Many adults give financial support to their parents, despite feeling a strain on their own budgets, new research finds.
About a third of adults in their 40s, 50s and early 60s said they had given a parent money in the past year, according to a new survey from the research arm of AARP, the advocacy organization focused on older Americans.
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money. The AARP survey delved into more details about the cash that the children are contributing and what sort of things it paid for, said George Mannes, senior editor of AARP The Magazine, which published the survey.
“It’s really for the basic necessities,” he said. “This is not about helping Mom and Dad take another cruise.”
The dollar amounts cited in the survey were “sobering,” Mr. Mannes said. More than a quarter of the adults who provided financial help to their parents said it had placed a “high” level of financial strain on their family. A third of all midlife adults said they were “just meeting” or “falling short” of expenses, which doesn’t leave much room for savings for their own retirement.
Many midlife adults are also supporting adult children, the AARP survey found. Nineteen percent of those with adult children and aging parents said they were helping both financially.
AARP conducted the telephone survey of 1,508 adults, ages 40 to 64, in the fall.
Americans overwhelmingly believe that adult children should support their aging parents, other research has found. That may help explain why so many are doing it, even at a risk to their own financial well-being. After all, Mr. Mannes said, “they raised you.”
The findings help explain the challenges that many middle-aged people face in saving for themselves. A quarter of Americans who are not retired have no retirement savings or pension, the Federal Reserve reported last year.
Here are some questions and answers about helping aging parents:
You can apply for Social Security online at ssa.gov, by calling 1-800-772-1213 or in person at your local Social Security office. You must be at least 61 years and 9 months old to submit an application for retirement or spousal benefits, and payments can start as early as age 62. Your age when you enroll plays a big role in determining your payment amount, so take care to see how much you will receive at various claiming ages.
When can I apply for social security?
You can get a personalized estimate of your future Social Security benefit by creating a My Social Security account at ssa.gov/myaccount and viewing your Social Security statement. Your statement lists how much you are likely to receive in retirement if you continue working at your current salary until your full retirement age, age 62 and age 70.
"If you look at your Social Security statement today, your estimated benefit is based on your previous year's income," says Ross Menke, a certified financial planner and founder of Lyndale Financial in Nashville, Tennessee. "If you do stop working earlier, that will have an impact on what you would be eligible to receive as a Social Security benefit."
The statement also lists how much you will qualify for if you become disabled and what family members might receive if you pass away. Social Security statements are mailed to workers age 60 and older who don't have a My Social Security account.
How much social security will I get?
Most workers pay 6.2% of their earnings into the Social Security system, and employers match this amount. Self-employed workers contribute 12.4% of their paychecks. However, earnings that exceed $137,700 in 2020 are not taxed by Social Security or used to calculate retirement payments. Workers who earn more than $137,700 will see a bump in their paycheck when Social Security taxes stop being withheld.
Your Social Security payments might also be taxed in retirement. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit exceeds $25,000 ($32,000 for couples), federal income tax could be due on part of your Social Security benefit. If these income sources exceed $34,000 ($44,000 for couples), up to 85 percent of your Social Security payments may be taxable. There are also several states that tax Social Security benefits.
What is the social security tax limit?
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People tend to quickly say yes when a parent asks for help. But it’s important to examine your own budget and retirement plans, and calculate how much you can realistically spend over time. Adults should ask, “How much can I help without hurting myself?” said Brad Klontz, a financial psychologist. You may want to consult an online retirement calculator or a financial planner if you can afford one, to help analyze your situation.
If you decide you can help financially, be clear about how much you can provide and what the money is to be used for so boundaries are established upfront, said Julie Fortin, a financial planner in Windham, N.H.
If there isn’t much extra money to spare but you are determined to help, you may have to cut back in some way — say, postpone buying a new car — to free up cash. You could consider reducing what you contribute to your own retirement savings, but eliminating contributions is unwise.
“Don’t stop your own savings,” said Erin Wood, a planner and wealth adviser in Omaha. “You don’t want to end up in the same situation your parents are in.”
How can I keep my own retirement savings on track while helping my parents?
“Most people don’t feel confident talking to their parents about money,” Ms. Wood said. And parents may feel embarrassed or ashamed about asking for help, which can make a discussion even more difficult.
So accept that the conversation will be awkward — but have it anyway.
