Many young people in Britain will shriek at this, but unfortunately, a study done by MetLife is probably close to reality. It showed that around 16% of parents over the age of 40, expect to require financial help in their retirement. This photograph may be the sort of generally suitable expression for how this makes you feel if you relate to this.
It’s important to look after your elders. However, millennials are already expected to earn less than their predecessors (source). That opens the question of whether lots of people are going to be in a position to help their parents. It’s one thing to want to offer financial help, but it’s another to be able to do it.
Parents work hard to bring up their kids, and it costs lots of money. It’s fair enough to expect a bit of help later in life if required. The moral side of things shouldn’t be an issue or a taboo to talk about. As Simon Massey, the wealth management director at MetLife UK pointed out to Press Association, “Parents will have worked hard to support their children so perhaps they should feel entitled to rely on them if they need financial support in retirement.”
What action can you take now?
The appropriate action is to definitely to sit down with your own family and talk about it now. That goes for whether you’re the parent or the child. If you’re the child it is totally fair to ask the question of whether your parents think they will be ok in retirement without any need for financial help. If they expect to be fine then you’re all good!
If they expect to need help then it’s beneficial to work out a strategy now. Even if your parents are only 50 and expect to work for another 15 years, it’s wise to plan out a strategy now. The earlier you do it, the better prepared you will be.
The best thing you could do as a start would be to help your parents put themselves in a position where they’re independent in retirement and don’t require your help. Whether that means cutting costs, increasing pension contributions or starting more investments. On top of that you can then make your own plans, perhaps a small monthly savings scheme. Paying in a small amount each month for 20 years eventually adds up very nicely!
These sorts of studies are of course not good news, but they don’t have to be a major problem. Planning ahead and calculating potential future pension pots to work out how much you need to pay in each month can get you there.