Question:

“I am a young adult or a “millennial” as people seem to love pointing out, and I am concerned about my parents’ decision to retire young.  Now that I’m a college graduate working full-time, paying off loans and supporting myself, I see and understand how long it can take to amass a significant amount of retirement savings. It’s not that I don’t trust their judgment, I just wonder – with medical advances and life expectancy for the healthy on the rise – if they will have enough to live comfortably across the 40+ years they could realistically live. That’s a long time not working.

Here is some background. My family has always been middle class, never wealthy.  My father will have a government pension, as he has been an employee there for many years. They have not always been the best money managers, and I would hate to see them struggle in retirement. I have already seen my grandmother run out of money for her care and needs. I am wondering if they are making the right choice to retire in their early 60’s when they may have so many years to live. Should I say something?”

Answer:

Money management is a tough topic to discuss with your parents when you recently stopped being their dependent.  They may feel that you have not a clue about money yet.  On the other hand, you are asking a very mature question.  I believe that many financial planners in this country would share your concern.

When you reach 60 years of age, it seems like everyone around you is retiring or talking about it.  It can feel like you are missing out if you are not planning to retire also.  It is a bit of herd mentality in my opinion.  It is not easy to comment as to whether or not their retirement is a good idea without quite a bit of additional information; but since you asked, let’s talk about your next steps.

You have clearly witnessed poor decision making as it relates to money management.  There is one definite piece of good news, your father’s government-controlled retirement program.  They are not going to receive a lump sum of money with a pension program.  It will be much like a paycheck for them, which is consistent.  Social Security works much the same way, as individuals who have paid into the system receive a monthly check when they begin collecting.  In sum, they are not going to be able to spend the money until they receive it.

The only caveat is their spending habits.  If the monthly checks they are going to receive will not cover the bills they accrue each month then retirement is not a good idea.  If they are comfortable with credit card debt, they should not be retiring, as raises and promotions are not an option anymore.

As their relatively young child, I say take the risk by simply asking a few questions.  I would start with, “How do you know when you are financially able to retire?”  Ask them to explain it to you.  Maybe they have savings that you are unaware of.  Ask them if they are afraid of running out of money.    Ask them to explain to you how Medicare works.  Finally, I would ask if they walked through their plan with a financial adviser.
 
Your questions should prompt some interesting discussion, either providing you comfort that they have thought this out carefully, or cause you concern.  Hopefully, your parents have it figured out, and if not, you will get them to at least think through it again.