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?

@RosesAndHellebores .

They have no spent your inheritance. They've spent their money. It isnt yours. It was never yours. you have no right to it. it is theirs. Theirs to spend; nothing to do with you.

You're as bad as my sister who didnt speak to my parents for months when the bought a nice place to retire in because they were "spending my inheritance". Ita disgusting.

I would, but in your situation would probably squirrel funds away so that it is an option to help them or you if ultimately they don't need it. Could you say to your Dad that if funds reduced you would always help out and if they got to thinking about equity release rather than downsizing to talk to you first. You can remind him that he has always helped you.

I would honestly focus on your own financial security at the moment. If they have a large house they can downsize that when they need to.
I'd help out for emergency repairs etc. but not regular payments to maintain a lifestyle they can no longer afford.

Based on your posts, I'm guessing they're around 70 now? So you could be funding them for another 15-20 years. Is that realistic?

I think you're very considerate to be thinking about this and it would be useful to sit down and discuss their finances with them, if they're willing to. Perhaps you should just let them know that the offer of help is there if they ever need it.

My SIL got a shock shortly after her marriage when her DH said that they'd need to help his parents in later life - she had no idea that they weren't financially secure. He has helped them in specific ways, like buying them a new car when theirs got very old and paying for certain other large bill, but to my knowledge, it's more of a "when they need it" arrangement. Perhaps that might work for your parents.

Just to centre my thoughts, I was thinking I could either:

A) start to take over payment for some every day things, to lighten the load and give them more available money on a day-to-day basis. I already pay their Netflix bill (I set it up and just put my details in years ago). I also pay their phone and iPad bills (gifts). I could look for more things like this? My problem is, this doesn’t go to the heart of the issue, and in fact kind of encourages more day-to-day wasteful spending.

B) Do nothing now, but talk about when they plan to sell the house (raising it as a general ‘what are your future plans’ discussion. As part of that I could discuss perhaps buying their next flat and having them live in it rent free, so they would have all their money. I could explain this would be an asset for me, and they would be good tenants, who would look after the place. Obviously this is an expensive option for me, i would need to save a lot between now and then to be in a position to do it, and to afford 2 mortgages, and I would lose money in no rent. However, I think it would be cheaper than paying them an allowance every week/ month?

C) pay them money every week/month. Obviously this would need a sensitive discussion first and may not happen for some years, but do I mention it early so they aren’t worried about money now? Just let them know that I will always be there financially? (Or be there to the amount of $xx financially and no more!)

Not sure. All options feel awful.

Sorry if I've missed this, but how old are they?

I wouldn't subsidise them - doing so will decrease your own chances of a comfortable retirement. This could turn out to be a bottomless pit.

Ultimately, they have the equity in their home, and an invested pension. They've also had significant inheritances. The stock market has made good returns in recent years, so it's not clear why they have ended up burning through their capital. They may need to look at equity release or downsizing, but it's naïve to think that they will be able to avoid this.

If needed then yes I would.
But I think you need to tread very carefully indeed. I have a friend whose mum was a widow for many years and depended on a tiny state pension. Her and her brother paid her council tax and utility bills between them. That's fine and appropriate.
If your parents are in a nice home they own outright then I would hesitate to even broach it. They presumably have enough resources to see them out. They can sell and downsize and afford to be comfortable still. They would be mortified by your offer by the sounds of it!

If they are considering equity release would it be possible for you to buy a share of their property, they can continue to live in the house they love, they have more money, you will have an asset or at least a share in an asset so a financial investment for your future.

Don't know if it would work, just an idea.

How early did they retire?

Can you not just say to them that you are worrying after your previous conversation, and are concerned they are struggling. Is this the case? Do they need help, or will they? What are their future plans for money?

Also, do they have a Power of Attorney sorted? And wills?

It's a lovely thought OP, but personally I would find it very difficult to accept money from my children.

I would have to be in dire need and it doesn't sound as if your parents are there yet.

