by Mitch Anthony
Many of you have clients who want to help their parents—perhaps mom and/or dad are getting by on a combination of Social Security, a pension (if they’re really fortunate), savings, a part-time job, or some combination thereof. These same parents have helped their children by providing support that may have included a college education, a loan for their first home, or perhaps a roof over their heads during a transitional phase—now their children would like to return the favor. In this article, we’re going to discuss two options: (1) creating a parental pension, and (2) hiring their parent(s).
Parental Pensions
A parental pension is a way to give back and thank mom and/or dad for the sacrifices they made. My own father turned down higher-paying, more prestigious jobs in bigger cities because those cities were experiencing unrest during the late 1960s. He chose instead to restrict his career advancement so he and my mother could raise us in a smaller, more stable city. I can guarantee that at least some of your clients have had similar experiences and are inspired to do something to thank their parents for their sacrifices. Here’s a story from Andrew who, along with his sister, created a parental pension for their father:
“My sister and I had talked many times about how unjust our father’s retirement situation was and wondered if there wasn’t something we could do to make his retirement years more enjoyable.
“He had worked loyally and earnestly for the same company for 30 years. Because of numerous ownership changes over those 30 years, the end result was that his pension was basically worthless. Now Dad is 65 and working odd jobs (some he likes and some he doesn’t) to make ends meet. We could see the anxiety in his eyes even when he said he was quite content. My sister and I talked together about the fact that we had both prospered in our respective professions. Neither of us was yet at the point where we were set for life, but we figured out a way we could help. We had agreed years ago that we would take care of Dad’s needs in his later years should he become ill or frail, but now we realized that the best thing we could do was contribute now while he was still healthy, vibrant, and full of life. Why wait until a parent’s life is limited before you help?”
Andrew and his sister arranged to have a fund set up that produced a steady return year after year. They arranged to have a specific amount ($500) direct deposited into their father’s checking account every month. Even though their father receives the distributions, the fund is in their names, meaning their father doesn’t have to worry about managing the account. It was easy to arrange, and Andrew and his sister plan to add more principal down the road. Both Andrew and his sister feel good knowing they have helped reduce their father’s financial anxiety: “We feel it was the best thing we ever did.”
In the preceding example we see how two people discovered a way to give a parent a margin of comfort and security while that parent is still vital and mobile enough to enjoy it. Many children have already prepared themselves, at least mentally, for the possibility that they may need to subsidize and support their aging parents’ later years. Some of these people, like Andrew and his sister, have decided to accelerate that subsidy to lessen the economic anxiety of their parent’s retirement years. A parental pension doesn’t have to be a large sum of money—even $250 to $500 a month can go a long way towards peace of mind. It really isn’t important what parents do with the money; they may even put some of it in the bank. What is important is that they feel a sense of security and a margin of safety in their retirement years.
Hiring Mom and/or Dad
A few years ago when I needed a house repair, the servicemen who came were a 40-year-old man and his 74-year-old father. I told them what a great idea I thought that was. The 74-year-old said, “All my friends at the retirement community are jealous. I have something meaningful to do. I still get to fix things and be productive. If I didn’t have this, I’d probably end up dying like a lot of my friends who had nothing to do.”
If a parent is too proud to accept a parental pension, another option is for the children to hire the parent for babysitting, odd jobs, or even help with a small business. Both sides win. Mom and/or Dad get meaningful work, extra income, and a chance to do something that contributes to their child’s success. And the child gets help from someone he or she can trust. My own father has been working with my company part-time for years, and it has been a great reciprocal arrangement in both tangible and intangible terms.
Hiring a parent can be the saving grace for many retirees who want either extra income or meaningful work––or both. If one of your clients has a business, it can be the optimum way to give back, while parents get the chance to contribute to a son or daughter’s life. I have found that it isn’t just about money and being able to work; it is also about adding a whole new and intriguing dimension to a parent-child relationship as they build an enterprise together. If a child wants to help his or her parents, this is a great alternative to a parental pension. It’s a great way to ensure Mom and/or Dad still contribute in a meaningful way—and for many folks, that means earning a paycheck.
These decisions go beyond just the clients who are making them. Others are and will be affected by the decisions they make. Whether it is family members or those affected through a client’s charitable efforts, the decisions they make with their money and life can send ripples that are felt by many others for many years. One of the biggest ripples is that grandchildren can see first-hand the value of giving to others, and the value of family.
If you have been having these dialogues with your own clients, keep these ideas in mind. Your clients’ lives are bigger than the balance of any account they may own—and both parental pensions and hiring parents contribute to a greater Return on Life. If you sense your clients want to do something, but don’t know where—or how—to start, Mother’s or Father’s Day is as good a reason as any to introduce these concepts!
© 2015 Mitch Anthony
Mitch Anthony is the founder and president of Advisor Insights Inc.and the Financial Life Planning Institute, the leading provider of financial life planning tools and programs.
For almost two decades, Mitch and his team have provided training and development for both individual advisors and major organizations throughout the world. Mitch personally consults with many of the largest and most-recognizable names in the financial services industry on both financial life planning and relationship development.
Mitch has been named one of the financial services industry’s top “Movers & Shakers” for his pioneering work, and is interviewed by the media on a regular basis. The Institute is partnering with both Texas Tech University and the University of Georgia to develop financial life planning programs for their undergraduate programs. Mitch is a popular keynote speaker, columnist for Financial Advisor magazine and Journal of Financial Planning, and host of the daily radio feature, The Daily Dose, heard on over 100 radio stations nationwide.
Mitch is also the author of many groundbreaking books for advisors and consumers, including perennial bestseller StorySelling for Financial Advisors, cited by “Financial Advisor” magazine as the number one “must-read” book for financial professionals. Mitch’s other books include The New Retirementality (now in its 4th edition), From the Boiler Room to the Living Room, Your Clients for Life, Your Client’s Story, The Financial Lit-Kit: The Cash in the Hat, The Bean is Not Green, and Where Did the Money Go?. For information on these books and more resources, click here. Contact Mitch at [email protected].
