your parents tried setting curfews or enforcing house rules, so too will your parents not enjoy being told what to do. When you have the talk, be courteous — but also be realistic.
When all else fails, play the guilt card. If your parents really aren’t taking their retirement savings seriously, play up the extent to which you’re worried about them. Tell them it keeps you up at night. That’ll get them.
No matter what approach you take, if you’re concerned about your parents’ lack of retirement savings, don’t put off that conversation. The sooner you get involved, the more time they’ll have to get back on track.