How to Help Your Parents Financially

If old age was easy, we’d do it while we’re young.

Jokes aside, navigating the transition from working to retirement is a daunting process. From government and employment benefits to budgeting on a fixed income, navigating our golden years presents challenges. If your parents are approaching this transition, it’s likely they’ll need your support. Here’s a rundown to help you help them navigate this life stage.

How Many Americans Are Financially Supporting Aging Parents?

A 2024 survey from NerdWallet revealed that 55% of Americans are currently helping or plan to help their aging parents financially. For some, that help may be limited to offering advice or assisting with bill pay, but for many more it means supplementing their parents’ income to cover food, utilities, housing, and even healthcare costs.

The decline of defined benefit pension plans, lack of financial literacy, soaring healthcare costs, and inflation have left many Americans short on savings at the end of their careers. Gen X (born 1965-1980) in particular is behind on saving, with around 24% of 55-year-olds expecting to need support from adult children. That’s almost double the number of 65- and 75-year-olds who need or expect to need support.

Gen X is known as a “sandwich generation.” They’ve had to provide more financial support to their Millennial and Gen Z children and support them for longer. Now that these younger generations are finding their feet, Gen X is turning its focus to their parents. This has made it particularly difficult for Gen Xers to save for themselves — and increasingly likely that Millennials and Gen Z will also find themselves sandwiched as their parents reach retirement age.

If you find yourself in such a pickle, have no fear. The future is not as bleak as it may seem. And even if you’re not a habitual strategist, you can do this — especially if you can spare a few minutes to read through this guide!

Transition Responsibilities Instead of Taking Over Immediately

Unless your parents are unable to make decisions for themselves — or are making self-destructive decisions — it’s often best to transition responsibilities from your parents to yourself slowly. A gradual change will be less overwhelming for you and less alarming for your parents, who may be emotional about giving up any degree of control over their finances.

Maintain Separate Finances

It might seem easiest to combine your parents’ finances with your own, but this isn’t a good idea. For one thing, mixing your finances can lead to accusations of mismanagement or appropriation.

Blending finances also makes it easy for you to overspend on your parents and underspend on yourself. While you want to keep your parents comfortable, you also have long-term goals that matter, such as paying off your mortgage, saving for retirement, and supporting your children.

Further, it’s important to keep clear records of your parents’ finances. You may periodically need to report their income and expenses to benefits organizations (for instance, if you’re appealing for an increased benefit to cover rising costs of living). Having clear records is an important way of protecting your parents’ assets.

Determine if You Need a Power of Attorney

A power of attorney is a legal status that allows you to legally manage your parents’ estate. There are different types of power of attorney, some temporary and some permanent. Having a power of attorney in place can help you:

• Make financial decisions for your parents, such as those involving paying bills or closing accounts

• Make medical decisions in accordance with your parents’ wishes

• Avoid family arguments

• Avoid anxiety or stress around decision making

Your parents will need to be of sound mind to enact a power of attorney. You might consider setting one up if your parent is diagnosed with a long-term or potentially fatal illness, or in the very early stages of cognitive conditions like Alzheimer’s or dementia.

Consider a Financial Advisor or Attorney

Money can be a very emotional topic for many people. In some cases, it may be beneficial to work with a financial advisor or estate planning lawyer who can advise you and your parents on their finances. Not only will these professionals have more experience and expertise than you, but they can help you make logical choices even when emotions run high.

Determine What Help Your Parents Need

Start talking to your parents about their finances early. It can be uncomfortable, but it will also be easiest and most effective to talk to them before they need a lot of help. You may have to start small and build trust through a series of conversations.

Check in with your parents regularly. Ask them what they need help with. In some cases, it may be the small things like switching from paying bills by check by setting up autopay that drive them bonkers. In other cases, normal cognitive decline may make it more difficult for them to keep up with day-to-day spending.

Regardless of how much — or how little — help they need now, these are some steps you can take together:

Evaluate Their Finances

Sit down and go through your parents’ finances together. Figure out what sources of income they have and how much each brings in. Create a list of recurring bills (with due dates) and debts. Write this information down or record it in a spreadsheet so you can keep track of everything in one place.

Make (or Adjust) a Budget

If you notice your parents are falling behind on bills — or if they’re just making ends meet — it’s time to revise their budget by cutting unnecessary expenses. Highlight items in the budget that can be reduced or eliminated and go through the items together.