We buy stuff for my in laws, food hamper at Christmas, always pay for everything if we take them out etc, but we wouldn't get into setting up a regular payment with them. They frittered away a lot of money and though we would never see them in real hardship I'd much rather give any spare money we have to our children.

In 20 years time you will likely be older than they were when they retired, but you may still be having to work in order to fun pay their bills, while they're still in the house you don't want them to have to downsize. If they're having regular lunches out, they are not skint.

I have a SIPP, and can echo previous posters' comments that the Covid fall has more than bounced back.

I would choose option D - have a frank discussion about what they have, and where (including the equity in the house), and what they might need to do. Look at bank accounts and analyse where the money has actually been going - are there any obvious savings to be made?

Do not offer to buy them a flat or anything else at all until you have an understanding of what's happened.

@Anonymice1

How early did they retire?

OP said mid-fifties

I wouldn't subsidise them at this point, no. They're living in a big house, which they could easily sell. If you put their age aside, would you worry about the finances of two people living in house much bigger than they needed? Or would you just think they could downsize?

The thing about leaving downsizing until you need to, is that often that moment is not a nice time to move. It would be a moment of crisis, far better to my mind to move before you have to, whilst you can enjoy the process of househunting. My DM has said to me that my parents have agreed that once one of them has 'popped their cloggs' (her words not mine), the surviving partner will downsize. But I know my mum would find that incredibly hard, as would I. Much better to do it before. It also means you can settle into your new community whilst you're still very capable and can get out and about, meet new neighbours etc.

Do encourage them to get some decent financial advice, and steer them away from any equity release companies.

Do you think they would be willing to take on a lodger? That's quite a good way to supplement an income, if you have a spare room.

If I were you, I'd:

1. Sit down with them and work out if there is definitely a problem or if it was a vague worry
2. See if they actually want your help
3. If you're going to help, it has to be sustainable - if they've been unwise with their own money, they shouldn't be unwise with yours
4. Work out a sensible budget, see if they need to move home, see if you need to plug the gaps but only do so at an amount you can actually afford.

I have limited sympathy with early retirement really, with life expectancy around 80 you can't just work for 30 years of your life, unless you're a millionaire!

I suspect what happened with the stock market, if they have been retired over 15 years, is that they had a "fund" which was a portfolio of equity investments. If it had been set up sensibly it would have been tilted towards enough income to fund their day to day living, and growth for the rest. If they ever needed capital for house repairs, new cars etc then they could have taken some capital out - at the cost of reducing the remaining capital available to generate income. The financial crisis in 2008 has killed that kind of thing dead. Near nil bank interest rates have rippled out through the rest of the markets so any income generation, whether that's from dividends or bonds, has become very difficult and expensive. Dividend paying shares may have shot up in value, but the income hasn't and yields are still flatlining.

If your parents didn't buy an annuity, and it sounds like they didn't, then the real income their portfolio generated will have plummeted shortly after they retired and they would have had to draw down more and more capital to fund their day to day costs.

Another mistake a lot of early retirees make is assuming that income requirements on the day they retire stay the same for the rest of their retirement. They don't. 'Pensioner inflation' is much higher than for the rest of the population because of the relatively higher spending on food and energy. Many of the things they had in the house on retirement - computers, appliances, cars will have needed replacing by now. And many things that you can easily do yourself when you're fit and active at, say, 55 - such as heavy cleaning, gardening, minor building or DIY stuff - are a different matter when you're 70 and decrepit and you need to pay someone else to do them.

One of the reasons the UK state pension is so low is because when it was introduced, a man claiming it from 65 was already beyond average life expectancy at his birth, and having reached 65 had somewhat less than a year of residual life expectancy left. It was never intended to fund replacement shoes, never mind cars, double glazing or boilers.

Extravagant expenditure doesn't help, but I'd bet your parents have simply got their planning badly wrong.

