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?

Financial issues need attending to asap as things might get worse.
I think I would put money aside in an account on your name that you could go to later if necessary.
They might get upset if you tackle them with any implied criticism but a good old-fashioned chat might do the trick. They might be really worried and be glad of the chance to talk it through.
I wish that had happened for me.

Why the hell did they take on a mortgage at retirement age? Most sensible people would pay off mortgage then downsize if anything! Not saddle themselves with debt when they don't work? It's up to you if you want to subsidised them, but it's their own poor choices.

Probably the best way forward - if you can afford it, is buy a percentage of their house. My husband's brother did this for his parents years ago, and then obviously got the largest part of the proceeds when it was sold after they both passed away.

@fishonabicycle, because it’s common practice to suggest a mortgage with money placed in an investment fund.
What was suggested was probably sound advice prior to 2008.

@rhowton

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

Downsizing is preferable to equity release. I think it's time for a proper discussion, but gently 🤔.

Each month put a little away in an account, then if your parents get stuck you can help out.

Sadly, houses that are too big for the elderly just drain money all the time. Heating,council tax etc. Maybe updating their home was a priority. Would a smaller home, newer, with less maintenance suit them. I thought interest rates are going up soon for mortgages.Maybe all the siblings could meet up to discuss their living arrangements. I dont see why it should all fall on you, as sorting my parents lifestyle fell on me. I have several siblings

If they need more money, presumably they can get drawdown equity release on their home. They would obviously need to get financial advice but my understanding is that they can remain in their home for the rest of their lives. Of course, the money available when they die will be depleted but, from what you say, they have already been very generous in providing education and other support for you.

Sorry if this sounds a bit mad - not good with money matters myself - but - Perhaps you could "invest" in their property so that it would be like an equity release for them, but with you as the means of funds. You could tell them you were looking for a way to invest some of your earnings in property and ask if they might be interested in selling a proportion of their house to you. You'd need some sort of agreement that you were joint owners of the property in whatever proportion you decide. Your money would be safe and increasing in value in accordance with any increase in the property value (which would be better than any bank interest rates!), so a win win situation where they will feel good because they will be "helping" you, and vice versa ... and they will still feel able to splash out and go on holiday/buy gifts etc which sounds as though it is important to them.
When they then decide it's time to downsize and want to sell the property the funds from the sale can be divided up proportionately (though you may need to "invest" a bit in their new smaller property on a similar, "sharing" basis if they have over-indulged a bit!!).

@LoisLane66

I think you are a wonderful daughter and your parents would be really proud of the fact that you have real concerns for their future financially. Of course, they have no idea you are worrying and that in itself shows the kind of person you are.bif only all daughters were like you. If I get a text I know it's a short pleasantry followed by a request for money which is never repaid. They are all three in well paid jobs with gold plated pensions. I realise that your parents problem is a delicate one but I really think that your siblings could and should make some contribution. To be paying your parents Netflix and phone and iPad bills is OTT, IMO. They are living above their means and they must both be aware of it. The gifts they give to you, your siblings and their grandchildren plus the treats and lunches out etc is like you putting in one hand which they are giving out with the other. Do you see the silliness of that. In essence, you are enabling them to keep what they have ie: their home and keep their spending on gifts etc plus holidays whilst you worry about YOUR future. You have no partner to turn to. No children to look after YOU as you are looking after YOUR parents. If you paid money into their house then on their passing it might be split between you and your siblings equally which would not be at all fair and proper. Equally, it would not be a good idea to purchase a flat for them, rent free, and have that mortgage on your shoulders along with your own mortgage and the Netflix and phone/ iPad payments, whilst your parents, lovely though they might be, live the highlife spending the money realised from the sake of their present house. Do you understand the chances you are taking? If you fell ill or mortgage repayments and bills went beyond what you could afford, what then? The next few years are going to be difficult enough with all that's going on. I'm going out on a limb here in saying that I think you feel guilty...of what or why I have no idea but for some reason, over and above the love for your parents, you feel obliged to walk a marathon on your knees carrying a loaded rucksack, whilst your parents sail past you in a Range Rover, completely in ignorance of your selfless acts. That is because you refuse to gently confront them with the truth and the solutions. You are wearing sackcloth and ashes when there is no need. Your parents are adults, make their own decisions and rise or fall accordingly. I am 77 and have children your age and older. I have had nothing and everything and now live somewhere in between quite comfortably. If I can afford gifts I buy them and if I want a new TV, I save or take money out of my property. Your parents seem to have no conception of cutting their coat according to their cloth, as the saying goes. Love us not necessarily cushioning other adults from the realities of a situation they may find themselves in. You say they have savings or similar which are shrinking but they surely have work pensions plus state pensions. That would certainly be enough to live in comfort but not if they spend spend spend. You need to think deeply about yourself, YOUR needs and desires. You owe parents nothing but respect and hopefully, love. No guilt. You are a good woman but enough is enough. You need to talk to your siblings and your parents about a way forward which does not place more of a burden on your shoulders for the next umpteen years. I send my good wishes and hope you think long and hard before making a decision. 💐💐