Whenever possible, keep your parents involved in the decision-making process. It’s fine to weigh in on their choices, but your parents will likely be more receptive to changes in their budget if they’re able to help make decisions.

Streamline Their Finances

Your parents may have multiple checking, savings, and credit card accounts. It’s possible one parent covers certain expenses and the other manages other costs. If this is the case, start consolidating accounts. Simplifying their finances will help you keep track of their money and will make it easier for them to as well.

Create a Debt Payoff Plan

Even if your parents are comfortable, it’s wise to have a debt payoff plan. Health and cognitive function can change quickly in old age, and your parents will be better prepared to handle economic ups and downs if they’re not hauling around lots of debt.

Discuss Their Financial Goals

Talk openly about your parents’ financial goals. They may be planning to move to a retirement community or leave an inheritance for you or your kids. These goals are important to them, and whatever financial decisions you make together need to be made with these goals in mind. 

Get Organized

Your mom may have all her important numbers memorized, or maybe your dad has them saved in a Rolodex — or they could be stashed in one of many disorganized shoeboxes. But when you need important documents, you won’t want to hunt them down, so get organized! You’ll need your parents’:

• Social Security numbers

• Medicare IDs

• Birth certificates

• Bank account numbers

• Insurance policy numbers

• Estate planning documents

• Doctors’ names and numbers

• Lists of current medications

Fireproof document protectors are a great option if you want to keep important paperwork at the ready. You may also want to get notarized copies to keep in a safe deposit box. 

Digital copies can work in a pinch, but there are cases when you’ll need official copies. Digital copies need to be saved securely — such as in a password manager that stores secure notes or other secured cloud storage — where they won’t fall into the hands of bad actors.

Check That They’re Enrolled for Their Benefits

One of the more confusing parts of retirement is enrolling in various benefits programs. Different programs each have their own eligibility requirements, and in most cases your parents will need to file in order to begin collecting benefits. You and your parents may find it helpful to put together a calendar with filing deadlines, lists of documentation needed to file, and a list of the benefits each program offers.

Government Benefits

The Social Security Administration provides a host of benefits, including:

• Retirement payments

• Disability benefits

• Medicare

• Survivors’ benefits for widows and widowers

• Supplemental Security Income (SSI) for people 65 and older with limited incomes.

Some of these programs have multiple parts, such as Medicare, which is divided into Part A (for hospitalizations, hospice care, and home health care), Part B (routine medical insurance), and Part D (for prescription drugs). It’s important that your parents are enrolled in each part they need coverage for so they can maximize their benefits and minimize out-of-pocket costs that could eat into their retirement savings.

Your parents may be eligible for Social Security benefits if they’re 62 or older and have worked and paid Social Security for 10 years or more. They may also be eligible based on their current or former spouse’s work. You can check their eligibility on the Social Security Administration website.

You can help our parents can sign up online, by telephone, or in person at their local Social Security office. They can also register at a U.S. embassy or consulate if they live abroad.

Military

The type of military retirement your parents are eligible for will depend on when they served and which available options they chose. There are other common military benefits your parents may be eligible for as well, including:

• TRICARE

• Dental and vision care

• Commissary and exchange privileges

• Veterans’ Group Life Insurance

Many of these benefits are available to service members while they are serving, but they must be enrolled in or convert the benefits upon retirement if they want to keep them.

Retirement 

It’s possible your parents have a pension from their employer, but it’s more likely they have a 401(k) or equivalent employer-sponsored retirement account such as a 403(b). It’s possible they have supplemental retirement benefits as well, such as an IRA or brokerage account.

In most cases, your parents will face penalties if they withdraw money from these accounts before age 59.5, although this depends on the retirement account type and your parents’ situation. At age 73, they will be required to start withdrawing a minimum amount annually.

Your parents will pay taxes on these withdrawals unless they’re withdrawing from a Roth IRA, so take that into account when budgeting. They can start withdrawing from their account online or by contacting their plan administrator (usually a company like ADP Retirement Services, Fidelity, Vanguard, or Charles Schwaab).

