A lot of people manage to retire securely through years of diligent savings. But some people unfortunately reach retirement age having saved very little. It’s people in this boat who often end up having to rely heavily on Social Security to make ends meet. And that’s not a comfortable position to be in.
Such is the situation this Reddit poster’s parents are in. The parents are in their early 60s and are still working, but they’re starting to slow down and think about retirement.
The problem, though, is that the parents don’t have a lot of savings. The poster is guessing they have about $200,000, which isn’t a lot in the grand scheme of what could be a 20-year retirement or longer.
Since the poster is well off, they’re looking to help make their parents’ retirement more rewarding. But they’re wondering how to best go about it. Here are some options they can consider.
1. Gifting the parents money — or gifting them an investment portfolio
If the poster has plenty of money to spare, they can always opt to gift their parents money. The issue here, though, is that they may run into gift tax issues.
Also, gifting the parents money doesn’t necessarily teach them what to do with it. At this point, it would be a good idea for the parents to get a crash course on how to invest appropriately for their age. If they’re still working for a few more years, they don’t need to spend their child’s money right away. So instead, it could be a good idea to set them up with an investment portfolio that can generate income.
2. Helping the parents cover expenses and leveraging Social Security
Another option for this poster is to offer financial support to the parents on an as-needed basis once they retire. The poster could, for example, step in and pay the mortgage some months, or cover car repairs and surprise expenses as they arise.
The poster also says it makes them sad that their parents want to travel and enjoy retirement, but a lack of funds will probably hold them back. The poster could use their money to pay for a few special trips for their parents, or do things like pick up the tab for dinners out or other entertainment they enjoy together.
An advanced strategy to consider under this umbrella is subsidizing their lifestyle specifically so they can delay claiming Social Security benefits until age 70. For every year they delay past full retirement age, their permanent monthly payout increases by roughly 8%. By covering their immediate living costs for a few transitional years in their 60s, you essentially manufacture a guaranteed, inflation-protected income raise for the rest of their lives.
3. Protecting the existing cushion against fraud
Before putting new capital on the table, it is vital to ensure your parents protect the savings they already have, as financial scams targeting older Americans are highly prevalent. A highly effective, zero-cost safeguard is to help them fill out Trusted Contact Forms on all of their bank and brokerage accounts, which allows financial institutions to pause suspicious withdrawals and alert you without stripping them of their autonomy. Additionally, establishing a legal Power of Attorney early ensures you can seamlessly step in to manage bills and accounts if health or cognitive declines occur later.
4. Uncovering government incentives and relief programs
If your parents are still pulling an income, help them see if they qualify for the federal Saver’s Match program, which offers matching funds for retirement contributions made by lower-to-moderate-income earners. Furthermore, billions of dollars in government assistance go unclaimed every year. Reputable tools like the National Council on Aging’s BenefitsCheckUp site can help determine if your parents qualify for local property tax relief, utility assistance, or nutrition programs, which frees up their income to grow their retirement accounts naturally.
5. Strategizing a phased retirement
Retirement doesn’t have to be an all-or-nothing switch, and complete stagnation can be detrimental to both mental acuity and physical health. Instead of encouraging parents to stop working cold turkey, look at funding a transition into a phased retirement or a lower-stress part-time job. A casual role can provide them with an active social circle, a sense of purpose, and just enough supplemental income to cover basic wants, all while reducing the velocity at which they dip into their core nest egg.
6. Setting the parents up with a financial advisor
It may be that the poster’s parents don’t have a lot of savings because they weren’t such high earners. Or it may be that they weren’t so good at managing their money.
Another great way to help the parents in this situation is to set them up with a financial advisor. An advisor can help them get on a better path with their own savings and help them make smart decisions during their last few years in the workforce. An advisor can also help them create a realistic retirement budget to get a good sense of the lifestyle they can expect.
If you have parents in a similar boat, one of the best things you can do for them is get them financial help. There’s no shame in partnering with an advisor later in life. It’s a great way to make up for years of missing savings and get your parents’ financial house in order before their careers officially come to an end.
Editor’s Note: This article was updated to include additional strategic guidance on utilizing the federal Saver’s Match program, leveraging local benefits checks, establishing financial protective measures against elder fraud, implementing a Social Security delay strategy, and executing a phased retirement framework.
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