To avoid misunderstandings, it’s best to begin talking when parents first ask for help, Ms. Wood said. Don’t be shy about requesting details about their finances, she said. “No one should give an open checkbook to a parent, or to anyone.”
Pinpointing the reason for their cash shortage can help identify possible solutions. If it’s a costly medical prescription, you can help identify options like taking a generic drug or using a money-saving mobile app. If your parents are spending a lot of money on entertainment, they may be bored and need some structured activities — perhaps a part-time job or volunteer work, if they’re able. If significant, continuing assistance is necessary, professionals suggest organizing a meeting with siblings and other members of the family to discuss who can contribute, and how much. If you are short on funds, you may be able to offer other kinds of aid, like helping your parent with home maintenance and repairs, or researching possible financial assistance programs. If emotions run high, it may help to have a neutral person — a lawyer or a financial adviser the family trusts — mediate the discussion to make sure the conversation is constructive.
What if I’m reluctant to press my parents for details about their finances?
Many U.S. citizens with a driver's license or state-issued identification card can use their My Social Security account to apply for a replacement Social Security card online. You can also fill out a paper application and mail it in or take it to your local Social Security office.
What other financial options are available to help aging parents?
Most Americans contribute 6.2% of their earnings to the Social Security system, and employers pay a matching amount. Those who are self-employed pay 12.4% of their income into Social Security. Workers who have sufficiently paid into the system can collect retirement benefits beginning at age 62 or older. You may also be eligible to collect benefits if you become disabled, and your family members might qualify for survivor's payments after you pass away.
How does social security work?
If you have a medical condition that significantly limits your ability to work and perform basic activities such as walking or remembering, you might qualify for Social Security disability payments. Be prepared to provide medical records documenting your condition and why it prevents you from working. Social Security disability payments won't start until six months after your disability began. There's also a several-month wait time to process disability applications.
How do I qualify for social security disability?
Social Security beneficiaries are required to sign up for electronic payments. Social Security benefits can be directly deposited into a bank or credit union account or loaded onto a prepaid debit card. The payment dates vary based on your date of birth. If your birthday falls on or before the tenth of the month, you will receive your payment on the second Wednesday of each month. Those born between the 11th and 20th get their payments on the third Wednesday, and people born late in the month get their direct deposits on the fourth Wednesday.
When will I receive my social security check?
Last year, flows into U.S. sustainable funds more than tripled, marking the fourth year of record flows, according to Morningstar. Talking about sustainability “is a way to build better relationships with clients. And it’s material to returns,” says Catherine Banat, managing director of responsible investing at RBC Global Asset Management. One beneficiary will be impact investing strategies—where people seek specific outcomes from their portfolios—many of which are aligned with the U.N. Sustainable Development Goals.
In 2019, according to the Global Impact Investing Network, assets in this market totaled around $500 billion, based on surveys with 1,300 impact investors. That will happen in mutual funds too: According to Morningstar, the largest impact funds include the $4.8 billion TIAA-CREF Social Choice Bond (TSBBX), the $2.4 billion Community Reinvestment Act Qualified Investment (CRAIX), the $1.2 billion Domini Impact International Equity (DOMIX), and the $1.2 billion AB Sustainable Global Thematic (ALTFX).
12. Flows will keep surging
Particularly of people who are great at building computer models and handling large data sets, and who are thick-skinned when dealing with corporate executives and officers. “There’s a global hiring war in ESG right now,” says Manulife’s Chew.
13. Expect more hiring in the sustainability industry...
About half said they had given at least $1,000, and about 20 percent said they had given $5,000 or more. The money was most often paid monthly or weekly for needs like groceries and housing, the survey found.
Earlier research from the Pew Research Center found, similarly, that about a third of adults with parents 65 or older had given them
Parents might consider selling their house and buying a smaller one, renting a more affordable home, or moving in with their children if there’s room, advisers suggest. If they don’t want to do that but have substantial equity in their home, a reverse mortgage — a loan in which you borrow money secured by the house and receive payments from the bank — may be an option. Federal rules require borrowers to be at least 62, and there are limits to the size of the loan. Counseling is required before borrowers can take out the loan; they can risk foreclosure if they don’t make necessary payments for property taxes, insurance and maintenance, and meet other requirements.
The National Council on Aging offers suggestions on money management on its website, including an “economic checkup” tool and another that can help maximize public health, nutrition and housing benefits.
