How do I help my parents who didn't plan for retirement

[Anonymous]

My parents always made very good money, but they are horrid savers and just didn't worry about retirement. The only reason they will not be destitute is a $500k inheritance they just received. Still it will in no way afford them the life thru are used to. They retire in 5 years. I am 35 and extremely fortunate. Dh and I have a net worth of about $7m. We are pretty money savvy. How can we best help my folks without enabling their bad habits?

[Anonymous]

You can't save them from themselves. If you are that well off, I imagine they will hit you up for money. I wouldn't expect that $500k to last very long. The best thing to do is to talk to them NOW. They need to talk to a financial planner. They need to manage their expectations, and it is unlikely they will be able to retire in 5 years as planned.

[Anonymous]

You could look into long-term care insurance for them, but if you are willing to "insure" them anyway that might be cheaper.

Do they own? Maybe figure out what is a reasonable living situation and help with the mortgage?

Frankly 500k plus social security is significantly more than the average American has.

[Anonymous]

I have found with my parents that they don't listen to reason and they don't think logically. I am aghast over and over that they and do things that are constructs in their own mind rather than based on actual information and logical thinking. For example, my mom will lament the fact that she can't go to the library to look things up when they have a computer and could simply google whatever it is. They have internet, google, etc. My dad even uses the internet to look things up, like air fares, etc. She'll talk about how she can't "get around" like she used to so she wasn't able to find something that she wanted to look at in a periodical. I'll say, "mom, why don't you google it?" There will be this silence and then she'll say, "well I suppose so..." and then she'll launch into a diatribe about my dad and how messy his desk is or some such. No logic, just the same cyclical thinking and stuck paradigm.

So I imagine you'll have a bunch of similar conversations which will drive you crazy. You won't be able to change them most likely, or get them to listen to reason. So I would protect yourself. You can purchase long term care insurance for them, and pay the premiums. You can set $ aside for costs to take care of them later (a caregiver). You could even set up a trust that you control that would pay the mortgage for them or something like that. The key is that you control the resources and don't give the cash directly to them.

[Anonymous]

Maybe sit them down and have a heart-to-heart discussion with them about how their lack of financial planning really worries you....and see if you can get them to come up with a plan for making the $500,000 last...i.e. a fixed annuity so they don't blow it all in a few years.

[Anonymous]

Do they have equity? My mother is living off a reverse mortgage on the house she inherited.

[Anonymous]

Agree with PP that you should get LTC insurance for them and pay the premiums and put aside money to help them in their later years since they will surely need your assistance.

[Anonymous]

Would it be a big deal to take care of your parents in their old age, since you are so fortunate?

[Anonymous]

Disability and life insurance (if you can get it on them, you probably can't) and LTC insurance definitely I have an enormous life and LTC policy on my husband -- I've seen first hand what a lingering death can do to a family's finances. Fortunately, I bought the policies when my husband and I were much younger and in great shape. I don't think either of us would qualify now. The policies are expensive but worth it to protect me and still at home children should something happen to DH.

Check to see if you can purchase any group policies through AARP or the other more conservative sr. citizens group. I have been told their policies are reasonably-priced.

If they own a home and have equity in it and both are over 62, then a reverse mortgage will help. Be prepared for them to have to declare bankruptcy. Also be prepared to take them to an elder care lawyer (they exist) should one be hospitalized for a long period of time. Medicare drops out after 90 days. A friend of my parents consulted an elder care lawyer and the lawyer counseled the woman to divorce her husband if he passed the 90th day in a nursing home. He had stroked out and was unconscious in a nursing home. She had the paperwork ready to go because she would have lost her home and what little savings she had left if she had to start paying for her husband's care in full but her husband "fortunately with God's blessings" (her words, not mine) died before Medicare ran out. Awful situation. But she had prepared for her security and is still doing very well on her own - now in her 80s. i was shocked when she told me she was filing papers to divorce her husband but she was very matter-of-fact about it. She was going to lose everything she had left for her own security if she didn't.

This was under California law, BTW.

[Anonymous]

Why are they retiring in 5 years? If it is not mandatory, perhaps you can take them to a fee-based financial planner and have the planner do a projection of their income in retirement, assuming their current habits. This will probably scare them into reconsidering their retirement plans or at least put them in the right frame of mind for saving. Good luck, OP.

[Anonymous]

How in the world do you have a net worth of $7mil at 35, assuming no inheritance?

I'd pay it forward. Help them. Get them to a financial planner and help them financially as well, if they can learn to be responsible.

[Anonymous]

Anonymous wrote:Disability and life insurance (if you can get it on them, you probably can't) and LTC insurance definitely.

Why would they need disability or life insurance? They are retiring in the near future.

[Anonymous]

If their expenses are low e.g. no mortgage and that $500k is invested well and they save more over the next five years it will go further than you think. to most people (not super rich like you) $500k is a ton of money.

Also, are you sure that they don't have more than you think? It's not common for parents to share the exact details of their financial situation with their children.

[Anonymous]

Sorry to sidetrack, but how does one accumulate $7 M by age 35? Just curious. That fact kind of jumped out at me.

[Anonymous]

Can someone explain how long term care insurance works?
Costs, benefits, terms, who should purchase it, etc.

Also, when is the best time to purchase life insurance? We don't need it now (no kids, no debt), but some PPs have mentioned getting it early on to get a better deal?