When we talk about how to retire early, and how much we need to save, we often only talk about how much our own needs and wants will cost.
But of course that’s an incomplete answer. For nearly all of us, there are other people in our lives who may need to factor into our plans in some way, both directly and indirectly.
For a large majority of adults, there are kids to consider. All their costs while growing up, then maybe the costs of college and of getting set up on their own afterward. While kids don’t have to be as expensive as the statistics tell us, they never cost nothing. And parents and caregivers need to account for that. That’s a conversation that happens often in the early retirement community, because for those of childbearing age or those who are already parents, the costs are right in front of your face, right now. Or they will be soon.
But there’s another important set of people you may want (or need) to account for in your planning, ones whose financial, emotional and logistical needs may not be top-of-mind right now: your parents.
So let’s talk about them.
There are as many different sets of family circumstances as there are families, so you know what applies to your situation and what doesn’t. But even speaking abstractly, aging parents or other loved ones aren’t a frequent topic of conversation for most of us.
I’ve shared before that my dad is disabled, and retired early in his 40s as a result of that. But I haven’t said much more than that, because it’s his story to tell, not mine. Which is great for his privacy, but not great for this much-needed discussion. So today, I’ll try to share as much as I can about our parents and how we’re thinking about this stuff without sharing too much, as well as add more general info about how you can and should incorporate aging parents into your plans. For added context, Mark’s dad also retired early, in his 50s, Mark’s mom stayed home after the kids came along, so is also “retired,” and my mom is still working.
Retiring before a parent
Though the actual average retirement age remains right around 62, most people nearing retirement say that they plan to work much longer than that. For those who actually have the option to do that — that is, they aren’t too sick or forced to retire to care for a loved one — you might find yourself in the position of retiring before a parent if you retire early enough. I did with my mom.
This isn’t something to plan for as much as something to be aware of, but than can be a tricky thing to navigate in a relationship. The still-working parent might be completely thrilled for you but also feel a whole host of negative emotions about what it says about them. Do your best to be sensitive to what they might be feeling while reminding yourself that they are, in fact, happy for you. I find myself needing to do this with mom because, understandably, she is not thrilled to be stuck at work for the foreseeable future. But that’s her situation and not mine.
Parents who aren’t financially prepared for retirement
The first real obstacle you may need to consider is a parent or multiple parents who aren’t financially prepared for retirement or other financial events. Currently, 65% of retirees rely on Social Security for more than half of their income, and given that the average monthly benefit is in the neighborhood of $1,500, we’re talking about a lot of seniors who are scraping by or doing only slightly better. And that’s before you talk about the figure that keeps creeping up: the cost of medical expenses that the average retiree can expect to pay for from the time they get on Medicare until the end of life, currently at $280,000 or so. That’s why Kaiser Family Foundation projects that Medicare beneficiaries will spend half of their Social Security benefits on out-of-pocket Medicare costs by 2030, a figure that already stands at 41% currently. It’s even more for those 85 and over, those in poor health and those with modest or low incomes.
And so it’s not unimaginable that you may have a parent or more than one parent who is not prepared financially for their nonworking years, and that you may need to do some thinking about when and under what circumstances you’d step in. You’re under no obligation, after all, to completely support a parent who’s in a bad financial position entirely because of their own choices, but you may also recognize that the lack of preparation for retirement might be due to things beyond their control, and you may wish to help in some way.
Some of those ways you can help might be offering to help them move to a cheaper living situation or to a cheaper part of the country (or near you), offering to teach them strategies for spending less in problematic categories, helping them negotiate lower bills, or perhaps something bigger like letting them move in with you, buying a rental property to rent to them so that you can prevent the monthly rent from creeping up or even providing direct financial support. Or you might choose to pay for services that they need but can’t afford, like housecleaning, in-home assistance, etc.
It’s worth considering which of those options, or others that apply to your situation, you might offer, and what it would take for you to offer more. Then take a close look at your financial plan and make sure you could withstand the financial hit for a number of years. If you can’t, consider bumping up your targets to make room to help.
And consider the emotions that are likely to go along with some of these choices as well. Parents forced to admit they need help from their kids may feel infantilized. You may feel resentful that you’ve been put in the position of having to help. All of that’s valid, but the more you can mentally prepare yourself in advance, the more you can manage those emotions.
We’ve gone into several financial arrangements with family — namely making a sizeable personal loan and buying our rental property expressly to rent to a loved one — and while I wouldn’t recommend mixing family and money in every instance, if you think that particular relationship can handle financial entanglement, a good option is to create an arrangement that is mutually beneficial, like making a loan that pays you interest, or buying a rental property that will be profitable long term but also helps the person in need save money and gain security. Fortunately in our case, we made both of those arrangements while we were still saving, so they didn’t force us to massively reconfigure our retirement finances. But if those needs arose today, we’d still try hard to help.
