How to Talk with Your Parents About Their Retirement Finances During the Holiday Season

How to Talk with Your Parents About Their Retirement Finances During the Holiday Season

Discussing retirement and finances with your aging parents isn’t always easy, but it is a necessary conversation to have. Families need to have a general understanding of their parents’ financial standing. It’s important to know if your parents will have enough money for retirement, where their retirement income will come from, and what legal documents they still need to set up.

Sensitive topics like these are better done in person, but you don’t want to wait too long. If you’re going home for the holidays, find an appropriate opportunity to discuss your parents’ retirement finances with them. Here are three important topics you should cover.

How to Budget While in Retirement

A realistic budget is an important part of a retirement plan. To ensure your parents don’t run out of money, they need to create a budget and stick to it. While you’re visiting for the holidays, you can start by reviewing their bank accounts and bank statements. Then you will need to calculate your parents’ guaranteed sources of income (such as social security, pensions, and annuities) and their essential expenses (such as health care, housing, insurance, groceries, cable, utilities, cell phone, etc.). Make sure your parents have more than enough income to cover their ongoing monthly expenses.

Next, you’ll want to account for discretionary spending, such as dining out, entertainment, and travel. Make sure your parents’ retirement budget can accommodate the fun stuff or that they have enough money in their savings to cover any longer vacations that they may be planning for. It’s also crucial that your parents have some money tucked away in an emergency fund for those unexpected expenses, such as home repairs or veterinarian costs.

Tip: It is highly recommended that you consult with an experienced CPA to review or assist with your parents’ retirement budget, especially if their financial standing is complicated.

How to Earn Extra Income While in Retirement

Once you and your parents have created a retirement budget, you’ll have a better idea as to how much additional income they’ll need. Many retirees may have more sources of income than they realize. For example, if your parents need an additional source of recurring income, they can convert their life insurance policy into an income annuity by way of a 1035 exchange.

Another strategy for generating extra income during retirement is to minimize taxes by itemizing all possible deductions and minimizing the taxes your parents will pay on their retirement accounts. You’ll also want to make sure that your parents are receiving all of the government benefits that they are entitled to. While you’re visiting your parents for the holidays, make sure to visit to find out if they are entitled to benefits that can help supplement their retirement income.

Learn more about how your parents can generate extra income during retirement.

Setting Up Trust and Estate Documents While in Retirement

While you are home for the holidays, find out if your parents have created a will or trust. If your parents are entering retirement but have not yet created a will or trust, they need to do so immediately. If your parent dies without a will or trust, the state will determine who gets what regardless of your parent’s wishes. This is why it’s so important for your parents to start planning their estate now before they become ill or incapacitated. An attorney is not necessary to create a will or trust, but getting professional legal guidance is highly recommended, especially if your parents have a complex estate.

You should also discuss the benefits of hiring a professional fiduciary to manage your parent’s trust, as well as their personal and financial affairs, when they pass away or become incapacitated. A professional fiduciary, like Marcia L. Campbell, CPA, can provide both accurate court accounting and bookkeeping services for your parents, as well as securing their independent living as they age.

Why You Should Discuss Retirement Finances During the Holidays

While you may be hesitant to bring up such sensitive topics during the holidays, you shouldn’t wait to make sure that your parents are financially prepared for retirement. While you’re visiting during the holidays may be the most convenient time to discuss your parents’ retirement finances if you live out of state or far away. Just be mindful that these may be touchy subjects for your parents and approach with kindness, understanding and patience.

Need Help With Your Parents?

At Marcia L. Campbell, CPA, your parents’ physical and financial well-being is our primary concern, and we provide a wide range of support and management accounting services to help them maintain their independence for as long as possible. Contact us at 1-951-686-3608 to find out how we can help your family.







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