Maximize Retirement Income

Your parents may need to stretch their retirement savings for many years after clocking out for the last time. Even if they’ve saved a generous amount, they’ll want to make the most of those savings. Here are some tips for helping your parents maximize their retirement income:

Postpone Retirement

Working even a few extra years can really pay off. For one thing, your parents will continue adding to their savings, and they may be eligible to make “catch up” contributions starting at age 50. But there are other important considerations, too.

While not working may sound great, many people struggle with the loss of routine, social connection, and purpose they feel after quitting work. In fact, one study from Harvard School of Public Health found that people who have retired are 40% more likely to have a heart attack or stroke than those who are still working. This was attributed to lifestyle changes like becoming more sedentary and eating less healthfully, which are related to the aforementioned changes.

Your parents could also claim more Social Security if they wait until full retirement age (67) instead of drawing their benefits at age 62, and waiting until 70 could increase their monthly benefit by 24%.

Finally, as long as your parents continue working, they can continue taking advantage of employer-sponsored benefits like health insurance, retirement matches, and group rates for life insurance.

Partially Retire

Another option that can stretch your parents’ retirement savings is to partially retire. This can be done in a few ways:

• Keep their existing jobs but gradually reduce their hours over the course of a few years

• Keep their current jobs but cut back to part-time hours

• Retire from their current position and take a part-time job or run a side hustle

While your parents will likely give up any employer-sponsored benefits by partially retiring, they’ll still reduce how much of their retirement savings they need to withdraw and may be able to put off collecting Social Security. They’ll be able to adjust to retirement more slowly, possibly picking up new hobbies or finding new social groups that can ease the transition.

Take Advantage of Available Benefits

We’ve said it before, but we’ll say it again — make sure your parents sign up for all the benefits they’re eligible for. They’ve paid into Social Security their whole working lives and they deserve to reap their rewards! And even though Social Security only replaces around 40% of a retiree’s income, it helps make your other retirement savings last that much longer.

Finding Financial Assistance for Retirees

Most Americans are not saving enough for retirement. Experts often recommend saving 10-15% of your income, but that just isn’t possible for many. According to the Federal Reserve’s 2022 Survey of Consumer Finance, only 54.4% of families have retirement accounts. 

One factor influencing retirement savings is lack of financial literacy. Many Americans don’t know what kind of retirement savings accounts are available, which type is right for them, or how to manage their account. Less than half of American workers have access to retirement accounts through their employer, and many are unaware of alternatives like 401(k)s and annuities. 

Given this data, there’s a chance your parents won’t have enough saved for their retirement. Don’t panic. Both the Federal and State governments provide financial benefits specifically for elderly people on limited incomes. You can find these programs by:

• Contacting your local library

• Consulting organizations such as the Alliance for Retired Americans, the National Council on Aging (NCOA), or American Association of Retired Persons (AARP)

• Reaching out to your local government representatives

Tips for Managing Your Finances While Helping Your Aging Parents

It can be a struggle to provide your parents with financial support when you’re trying to save for your own financial goals, too. That struggle is amplified if you have children or other dependents with their own needs. Here are some tips to help you manage your finances in this situation:

Budget What You Can Afford to Give

Review your personal budget and decide how much you can afford to provide for your parents. Then stick to that number. You may feel guilty for not giving more, but taking on debt or delaying your own savings goals will only create a bad situation down the road.

You may want to consult with a financial planner or attorney about how much to give your parents. In some cases, your contributions could make them ineligible for some benefits.

Have Your Parents Move In

Housing is a major expense. Even if your parents have paid off their home, the home’s utilities, maintenance, insurance, and property taxes can be a drain on their finances. Consider moving them into a spare bedroom, mother-in-law suite, or fixed up garage apartment to help cut their living expenses.

Choose In-Home Care Over Facilities

Retirement homes and assisted living facilities offer many benefits for retirees, like social connection, activities, and skilled care. Unfortunately, they can also be expensive. More affordable options include skilled nursing care and home hospice care, both of which are sometimes covered by Medicare.

Ask for Help

Reach out to family and friends — both yours and your parents’ — for support. There may be things your network can do to help you save money, such as pitching in to help with home maintenance, providing ready-made meals, or accompanying your parents to the doctor so you don’t miss work. Their support will have the added benefit of providing enrichment and connection for your parents.

The Takeaway

Half the battle in helping your aging parents is knowing where to start. With the right resources and a clear plan, you and your family will settle into your new routine faster than you think. It might even help you sharpen your own retirement plans along the way.