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Helping your parents retire

Your parents are really struggling with their retirement bills, and you have money to spare. What can you do to help?

Plenty. There are a variety of ways to ease financial worries for your parents in their retirement. But you'll also need to broach the subject of financial help carefully.

"You need to preserve their dignity and protect their assets," says Deena Katz, a certified financial planner in Coral Gables, Fla.

"Whatever you do, I would suggest you follow those guidelines."

Be prepared for some resistance. Your folks may feel uncomfortable taking what they view as charity from one of their children.

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"As people get older they don't lose their sense of dignity and pride," Katz says. "Say, 'Look, you made a lot of sacrifices for me, and now it's my turn to do something for you.'"

That "something" could be anything from paying your folks' utility bills to buying them a house or car to purchasing long-term care policies.

Here's a closer look at some of the ways you can help mom and dad with their retirement.

Say it with cash
You may be able to ease your parents' retirement woes with a quick infusion of cash.

Tax law allows gifts of thousands of dollars a year to be bestowed without tax consequences for the giver or receiver. The gift-exclusion amount for 2002 is $11,000. This means you can give as much as $11,000 to anyone you want tax-free.

You and your spouse could give $11,000 per parent per year, for a total annual gift of $44,000. You can, of course, give much less than that. It depends on what you can afford.

Getting your parents to accept the money is the tricky part. They may not want to take cash from their kids.

Offering to pay for a specific expense may be a better strategy. Is there a particular bill that's stressing them out? Are they struggling with mortgage payments or medical bills?

"What you're trying to do here is not take over their finances but give them peace of mind," says Cynthia Conger, a certified financial planner in Little Rock, Ark.

Help around the house
If your parents are feeling weighed down by their mortgage, offer to take over the payments for them.

Did their plans to retire in the sunshine get nixed by the stock market slide? Step in and help.

If you can afford it, you could offer to buy them a house in a warmer climate.

Can't afford that? How about paying half? Splitting the costs of a new home with your folks could give them quite a financial boost. The reason? Your folks could take much of the money they get from the sale of their old home and invest it, boosting their nest egg considerably.

And you and your family get a new vacation destination for the dreary winter months: mom and dad's cool new abode.

Let's say your parents have built up a ton of equity in their home but are struggling with cash flow.

They might be tempted to sign up for a reverse mortgage. A reverse mortgage is a special kind of loan that allows a senior homeowner to convert the equity in their home to cash.

Depending on the plan they choose, consumers can receive their money through a line of credit or in scheduled installments. The loan becomes repayable when the borrower dies, sells the house or moves out of the house permanently.

Rather than shell out fees to an outside lender, you could offer to do a private reverse mortgage with your parents. You'll be the one sending them monthly checks and buying equity in their home, not a lender. And the house stays in the family.

"If you can do it privately, it's probably better for both of you," Katz says. "You will gain some equity in the home, and they will gain an income stream."

Help with medical matters
It's hard to sit back and enjoy your golden years when you're worried about your future and your health.

"A big concern of elderly people is they're going to outlive their assets, and they're going to be forced into a Medicaid situation and a nursing home," Conger says.

One way to eliminate this worry for your parents is to offer to pay for long-term care insurance. These policies help cover the costs associated with assisted living facilities and extended home care.

"Buy long-term care insurance for them. I've long been an advocate of that," says Joan Gruber, a certified financial planner in Dallas and author of Your Money: It's a Family Affair. "That may not be an issue now but it will be in the future."

Looking for a lower-cost way to help your folks? Why not cover the cost of their health insurance premiums or prescription drug bills? Something as simple as opening a charge account for your parents at their local drug store and paying the bill each month could be a big help.

"The cost of medication is a big worry for a lot of senior citizens," Conger says.

Help with the car
Are your parents driving around in an old jalopy? Offer to buy them a new car. With zero-percent financing and hefty rebates, it's a great time to be a new-car buyer.

If it's the payment that's the problem for your folks, you could always step in and take over the payments.

Can't swing an extra car payment each month? Why not offer to pay your parents' utility bill instead? Getting the payment debited directly from your checking account is a snap. And your folks will have one less bill to worry about each month.

"The main thing is looking for ways to free up cash for them," Conger says.

Give them a job
Another way to give your parents' monthly income a boost is to put them to work. If you own your own business, why not hire your parents to work part-time? You'll get a nice tax deduction and your parents get some extra income each month.

Just make sure your folks are doing meaningful work in case an auditor comes knocking. For the ins and outs of putting a family member on your business payroll, check out this article.

Before offering to help your parents, take a good hard look at your own finances. How much can your realistically afford to help?

"You have to be prudent," Gruber says. "Have you funded your kid's college education? Have you funded your own retirement?"

Would a brother or sister be willing to pitch in and help? Three people pooling money together for the folks would be better than one.

Ultimately, it all boils down to how much financial help you can give and your parents are willing to accept.

"Your folks may not want to discuss it with you. You have to respect that. It's not your business," Katz says. "Not every parent will trust the child or want to talk about it or want to get into it."

If they really don't want your help, let them be.

"The worst thing you can do is try to force it with them," Katz says. "Back off and ask them if they would like to see a financial planner that you would pay for.

"You can always do something later."

-- Posted: Oct. 22, 2002

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See Also
How mom can retire like a millionaire
Helping your parents plan their estates
Setting up a family money-talk meeting
Financial advice glossary
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