Helping Your Clients Give Gifts that Matter

“Honor your father and your mother, that your days may be long in the land that the LORD your God is giving you”—Exodus 20:12. 

At this time of the year, we all love to celebrate—at home, at the office, and with friends and family. We give gifts to those we care about to show our appreciation. What better way to celebrate and show appreciation than by giving back to those who brought us into this world: our parents.

Chances are many of your clients want to help out their parents in a substantive way but aren’t sure what they can do or how they should go about it. As a planner, you can help those clients fulfill their goal of wanting to help out one or more of their parents by helping them design a parental pension.

You’ve probably heard me talk about Owe-Grow-Live-Give, the four things you can do with your money. A parental pension would fall under the “Give” category.

I’m sure many of us would agree that we owe a great deal to our parents for the sacrifices they made for our benefit. My own father traded higher-paying, more prestigious jobs for a better quality of family life for us. He deliberately chose to restrict his career advancement, so he and my mother could raise us in a small, quiet midwestern city.

Consider the following story I was told several years ago:

“My sister and I had talked many times about how unjust our father’s retirement situation was and wondered if there was something we could do to make it 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 Dad’s pension was basically worthless. Now he is retired 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 told us he was fine. My sister and I got together and talked about the fact that we were both doing well. Neither of us was yet at the point where we were set for life, but we figured out a way we could help Dad. 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 his life was limited before helping out?”

“We came up with a plan. Here’s how it worked: we both contributed $30,000 of our own savings for a total of $60,000 into a mutual fund that had a strong and steady track record. We arranged for a disbursement of several hundred dollars per month to be sent to our father’s checking account. Even though our father receives the distributions, the fund itself is in our names so we, in effect, both still own the $30,000 we contributed. This was all quite easy to arrange. Basically, all we are sacrificing is the interest on our savings; a small price to pay to help ease our father’s financial anxiety. We feel it was the best gift we ever gave Dad.”

You can see how two people discovered a way to celebrate a parent by giving their father a margin of comfort and security while he is still vital and mobile enough to enjoy it—a parental pension. It wasn’t a lot of money, but it was enough to make a difference. Many of your clients have already prepared themselves, at least mentally, for the possibility that they may need to subsidize and support their parents at some point. Some of these individuals have decided to accelerate that financial support to lessen the economic anxiety of their parents’ retirement years.

I have met people who took a portion of a windfall they received and created a parental pension for parents who were living exclusively on Social Security payments. Their parents had already adapted their lifestyle to the level of income they were forced to live on—the additional money helped them enjoy a degree of freedom and comfort with the added income.

Whether it’s a parental pension or something else, the best gifts come from the heart and have a meaning that is significant and long-lasting. Now that’s something to celebrate!

From everyone at MitchAnthony.com, have a joyful Christmas!