Mom and Dad Retired with No Savings. It's Going to Cost You

The Financial Griot

Parents Retiring with no money? Read This Now!

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Have you considered when and how you will retire? Most people haven’t and the clock is ticking.

Aging millennials translates to aging parents. The second largest population is heading into their 40s with less assets, more wants and way more debt.

CNBC issued an Op-Ed, “What millennials, Gen Z need to succeed against the economic odds?”

The answer was simple; parents who are financially prepared for retirement. It’s estimated that each underfunded retirement plan will cost their kids and/or caregiver upward to $2,000 per month for each aging adult.

That’s already $24,000 for the year. With inflation settling in at over 4% for the coming decade, this is an amount we currently don’t have to spare.

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Knowing the Retirement Numbers for this Conversation

For four living adults that’s north of $8,000 per month. How did we arrive at this number?

Well that math is simple. A US household headed by someone aged 65 and older spent an average of $48,791 per year, or $4,065.95 per month, between 2016 and 2020. The top five categories for expenditures include Housing, Transportation, Healthcare, Food and Entertainment.

However, median household income for retiree settled around $46,360 in 2020 (per the US Census). This isn’t so bad, since it’s only short $2,000, however we are BLACK.

Our odds are worst.

An African American retirement insecurity crisis is brewing. Eighty-three percent of Black seniors lack the retirement assets they need to last the remainder of their lifetimes.

As of 2019, Black Americans age 62-70 have a median net worth of $46,200 as compared to $331,700 for whites. Over 80% are retiring completely dependent on social security. The average Social Security retirement benefit in January 2022 was about $1,614 per month, or about $19,370 per year.

The difference between the estimated income of $20,000 minus the expenses of $48,000 per year is $28,000 or $2,333 needed per month. Yeah, it’s tight. If we want to help our parents retire in grace and ultimately ourselves, we will have to step up sooner than later.

By 2050, Retirement will get very expensive

The financial griot invited special guest Ecclessiate Guerrier and brought back our guest host for the day, Michael Theodore to have an honest discussion on having the financial discussion with our aging parents.

*Be warned that our guests were using cell phone mics so it might get fuzzy.

So what’s the big picture when it comes to aging parents and retirement?

In nominal terms, by 2030, the annual costs will balloon to $155,490, assuming a 3 percent annual inflation rate.

To support those increasing needs, your nest egg should be about $1.7 million the day you retire. To think that CNN reported this back in 2003 in their Sticker Shock report.

Costs will go up by 2050 (check out the Brookings Institute Synopsis), so it’s up to you to mitigate nursing or hospice care of up to $100,000 per year per person.

The goal is to establish a solid retirement plan (for your parents) that doesn’t sink your own wealth in the process. If this scares you, you might need to work on your own retirement plan as well.

Can You Maintain Your Lifestyle after You Retire?

In short, most people wont be able to maintain their current standard of living. This will come with loads of psychological issues.

The Financial Griot podcast is centered around the possibility of better planning. If you want to maintain this current millennial lifestyle of around $60,000 per year, it will cost around $100,000 by 2040.

We did the math so you don’t have to.

In order to weather the storm, you will have to embrace becoming financially literate while incorporating actionable steps. You really don’t want to undo all the generational wealth you built. Well if you even start to build any?!

Don’t be fooled others are planning ahead and are retiring way before mom and dad. It’s all about strategizing as a family. If you start the process now, you can even get creative like we did and doubled my mom’s retirement income.

Check out the blog post, How to Double Your Mom’s Retirement Cash flow.