Would you subsidise parents?

[LifeAdvice]

This might be a bit more of a WWYD, but posting here as I’m not sure if I am BU or not.

I have recently become aware that my parents might not be as financially secure in retirement as I (and my siblings) thought. They both retired quite early, with a paid for house, a full retirement fund and some spare savings. They then sold their house and moved to the place they had always intended to retire too, however in doing so, had to get a small mortgage. Then the stock market went down and their retirement fund took a hit, but there was still a large amount there, and I (and they) assumed they had many more years for it to correct itself. They also knew they had a lot of equity in the house.

Over the last decade they have lived reasonably. They have had 2 medium inheritances and used them for house improvements and paying off (most of the mortgage). They have had some holidays, but mainly prefer to travel to see family. They spend money on keeping their home and garden nice, treating their grandchildren and children (just small things, but on a regular basis) and lunches or coffees out. They buy a new TV when they want one or new furniture etc, so my siblings and I didn’t think about their situation.

Recently I was talking to my Dad about my retirement account. Straight out of Uni Dad was v helpful with basic financial advice, and I still occasionally ask him about things, or tell him how a decision I made x number of years ago has worked out (eg “I now have XX in my retirement account, thanks for telling me to put a bit extra in it each month all those years ago” Or “do you think I should consolidate this fund?” Etc) Sometimes my Dad would mention their own accounts as an example, but not often. In doing this recently, my Dad hesitated and then shared that they didn’t have a lot of money left. He then tried to cover it and said they would use the house equity, but it left me very worried.

I feel torn, as I am wondering if I should help them financially? If not now, then at least offer now for later so they don’t need to worry? They haven’t asked and they never would. They would just worry and fuss in private. I would never be able to ask what they had or where they spent it. On reflection, I think they don’t look around for good deals and waste a lot of money by going for the first option, rather than researching - but it’s never been my issue before, and I couldn’t start now.

They have been good parents. Annoying at times, lifesaving at others - average parents! They paid for our education and gave us a great upbringing. They paid half of uni, we paid the other half and after that we were all financially independent. No financial gifts to any of us after uni, but plenty of practical help and small gifts etc.

Financially right now I am ok, but as each year passes I get more solid. I can’t afford to subsidise a whole other household (who can?!?) but I could start to give them money, and the amounts could increase as I get more financially secure. Of course, doing so delays my own financial security.

WWYD? And how and when would you do it? Knowing they were unlikely to ask and would suffer in silence?

What's the value of their house? Don't they get a monthly pension as well as the state pension?

All I would say is that the Stock market falling is a red herring as the FTSE has averaged 8.43% pa over the last 10 years and has recovered from where it was when Covid hit so any decrease in pension values is to do with their spending habits and not the market.

Therein lies your problem if you help them out and their spending habits don't change then it could cost you a lot of money !

Based on what you've said they aren't as financially savvy as you think and have over spent !

Both sides have been told they can ask is anytime they need. However both sides are cautious with money.
Tricky situation for you I think.

If I could afford it I would give them what I can each month of course.

You could definitely walk them through some money saving ideas on their utility bills and insurances or do they have that side covered?

In their position I would downsize. It seems mean to expect you to subsidise them.

Not in the UK, so no pension. There is a retirement account in the stock market, which pays out an income each year, decreasing the account, but the account still earns gains in the stock market. At the time of retiring the amount there would fund them both until 100, when it would have reduced to nothing.

So the stock market did lower the initial amount, and as they then started to draw from it, it did rebound, but not as high, as money was already coming out.

Spending has been strictly at the level the predictions were based on. Either advisors got it wrong, or fees were high or stock market didn’t recover as well (as above) or
Probably as mix of all three. There is still a significant amount of money there, just not the amount expected, and as more comes out, less is earnt and less goes back in.

It can definitely be time for you to be treating them when out together since they are the pensioners, that's my rule of thumb anyway!

It sounds to me as though they haven’t cut their cloth, so no. I am well aware my mother and step have spent their capital—and my inheritance—. They have not acted wisely so no; they can sell up and buy a one bed flat. Obviously if all they had was a one bed flat, old furniture and hadn’t spent the last decade cruising and/or golfing in Florida I’d help faster than a heartbeat.

Could you pay the mortgage for them in exchange for a percentage of the house when they die? That way you are saving and they a relieved of the burden of the mortgage and so will live more comfortably.

I think it would be worth sitting down and having an honest conversation with them about their finances (assuming they want to) and seeing if there’s any obvious changes that can be made.

How old are they?

They do have options.

Downsize
Equity Release

I wouldn't say anything yet.

@Wigglefish123

All I would say is that the Stock market falling is a red herring as the FTSE has averaged 8.43% pa over the last 10 years and has recovered from where it was when Covid hit so any decrease in pension values is to do with their spending habits and not the market.

Therein lies your problem if you help them out and their spending habits don't change then it could cost you a lot of money !

