Thanksgiving sparks a number of discussions around the dinner table, some more welcome than others. If you have aging parents, retired parents or soon-to-be retired parents, try the below conversation starters to help them on their way to a fruitful financial future.
Your golden years are a time to kick back and relax in the comfort of your home, and get back to the hobbies you have been putting off. Unfortunately, more and more Americans are retiring later in life due to not having enough saved or working later in life to get by.
If your parents are nearing retirement and still have debts to pay, you might be thinking about ways to cut down on this obligation. Fortunately, Johnson Wealth and Income Management has come up with a mix of tips to prevent debt from demolishing your parents’ retirement dreams.
Here is what you need to know.
Talk About Finances
Having a transparent conversation about finances with your parents to see where they are at financially is a great place to start. It can be helpful to know how much your parents have saved up, invested– and most importantly how much debt they have. There are typically two outcomes with this.
Either your parents are well-equipped to sustain themselves financially for retirement, or they might need your help. Regardless of the outcome, there are still ways you can assist them while planning for your own future as well.
Prioritize and Strategize
If your parents want to retire debt-free, it’s a lofty goal. But by prioritizing and strategizing, you can help significantly reduce the burden of their debts.
First, make a list of debts in descending order starting with the one with the highest interest rate and ending with the lowest. Now strategically chalk up your budget to pay down the high-interest loans first while keeping up with minimum payments of the rest.
Once you pay off a high-priority debt, you will have the extra money in your monthly budget. Instead of splurging, add the money to the monthly amount you pay on the next debt on your list. As you knock off one debt after another, keep applying this principle to everything, including your mortgage.
This strategy will help you pay off your high-interest debts when you hit retirement—and ideally also some of your low-interest ones if you start early enough! Once debt is managed properly, you can begin discussing ways to help their extra money grow through smart investment strategies.
As your parents near retirement, you may find that they need to adjust their lifestyle to fit their new financial situation. One way to do this is by helping them downsize their living space.
Downsizing can be a daunting endeavor, but it doesn’t have to be! By keeping a budget and asking yourself if you are spending more than you can afford, you can figure out exactly where the money is going in your life and make adjustments accordingly.
For example, if your parents typically spend a good amount of money throughout the week on restaurants, consider making it a habit to help them plan meals and grocery shop instead of going out. Cutting back on other expenses such as lending money to family members or vacations is also a great way to start saving.
Discuss Supplemental Income
Supplemental income is a great way to help your parents avoid draining their savings and investments. As many people know, the cost of living nowadays is expensive.
Supplemental income are things like rental income, cash from life insurance policies and dividend income from stocks. Supplemental income can help your parents avoid pulling too much cash from their savings and investments in retirement. This way, your parents’ savings can last them longer than if they’d used it up on expenses right away. It’s worth talking to your parents about what supplemental income options they plan to use!
It’s estimated that Americans receive $1,658 per month in Social Security benefits. To get an idea of how much your parents may receive, you can use the Social Security Administration’s calculator to input information on their tax filing status, current income and desired retirement year. Remember this is just a rough estimate—it may not actually be what your parents receive!
Set Them Up With a Fiduciary Advisor
When we make big decisions in life, most of us look for a source of knowledge and guidance to help us make thoughtful choices to meet our individual goals and needs. Hiring a financial advisor is one way to help your parents build more wealth in retirement.
For most retirees who choose to work with an advisor however, advice is not just about investments. It’s also about helping them build a personalized plan around their full financial picture designed to help them pursue multiple goals, grow wealth, and take care of the people who matter most.
Everyone’s situation is different, so everyone will find different value in an advisor relationship. Generally speaking, the right financial advisor can help your parents if:
- They’re close to retirement.
- Their financial situation is too complex for search engine help.
- They need help with an investment strategy.
- They use emotions in investing decisions.
- They need tax guidance.
- They need advice on estate planning.
And remember, always make sure you choose a Fiduciary advisor. Why? A fiduciary must put your best interest above their own. A financial advisor who’s a fiduciary has an ethical duty to recommend the best investments for you.
Don’t be changing conversation to the burnt turkey just yet – having a Fiduciary in place doesn’t mean you get to wash your hands of tending to your parent’s finances. In fact, having a financial advisor means managing a relationship with someone who holds the very important keys to your proverbial castle. Johnson Wealth and Income Management is a full-service financial firm that provides an array of services to our clients in the state of Iowa.
From tax planning to investment strategies, our commitment is to help your parents work towards achieving all their financial goals and to help provide them with the tools for financial success.
Everyone deserves a chance at a comfortable retirement. At Johnson Wealth and Income Management, we give you and your family the tools to set you up for success throughout retirement. Regardless of your financial situation, we will work with you to create a plan that helps everyone in the long run.
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