Four Tips for Talking to Your Parents About Their Retirement Finances

By Sean Bricmont, Wealth Manager, First Republic Investment Management
December 27, 2016

As awkward topics of conversation go, money matters consistently rank toward the top of the list. And yet, despite the challenge of finding a tactful way to initially broach the subject, opening up a dialogue with your pre-retired — or already retired — parents about money is essential to helping secure their financial future.

You and your siblings will likely play a key role in helping your parents navigate their finances in retirement. Even if your parents seem well-prepared, getting on the same page sooner rather than later regarding the legacy they want to leave allows you to be proactive and seek alternatives if things don’t go as planned.

Here are four tips to help your money talks with your parents go smoothly while ensuring you cover the necessary ground:

Frame the conversation in a positive way

Initiate an open discussion that emphasizes a supportive, “help me help you” approach to their retirement planning instead of voicing your own fears or concerns for their future.

Remember, retirement is a major life transition and it will likely take more than one conversation to reach a consensus about how to best move forward. For example, it took me three or four discussions with my mother to learn that she wanted to stay in her house as long as possible. Opening the lines of communication early can help you cover the details as comprehensively as possible and give your parents time to get used to the idea of embracing a new normal in retirement as you work together to create a solid plan.

Start by understanding their goals

If you haven’t already, ask your parents to explain how they envision their lives in retirement. How long do they plan/need to work? Where do they want to live? What do they want to do post-retirement — spend more time with family, pursue a new hobby or even start a new business?

You might be surprised by what they want — or what they don’t.

For example, many Baby Boomers plan to create a hybrid of work and play in retirement. In fact, according to a Transamerica Center for Retirement Studies survey, 65 percent of Baby Boomers intend to work past age 65 or do not plan to retire while 52 percent plan to continue working after they retire. The reasoning is not driven by finances alone: Boomers report that they enjoy employment and aren’t ready to be done with their careers.

Dig into the financial details

Once you and your parents have established a set of retirement goals, you’ll need to determine whether they have the means to achieve them.  

Begin by breaking down all the expenses associated with your parents’ current lifestyle, the estimated trajectory of pre- and post-retirement income and the various ways both might change once they’ve retired. 

If your parents face an obvious savings shortfall, don’t despair. Instead, take action and get creative. There are measures you can take to ensure your parents use their assets wisely, reduce their costs and maximize their social security, savings, pension and any other income.

If they haven’t already, encourage your parents to contact a financial advisor who can help create a detailed plan for their retirement investments, income and expenses, as well as suggest income-replacement products such as annuities and life insurance to help bridge the divide.

Talk about their legacy

While you’re talking about the future, ask your parents about the legacy they want to leave after they pass away. Ideally, your parents will have an estate plan that delves into more specific details regarding how they’d like their wealth distributed — such as whether they’d like to create college funds for grandchildren or leave a large gift to charity, for example. At the very least, however, you want to ensure your parents have a living trust that denotes the distribution of their assets.

Helping your parents plan for this next stage of life can bring peace of mind to the entire family. These money talks not only help your parents think through their own plans and potential gaps, but also ensure you and any other extended family are prepared for the future as well. 

The information in this article is presented as-is.

©First Republic Investment Management 2016