Based on what you've said they aren't as financially savvy as you think and have over spent !

I never thought they were particularly financially savvy, or financially naive, but just (like most people heading into retirement) they had a solid plan, had waited until they could afford it to retire (as they retired early - they could have kept working) and were spending within their allowance (as set by the financial advisors). In hindsight, they should have waited to retire until their account was back at pre-stock market crash levels, but no one has a crystal ball.

However your point about costing me alot of money is spot on. If I do this, do I put limits on spending? It costs? I don’t want to do this, and it seems a bit mean. A real reversal of the child/parent dynamic too. But if I don’t - will I pay for them for another 30 years?

What about you paying into stocks and shares in your own name which you could give to them if they were stuck when they were older? That way it stays in your possession until a later date?

I would help if in a position to do so, but not at the expense of helping my dc set up in life (uni costs etc).

My job is largely working with 70+ people, and without fail every single one doesn't think they have enough money, even if it's blatantly obvious that they do. It's a generational fear. Most of them also in denial about mortality, think they'll be going on foreign holidays for 30 years when in reality most people after 80 don't leave their own postcode through a mix of lack of energy, illness, fear, paranoia. The costs of living from the exuberance/freedom of initial retirement to actual old age will inevitably dip.

From what I can see your fears are based on your Dad saying "not much money left" which is a very broad statement and one which I have seen 75 year old millionaires say. As others say, an honest chat is all that's needed at this point before you worry about any bailouts. Their version of "not much money" might well be 25 years of comfortable living costs.

They are clearly considering equity release and I think you need to discuss this with them quickly.... They need to downsize, and move.

When my in laws retired and sold their business they moved to a rented apartment and sold their house.

We questioned it at the time because they had nothing solid to Lee them going in property.

Fil invested in different places etc and that was that.

Only recently it's come to light they actually have very little left and unbeknown to us they fil had a lot of debt from the business and half the sale price of the house had to be used to pay that

He's always been very controlling with money and most things so mil didn't realise how low their pot was getting until recently and then mentioned it to us.

We can't for the life of us fathom why he made the financial decisions he did and now worry once he goes mil will be destitute ( he's a lot older)

They don't live extravagantly at all for the last few years.
No holidays ,they take coffee In a flask out now and never eat out at all.
Mil hasn't bought any new clothes for a long time

We don't own our house yet and still have two dependants at home.

Covid has meant we will spend the next two years getting bak on an even keel and that's both of us working full time with a side hustle to cover the extras going out so there's no way we can financially help them at all and sil is pretty much the same as us.

If they have also spent their inheritances and are still burning through savings then it's a bit concerning, their plan sounds far from solid and they sound naive and head in sand to not have made adjustments as things have progressed.

Yes, there's only my mum but I'd happily help to support her financially if she needed it. She's on a very low income (care worker) so DH and I already purchased the house she lives in currently as a BTL following her divorce from my dad and paid the 25% deposit out of our savings. She now covers the bills and we pay the mortgage. I wouldn't want any money from her for it as ultimately the house is an investment for us in the long term. If she needs more help financially once she retires I'd be happy to provide that too. PILs are very wealthy, so are unlikely to need any help from us.

Yes, I would consider helping my parents financially a non-negotiable moral obligation. Definitely over grown-up children at uni. I am covering probably around 70%-80% of their expenses now, but it is likely to go up to 100% as they age. They're not in the UK though, so thankfully there's some arbitrage there as the cost of living is also much cheaper, so the total bill is under a grand.

Mmm not sure I would help. Which sounds callous but it sounds like they're having a rare old time spending inheritances and the like. Life costs money, it's not free just because you're retired. If you are going to retire early then it's a risk that your money will run out (it's a risk anyway) but it sounds like they're ignoring that and carrying on.

Personally I think if you start to fund them then nothing changes, including their spending behaviour. Your family, your choice. But can you afford it? At the expense of your own family? Have they materially helped you out in the past (house deposit etc)? If so then maybe 'pay it back' but into an investment.

There was always a plan to sell their home when it became too much for them, and downsize to a unit or retirement village or assisted care (sorry - not sure of the correct terms, but we knew that depending on their mobility and health when the time for the house to be sold, they would either get a flat and keep living independently or move to another place. This was flexible.

I don’t want them to have to make this decision for financial reasons, I want them to move when they are ready. They love their home and garden and potter around on it all day. A move somewhere smaller will definitely be an emotionally backwards step for them, we just thought it would come with a sense of relief as to not having to do upkeep that was beyond them anymore. Not as a sense of financial failure.

I don’t blame my parents for not predicting this or saving more. I think they made the best decisions with the info they had. What I
Want to know is should I help, and if so how? I want them to keep their pride.

I think if they absolutely needed it then of course I'd help them out, but if they're just a bit short of cash and continue to splash out on treats for others etc I wouldn't.

They still have a decent chunk of money so I'd recommend they speak to a financial advisor.

No it sounds like they’ve had a right old time of it.