Money can be a taboo topic even in the most close-knit of federal families, so it’s no surprise that many aging workers put off talking about retirement planning. In a 2016 report, Merrill Lynch stated that many retirees and pre-retirees don’t have enough savings, which makes it hard to balance their needs with those of their adult children. While many are reluctant to discuss their retirement with family because the conversation can be an uncomfortable one, putting it off will only magnify the discomfort. 

Retirement planning is a difficult process, but it’s not just about preparing for your golden years; it’s also about ensuring that family members can take care of themselves. Here are a few tips for parents who need to start the conversation and get their adult children up to date on their retirement plans.

Have a Goal in Mind

Before discussing this with the younger workers in the family, it’s important to understand that plan’s long-term goals and practicalities, like legal and tax considerations. If you’re married, talk it over with your spouse before mentioning it to the rest of the family.

Almost half of pre-retirees believe that maintaining their lifestyle is just as important as leaving their loved ones an inheritance, and over one-third say that it’s an even bigger priority. Most notably, many think that it’s more important to leave behind customs, traditions, and life lessons, rather than possessions and money. One of the biggest parts is balancing your own financial needs with those of family members.

Consider the Family Dynamic and Create a Plan

All families have unique strengths and weaknesses, and they’re a crucial consideration when planning for retirement. For many American families, for instance, it’s easier to start the dialogue with basic items, such as your wishes. Other people are more responsive to broader conversations about legacy and values. 

Again, all families are different, but financial advisors often recommend addressing retirement planning over several conversations. Begin with a few talking points to get things started, and revisit the issue as needed. 

Pre-retirees in the public sector should keep in mind that, just because they’re keeping their kids updated on their plans doesn’t mean they need to know everything. Sometimes it’s a good idea not to be overly specific, especially when the situation is likely to change. 

Choose the Right Place and Time

When it’s time to talk, give your grown children notice that you’d like to set some time aside to discuss these issues. Some families broach the issue by mentioning articles they’ve read or conversations they’ve had with advisors and friends. No matter the segue, try to give the topic the consideration it deserves without turning a molehill into a mountain.

Financial advisors suggest choosing a specific date and time, but not a day when emotions will already be running high. Depending on the family dynamic—as well as logistics—it may make more sense to talk to the kids individually rather than bringing them together.

If your retirement plans are complex, it may be a good idea to bring your attorney or financial advisor into the conversation at some point, if only to answer a grown child’s questions or keep the conversation calm and respectful.  It can also be beneficial for them to meet the planning team as those may be the professionals your kids turn to for advice and inheritance guidance.

Make Decisions in the Right Context

On one hand, it’s important for family members to regulate their emotions. On the other hand, though, they must realize that this isn’t all about crunching the numbers. Some parents find it helpful to discuss the experiences and values that shaped their financial outlooks and decisions.

Remember that effective communication is bi-directional. Invite your kids to ask questions before, during, and after the process, and give them some grace if they’re overrun by emotion. Everyone handles thoughts of money and aging differently, and when families keep that in mind, planning for retirement becomes easier.

Keep The Lines of Communication Open

Any parent will agree that child rearing is a continuous process, and never is that more apparent than when discussing inheritance. Parents are likely to prioritize their children’s needs, and it doesn’t stop at the age of 18. Giving the kids a helping hand may not seem like a big deal now, but parents should consider the timing of that support as well as the amount. 

So, what does that mean for parents who regularly send their kids money? It might be a good idea to consider subsidizing an adult child’s lifestyle only after re-evaluating the numbers—including the retirement funding they could be losing.

Look at Things From the Other Side

Adult kids may react negatively when they’re informed of their parents’ retirement plans. Keep in mind, though, that they might not be upset over the loss of financial help, but the fact that their parents are changing and getting older. If that’s the case, try to be understanding and give them the time and space to accept those changes.

Think About the Sacrifices Being Made

A parent who is still working may consider enrolling in an employer’s 401(k) plan. However, if they’re retired or can’t access such a plan, an IRA or individual retirement account may be a good place to tuck any spare earned income. Both IRAs and 401(k)s offer tax benefits that allow pre-retirees and retirees to grow their savings faster, and both investment vehicles allow “catch up” contributions for those who are 50 and older.

A parent who starts planning for retirement early on can also invest in and save for the family’s current healthcare costs, as well as their predicted expenses during retirement, via contributions to an HSA or health savings account. HSAs are accessible to those who aren’t yet enrolled in Medicare but are in high-deductible plans. They offer tax-deferred growth and tax-free contributions, as well as non-taxable withdrawals during retirement. Like IRAs and 401(k)s, HSAs offer “catch up” provisions for those of a certain age.

Get Children Involved

While it involves a certain degree of sacrifice, it should not be left entirely to the parents. Teach your adult children a valuable lesson—and get them involved in their own retirement planning. No matter what you save, or how well plans progress, the longer an investment lasts, the more likely it is to grow. 

Though young adults face student loan debts and other financial burdens, there’s still much they can do. Younger workers are in a great position to benefit from their increased earning potential, simply because the money put away early on will have a long time to grow. Parents, however, are closer to retirement and cannot regain that lost time.

It’s OK Not to Sacrifice Retirement Sustainability to Support Adult Children

Parents often expose their families to more significant financial challenges by not buying disability income and life insurance coverage, and the same applies to adult children. By encouraging younger workers to consider these types of coverage, parents don’t just protect themselves from unexpected expenses, but they also help their children make better decisions that help them become and stay financially independent. For instance:

  • Disability income insurance, which is available through some employers, provides workers with benefits that replace part of their income if they’re out of work due to injury or illness. Covered parents can use these funds however they wish, which can create a sense of reassurance in knowing that it’s not necessary to dip into the family’s savings to cover ordinary expenses.
  • Life insurance is a crucial tool that helps parents shield their assets while supplementing retirement income, which are top priorities for those with financially dependent adult children. Both term and cash-value life insurance policies offer lump-sum payments, also known as death benefits, to beneficiaries if a breadwinner passes away prematurely. With cash-value policies, part of the premiums paid will accrue interest with time.
  • Critical illness coverage helps parents and grown children relax in the knowledge that they can pay out-of-pocket for sudden expenses while focusing on their well-being and health if the need arises.

If parents don’t implement certain safeguards to preserve their finances during retirement planning and afterward, the roles could end up being reversed—and their children could be the ones providing all the support.

Keep Talking

Ideally, retirement planning shouldn’t be a one-and-done discussion. The subject, although touchy at first, may become much more comfortable for all involved. Parents can continually provide their grown children with information and ideas on managing their finances. In turn, children can ask their parents about their concerns and plans, while offering the support needed to address certain issues. 

Follow These Tips for Smoother Retirement Planning that Benefits the Entire Family

The best thing about talking with your family regarding this is that starting is the most difficult part; it typically gets easier with time. Once parents have laid the foundation, they can build on it during future conversations that are more productive and less emotionally taxing. By opening a line of communication and keeping it open, parents can set themselves up for honest conversations that encourage kids to be more diligent about their own retirement planning—and that’s one of the greatest gifts they can give. Visit walkercpg.com/retirement-planning to learn more or call Walker Capital today.