3 things to do now to prevent Sudden large expenses due to Parents’ lack of retirement planning
Are your parents retiring soon or have retired in the past few years? Do you know if they have any retirement plans in place? If you are Asian like me, it’s probably no surprise to you that perhaps our parents’ retirement plan is us, as described in this NY Times article.
OUR PARENTS’ LACK OF RETIREMENT PLANNING DIRECTLY AFFECTS OURS
Our parents’ lack of proper retirement planning directly adds to our future sudden large expenses that we might not have planned for. That, in turn, will greatly affect our retirement plans. It might delay our expected retirement age and the happy second life that we have always been working hard to achieve. Below are a few of the many examples or symptoms that you need to be alert of:
We don’t know what kinds of insurance coverage and the level of benefits they have (if any)
They don’t have medical insurance coverage (or very limited benefits)
They are worried that their savings might be used up earlier than expected, so they always find the cheapest options for food and daily spending
They get very upset when their investments are having short-term bad performances (e.g. 1 week)
3 THINGS TO DO NOW TO PROTECT OUR OWN RETIREMENT PLAN
These topics are very sensitive to discuss within the family, especially when we are in an Asian setting. I have put together the 3 things you can do now (in sequence) to gain more clarity, and “Marie-Kondo” out the white elephant so that we can protect our own retirement plans:
Book a Family Emergency File service — This is a free service where you can get a consolidated file which includes these items for each family member:
One-page insurance protection summary with emergency contacts
Wallet card (summary of the one-pager)
You can include your retiring parents in this file, so we have a good excuse to know what kinds of insurance protections they currently have, before evaluating our allocations in each of the “4 Buckets of Gold in Life” as discussed in this post. Learn more about the Family Emergency File Service and make an appointment for an initial chat here.
Check their medical coverage — This is one of the expense management areas that we discussed in this post. It’s almost inevitable that they might get ill or have accidents (old people’s balance might deteriorate, so they might fall easily) at some point eventually. Once we clarify what kinds of medical coverage they have (or haven’t), we should evaluate if the benefits are enough. If it isn’t, and their health condition is great, then apply for VHIS with maximum benefits.
If their health is not great, it might be best to do these simultaneously:
Set up a “medical savings fund” ASAP so you don’t miss out on the time value with compound interests
Put up extra emergency cash in your bank account
Get yourself life insurance if your parents are your dependants (i.e. they live on your cash support)
Get professional advice for your parents’ retirement income — If your parents often get very upset about their investments’ short-term bad performances, or are worried that they don’t have enough money for the future, their retirement life is definitely not an enjoyable one. It might eventually affect you and your spouse too. Money doesn’t solve all the problems but most problems arise when there is no option to choose from. Getting a professional retirement wealth consultant to help them evaluate their portfolio and financial situation will be very helpful to them and to you especially if this is a sensitive topic for you to discuss with your parents. One potential solution is to help them divide their assets into supporting their first, second, and third phases of their lifetime, and move the last tier up for some steady-growth investment combo (as discussed in this post) to help them generate passive income.
CONCLUSION: DON’T DELAY, OR YOU WILL DELAY YOUR RETIREMENT
If your parents’ retirement plans are transparently communicated with you, it will eliminate a lot of blindspots and help you prevent sudden future expenses. Their emotions and sense of security are keys to their happiness. If they have a healthy retirement plan in action, yours will be much smoother too, especially if you have your own kids, you are what I call the “sandwiched” class — you are your parents’ and kids’ retirement plan.
This topic might be a very sensitive one for you and your parents, but it’s definitely helpful to start with our Family Emergency File Service as the first step to gaining more clarity within the family. Click here to book an initial chat now.