Would I help them? Not simply by throwing good money after bad. I'd want total control and complete transparency from them, so always going for the best value rather than the most convenient.

What I would do is help them out with non-monetary things - help with aforementioned DIY or gardening for example, if it meant they didn't have to pay someone else.

Me and my siblings help our dad financially. He’s on a low pension, not been able to save throughout his life due to always working in manual labour jobs, having had periods of unemployment and is now physically so worn out that he can’t do much. We each give him the equivalent of £100 a month (he in not in the UK), and help him if he has any larger costs for the house, car, teeth etc. I really don’t mind doing it, and I don’t miss the money, he needs them much more.

Do they want money from you, would your siblings also be helping them. You cant do much until they tell you their financial circumstances and if they are worried about it.

Yes I would help but initially it needs to be advising them to get financial advice. When was the last time they checked in with their financial planner/advisor?
They need this information first as they may be able to adjust spending habits or change platforms where they hold their funds to lesser fees which may help. If they need help then I would discuss options…

1. could you buy equity in their home? Essentially it would relieve them of mortgage outgoings , allow them to reduce the amount they spend which would allow fund to continue to accumulate. It would also mean you would be investing into an asset so not losing money and property value usually increases so a win for you (however their investment into the house would be less so they might lose out a bit there in the long term). It would also mean that they can stay in their home. This would need to be clear as impacts on inheritance. I would give my parents monthly payments etc. But getting them to take it would be another story which sounds similar in your case and it may be difficult not to offend them. Good luck

MIL is very asset rich. She is selling her London home and moving to the dark satanic mills of the North near us next Spring /Summer. She could buy a house with a few acres and six bedrooms but will buy a small bungalow with a lot left over.

Taking on a mortgage when retiring and the replacing stuff needlessly shows that they are actually not that great at financial planning. MIL isn’t, she received an inheritance of 80k a couple of years ago and has got through a huge amount of it. Sounds like they are in a similar position to my MIL. She really has zero idea what it’s like to be genuinely poor, she still buys every item organic in Waitrose. But she grew up in a house with servants and a tennis court so has a skewed idea of poor. We don’t expect any inheritance.

Don't keep speculating. Sit down with them and say your dad's comment has had you thinking and you are concerned they are trying to maintain a lifestyle and appearances that isn't possible long term.

Say they helped you when they were on top of how the financial world was working in your youth and you think it's now time to help them. Ask to run through investments, income and outgoings with them. Offer to help look into better terms for current investments and also have a frank discussion about whether now would be a good time to downsize to a comfortable flat with lower outgoings and secure the capital in an investment that won;t allow them to draw on it.

OP i say this with kindness, but you're talking about regular burnout by colleagues in a high stress job, and talking about putting your income their way while they continue to live a few more decades of leisure.

and you can't afford it.

your comments about buying a second home then letting them live in it rent free - have you thought about how that would work, practically? extra repair bills, maintenance, boiler, insurance?

i honestly think you're mad to consider helping your parents in this situation of their own making, you're in a much more financially vulnerable situation in the future yet you're talking about protecting luxury living choices that they've made year after year after year.

what's driving you here?

it's very disordered thinking and you need to step back and look at why you're trying to dive in and save them despite them objectively NOT needing it, and without their asking.

this isn't a normal response to the situation you've described.

You would be jumping the gun giving them money now. You don't even know if they need it - they could have £1m tied up in investments for all you know but your dad thinks its low because it used to be £2m.

And given they were so tight as to charge you interest of the deposit they loaned you, definitely don't screw yourself over financially for people who won't support you and will live the life of Riley with no care

It may also be to manage your expectations re inheritance! I think you have an awful lot of angst over one comment!

I would help, but only after I knew exactly what their income / expenditure was. A budget assessing how much they need against how much they have to avoid being seen as a bank. They should be trying to live within their means, or as near as possible.

Really, you are funding their choice not to work for 10 years from their mid fifties, which I would find grating.