How to plan for your parent’s retirement?

Listen, this is a mammoth task you’re taking on, so kudos to you 🙂

I helped my mother plan her retirement, I have to say, that was my ONLY contribution – I streamlined it a little and added some structure to it.

So where do we start with this?

Make sure you have their full consent before getting on this journey. If they don’t want to share the details, then reassure them that you’re always there to help and STOP. Do not push them just because they’re your parents.

Fiiiiiine I have their consent, now can we get started? Yes!

If you’re Indian, we both know that our parents are going to play their cards very close to their heart. Not because they’re diabolical beings, but because it’s highly likely we will be treated with kid gloves, especially when it comes to sharing the liabilities.

Its a graceful balancing act… you’re doing this so they don’t have to worry about their retirement. And they’re protecting you so you don’t have to worry about their liabilities. And round and round we go!

ALL RIGHT. After all the see-sawing. Let’s get into the meat of this activity.

Firstly, gather all their assets on one side and all their liabilities on the other side. What does THAT mean? Okay I’ll show you below, its not an exhaustive list but it should be enough to get you started.

Assets:

1. Bank Accounts – How many do they have and how much is in them?
2. Deposits – How many FDs/RDs do they have? Where are they?
3. Provident Funds – If they are working parents, then they will most likely have an Employee Provident Fund. Also, check if they have a Public Provident Fund. How much is in them?
4. Gold/Silver – Where is being stored? How much is it worth? Do they also have Gold bonds/ETFs?
5. Insurance Vehicles – Back in the day, our parents were sold many ‘insurance investment schemes’ – look for this very thoroughly. They might own schemes that are basically a ripping them off wildly or are DEAD investments. **ENSURE they have very well-rounded medical insurance cover. If they don’t have it, get it ASAP. Additionally, if your company provides medical insurance, check if you can add your parents there as a nominee.
6. Shares/Stocks/Mutual Funds – Where are their Demat accounts? What are they? Can you ensure that your parents have full visibility of them?
7. Property – They might own land or might have inherited land. Ensure all the documentation for that exists and see if you can ascertain their worth

Liabilities:

1. Mortgage/ Home loan – How many years left of this? How much is being spent monthly on this? How much is left?
2. Car/Vehicle loan – Same as above.
3. Business related loans – Same as above.
4. Education loan – Same as above.
5. Credit card debt – Same as above.
6. Borrowed money from friends/family – How much?

Gathering this data will be illuminating and give you a very clear picture of your parent’s financial health and their success in retirement.

• Put all this information that you have collected in one file that you can refer to.
• Try to ensure that you can make all these accounts and data available on their phones.
• Teach them how to access it and how to track their assets and liabilities digitally.

Go take a break, this would’ve been an insane ordeal. Have a beer and chill for some time. Come back to this with a fresh pair of eyes.

At the end of this exercise, you need to be able to clearly state your parents’ net worth (difference between asset and liability) and exactly where their assets lie.

Okay done, I have a clear idea of what’s what and what’s where… Awesome. When you are sharing this information that you have learned, ensure you do it with great care and sensitivity. Give them confidence about their future through your sincerity and reliability.

Now you know their net worth. How to determine if they are SET for retirement?

Well, it depends on the data that you have gathered.

Let’s do the below exercise and distill it even further –

1. What is the net worth? This can be calming, alarming, disappointing, overwhelming. But the point here is to be aware so you can take some informed steps. So yeah… chill. It’s okay. The number was already there before you found it.
2. What are their month-on-month expenses? Talk to them. Are you or your sibling a part of their expenses? You must have gotten an idea of this when you have gone through their liabilities, so you already know most of what their monthly obligations are.
3. How many more years do they plan on working? My mother is 60 and still works and plans on working for the foreseeable future. Please be sensitive when you’re trying to gather this information.
4. Is there a passive source of income? Such as a rental? Is there a way for you to set this up for them somehow?
5. What do their short-term expenses look like? Do you have a brother in the United States that they need to visit every year? Or are you planning on relying on them for your wedding or education or seed money for your start-up?
6. How much do you plan on supporting your parents during their retirement? If you do have plans of doing so, then using the information from #2 and #3, figure out how much and how long you need to invest in order to make this happen. If the amount you come up with is not viable, plan on investing an amount that you’re comfortable with for now. Keep in mind the number that you would actually need and let it guide your future investment actions.

Throughout this process, I urge you to be patient with your parents and let me reiterate, maintain complete transparency and make sure they have full access and visibility to the wealth they have built.

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