Very well put.

You need to talk to them as others say before you make any decisions. If you are in a position to help them on a monthly basis, make sure it is legally documented in some way so that if they need to go into a home and the equity of their house is used to fund it, that you can then prove that they have a legal financial obligation to you - this might need to be some form of charge on their house or something. You will need legal advice for this.

Both DH and myself help our parents out with money, mostly in the form of paying for things that they need like a new boiler or washing machine, treating them, and covering expenses and spending money when they visit us. I’ve also covered vet and gas bills as needed. But both have very low incomes and no savings, investments or private pensions through no fault of their own. Dad lost his business just before retirement and PIL are from an ex-communist country that collapsed.

Yours sound like their accustomed to a normal but in some ways fairly extravagant lifestyle, in the sense or not bothering to find deals or budget and buying stuff new to replace stuff that is fine.

They mention ‘equity’ seems to imply they aren't planning on changing their ways and will squander the inheritance instead. Which is totally their call but I personally wouldn’t sub them while they do it

An Update -

Firstly, thank you all for your thoughts and opinions. It has helped me sort out my own, which has helped in deciding what to do.

I spoke to my father, who confirmed, yes, their retirement account is dropping faster than they anticipated. However, they have paid off the mortgage now and have a lot of equity in the house. So there is a plan to use some of that money when they move. They have no immediate need/plans to move. I could see the reduction of the retirement fund was an upsetting thought for my dad, as he had planned and taken advice and thought he had done everything right. It is a reminder that even the best of plans can be undone.

I told him that I would always be there for them, and he shouldn’t ever be afraid to talk to me about it.

I haven’t decided what to do, other than to try and consolidate my financial position as much as possible, expecting that at some point in the future their might be another conversation with him and a discussion about help. I might also try and think about a win-win scenario, where I buy an investment property that they can live in. Obviously before I can do anything like this, I need to again have my own financial future very solid, as there is no one to help me out. In the short term, I have also resolved to be generous with gifts etc.

I also think I should clear up 2 misconceptions that have arisen and taken a bit of a life of their own in this thread. The first is to their financial savvy-ness. As I understand it from my Dad, the situation is as @fallfallfall has explained in several different posts in the thread. Suffice to say, it was retirement financial advice from a paid financial advisor/company, prior to 2008 it was all correct, after then (when they had already retired) people did think the markets would recover in all areas as they had historically, but this wasn’t true for some areas. I also think the advisors should have made different recommendations after that date, but they didn’t and my parents trusted them, so here we are.

Secondly, that they are ‘living above their means’. They are living on the same income from when they retired, about 15 years ago, and so have absorbed all the cost of living rises in that time. I mentioned them buying a new tv, but I didn’t say they have only been on 1 overseas holiday in that time. This is by choice - I meant this to illustrate in my OP that they were still living reasonable well now - not extravagantly, but not watching every dollar either. Recently I had started to notice them not replacing things, and I was wondering if that was financially motivated, or a genuine difficulty in sourcing the items due to Covid. My comments about the tv and not looking for deals, seem to be taken to assume they were being silly with money - that is not true. They (like all of us) prioritise what they want within their income. A tv replacement was a priority, overseas holidays haven’t been. In relation to deals, I mean shopping around for the tv - going to 3 different places to look at prices. They prefer to go to one store that they think has the best prices, ask for the best price and buy it. I don’t think that makes them too free with money!

Thanks for everyone’s views.

