Are your parents approaching retirement? Here's how you can help them.
Parents are generally not comfortable discussing their retirement plans with their children because, for them, it might mean admitting to their shortcomings or simply because they don't feel it is time to disclose their true financial worth. That is why you need to approach this subject with sensitivity and more importantly with practical plans in place.
It is understandable that even you may not be comfortable discussing money matters with your parents. Besides our cultural context, it may also be because at some level, it means discussing certain uncomfortable but inevitable and harsh realities.
But to avoid complications later, it is important that you discuss their retirement plans with them before they hit the age of retirement.
Here's a list of things you should bring to the table and seek a solution for the same.
1. Understand their expenses: Ask your parents what is their monthly expenditure and how do they intend to meet them, after retirement. You can start with these basic questions:
- Where would your parents like to live after retiring?
- Whether with you or in their respective homes. If the latter, how close are they towards owning the property?
- Does it need any alterations, repairs? Is there money set aside for such things?
- Would they need any monetary contributions from your end?
2. Plan for income streams: Start with the common questions:
- Are they likely to receive any pension from their days of service, if yes, how much?
- How can they create alternate revenue streams, from their Fixed Deposits or other types of the corpus that they have created over the years? For example, if they have multiple smaller FDs, it might make sense to put them all in fewer and more manageable debt funds or FDs to take care of their monthly expenses.
3. Assess existing investments: Once you have figured out your parents' monthly expenses, you can discuss options to meet these. You can also discuss their existing investments, and help them organize the investments to meet their expenses. If an insurance matures close to the time of their retirement, can you help them reinvest this sum, and where?
4. Pay off loans: If your parents wish to stay in their personal home, but have taken a loan for it, it is advisable that this loan is paid off before they retire… The same goes for any other loans. You can offer to help with these loans as well. Inquire about the amount that remains to be repaid and the time remaining for the same.
5. Health Insurance: Does your health insurance cover them? Do they have their own? Does their employer provide health insurance coverage after retirement? If yes, to what extent?
This covers the most common aspects of their financial planning post-retirement. You may have more things to add specific to your situation.
How do you go about doing this?
We understand how this could be difficult. My own father brought up the topic himself but that may not happen to you. Here are some suggestions on how to broach this subject:
- Don't bring it up abruptly while you are visiting them and it's definitely not something to be discussed over the phone. Have a face to face.
- To make them warm up to the subject, start with your own finances - talk to them about your own financial plans. Talk about how you are including them in these plans.
- You don't have to discuss hard numbers on day one. It is a process and therefore, discuss things one subject at a time.
- The tone you might want to adopt can be understanding and helpful so that your parents understand the motive behind your bringing up the topic.
It's easy to keep deferring this conversation but the sooner you do this, the better it will be for your parents. The planning will not only give them some peace of mind, but also some clarity and comfort to you and your siblings.