We’re hugely thankful, though, that three out of our four parents have military or VA health care for life, on top of their Medicare, meaning they are unlikely to face medical bills they can’t afford, or — worse — turn down needed care because of financial worries. We thank our lucky stars that we only have one parent out of four who may face the medical financial stress that impacts so many seniors.
Providing nonfinancial care
As parents get older and slow down, there are any number of other types of support they might need: social interaction to counter age-related isolation, help getting around, help keeping their home in order, help navigating the health care system and making decisions in their best interest, and on and on. If you live nearby, these types of support may be easy to provide, more so after you’ve retired yourself and have a more flexible schedule. And if you live far away, it’s a bit tougher. Even if the particular support your parents might need comes with little cost other than perhaps your own transportation to go visit them, you may still want to mentally budget time to help out.
In the rush of planning for early retirement, we often consider only our own needs and wants, or those of our immediate family or household. But consider where your parents are in life and whether they might need more from you when you have more free time as well.
When a parent needs some of everything
The reality is that some of us have parents who will need a lot of support, financial and otherwise. Or maybe already need that level of support. If you have siblings to share the weight of it all, that’s helpful, but it also means more relationships and feelings to navigate, and the possibility that one sibling will become resentful about doing more than their share of the work.
So think through all of this stuff, and ask yourself at least what your preliminary boundaries are. How much financial support are you willing to provide? How much other support to you want to make time for? The real answer could change when you’re faced with an actual parent in crisis, but at least think through the question before that crisis happens and make sure your financial plan is robust enough to back you up. Talk with your siblings if you have them, or with your spouse or other relatives who might be involved, sharing that you want to be sure your parents are well looked after, and that you’d like to talk about how to divide some of the duties that come with that.
Having ‘The Talk’
I joke that when you’re a kid, your parents dread having “the talk” with you, wherein they illuminate all the gory details of sex, and you get to return the favor as an adult by dreading having “the talk” with them, this time about aging, money and death. (I joke because it’s better to laugh about these things, so you don’t cry.)
As unfun as it may sound, it’s critically important to have the talk with your parents.
You want to know whether they have estate documents like a will, advance medical directive and durable power of attorney granting decision-making authority to someone should they become incapacitated, as well as whether they’ve established any trusts or other entities you’d need to know about. You want to understand how to access their accounts and life insurance policies when the time comes. You want to know their final wishes, and whether they’d like to be buried someone in particular or cremated and their ashes scattered in a meaningful place. Knowing their wishes around life support and resuscitation is hugely important, especially if you have siblings or other involved family members, to avoid arguing at a time of health crisis. And you need to know at least the broad outlines of their financial situation. Can they truly afford to retire or to maintain their lifestyle? Are there any looming financial obstacles coming?
An alarming number of seniors who end up needing nursing home care end up having to spend down their assets to qualify for Medicaid, which covers nursing home care, unlike Medicare, which doesn’t. And that’s often the time when adult children realize what a mess their finances actually were in, or how little they were living on before. If those children had known sooner, there might have been other options. So don’t wait to have the talk.
In our case, Mark’s parents initiated the talk with him and his three siblings, and they all managed it in a positive way. I initiated the talk with my dad, and though it was a bit traumatic for him at the time, he later was glad we’d gone through everything. And the talk with my mom didn’t go nearly as well because she just didn’t want to have it. I struggled with that, because she’s an adult and is entitled to her own opinions and wishes. But I’m also her only blood relative on the continent and knew from other information that I’d likely have to get involved at some point. I needed to know what was likely to be coming, so I could plan accordingly. So I tried hard to be sensitive, but still pushed to have at least the surface-level version of the talk, and we now know the rough outlines of her situation and can mentally brace ourselves for what may be coming.
The gift of time with aging parents
When I was still working and would picture my early retirement, images of adventure and travel, and of time to dig into creative projects, always popped into my head first. And it’s been special and meaningful to get to embark on those things, absolutely. But the other best part of early retirement has been having more time with our parents and families generally. My dad lives nearby, and I see him much more now, and can spend real quality time instead of mostly drive-by visits. And we’ve been able to see Mark’s family more, and plan more trips to see them than we could before. Though all of our parents are healthy, and there’s no reason to think they won’t live long lives, we still know that time is in short supply, and we’re doing our best to make the most of it.