@LifeAdvice - sounds like you handled it well with your parents. I think you have siblings, though? I think you ought to speak to them if you want to retain a good relationship with your whole family, and explain what you are thinking of doing in the future and why. I’ve seen enough threads on here where family have fallen out at their parents’ death, because they had financial arrangements with certain children, had altered wills, or the children they had an arrangement with had made a profit out of the arrangement (or a loss) and this created ill feeling and mistrust at just the time the siblings would have wanted to feel close to and supportive of each other!

OP can you Do some switching for them on deals, mortgage etc? I’d have a frank discussion and I would definitely help my parent did they needed it, but in this case, I’d also try to help them be more savvy.

👍

I’d be very careful buying them a property. A few years ago I had a client with no assets who’d lived with her family for about a year and the council were going through the courts to sell the family members house. The client passed away before the house was sold luckily for the family.

Technically that shouldn’t have even got to that stage, no one could believe it was happening but it’s coloured my view of what councils are willing to do. I haven’t seen it happen before or since but it’s made me cautious.

I wouldn’t hesitate to help my mum (dad has sadly passed) out financially if I needed to. My parents retired very early, both for ill health, my mum was younger than I am now (I’m mid 40’s) when she stopped working. My mum doesn’t have money worries as mortgage is paid and she has savings and now a few small pensions plus state pension coming in. So whilst I’d be working a lot longer than she is that wouldn’t stop me wanting to help. I know my mum wouldn’t hesitate to help me out financially if I needed it, and I think the same goes for me, I have a moral obligation. I earn more than my parents earned combined and yes I’ve worked hard to get to that stage, but I would be happy to share that with family. I’d help my brother out too, even though I don’t think he would for me (I say that as he’s quite tight, but if I was desperate I’m sure he would offer me a loan!).

Sounds like you’re taking the right approach with gently mentioning it and letting them know you’re happy to help. I think the offer of purchasing their next property is a good one. You could spin it so they are doing you a favour by being good tenants and it’s an investment into your future etc.

OP- my parents are now both dead and my almost 90 yr old father was very IT savvy but he struggled with comparision websites and the concept of switching for a cheaper deal, loyalty etc

From 80yrs old, I started to do that for them - I clearly remember the first time - I halved their house insurance, car insurance to a third of previous cost, £30 pcm on utilities, changed their wifi and mobile phone contracts both paying £40pcm and down to PAYG and £7pcm! - they were shocked but very happy.
It made me realise how the completely intelligent elderly were taken advantage of by fast talking shop assistants and fast talk- my Dad has insurance on every appliance in the house that he ahd replaced - that went aswell.

I paid for a few holidays but they would never have accepted cash.
After my Mum died I had POA and organised all the finances - cleared out old DDs and challenged some stuff that they really did not need.

I would not have hesitated to help them out if they had needed - but what they needed was a help in an ever increasing digital world and the ability to access cheaper deals a couple of times per year with someone who was not on commission and looking for a fast buck.

Your father might be simply pointing out that you won't be able to reply on any inheritance because they will have spent all their money.
I wouldn't financially assist anyone who upgraded their house and spent inheritances buying new furniture etc. They don't need your help, they need to just stop wasting the money they already have.

You need to do a proper analysis of their financial position. You have to list all their incomes, savings, value of investments, bonds and outgoing commitments.
You need also to calculate their regular spending and costs (car, etc.) and write it all out as detailed and accurately as possible. There is no other way. You type it all out. It is a personal financial report, and whilst it may seem intrusive it should provide a clear picture of their financial position. I used to be a financial advisor, it is the only way you can advise someone of what to do.

It would be a mistake to offer them some of your income blind, particularly if you haven't even got a mortgage. My dear old Mum had been widowed when I was ten. She was stuck with 4 kids at school and had always grizzled endlessly over money. When I had my
first salaried job and visited her, she was still complaining about the cost of eveything. I was fed up with it and felt sorry for her so I offered her a monthly income of about £400 a month equivalent in todays money. I was living very cheaply and frugally at the time and I reckoned I could manage that. She was horrified and immediately said that she could not take it. She then admitted she had been fairly well paid via a war office pension from my Dad which was enhanced due to all her children. She never ever complained about bills to me again, and when she died of cancer about 10 years later she had quite a lot of savings and her income had been very reasonable. I was rather pissed off that she had not spent some of that cash and enjoyed herself more with a decent car and some sunshine holidays.
My experience with being a FA is that most people's finances are rather crazy. Even the well-paid can have loads of expensive debt and extravagant spending; new cars, several holidays a year and so on. I don't know how they sleep at night.