Within the last year as I've learned more about finances, I've realized that I grew up in a financially illiterate family, and so did my husband. Both of us grew up with poor but frugal parents, and our frugality has helped us manage so far.Â
We have a credit card, but we pay it off every month. We've paid off our two used cars, and we pinched pennies to pay off our school loans before our two kids were born. We bought our first house in June 2020 and have a monthly payment of about $1,600, so the only debt we have is that mortgage. I am a stay-at-home parent and my husband's salary is $70,000 before taxes, insurance, etc., is taken out. We currently have about $13,600 between our checking and savings accounts, and my husband has a 401(k) through his employer with a 50% match, which we use.
But here's the rub: When I was in college, some of my financial aid fell through. I had to face the fact that I couldn't afford to go back after that summer. I was distraught because I was young and dumb and could only think about missing my friends and boyfriend (now husband).Â
I don't remember how it got smoothed over, but it did. I was allowed to go back. Again, I was young and dumb and didn't give it another thought.
Much later, I learned my father took loans in his name to pay for what my financial aid didn't cover. He paid off those loans with his and my mom's retirement savings. I didn't realize this until it was already done.Â
Now they are talking about retiring in the next few years. (The date keeps shifting, but currently they're talking about 2025 at the ages of 69 and 68.) They are missionaries living overseas and plan to move to the U.S. to the same state my brother and I live in.
Because they currently have about $6,000 total to their name (no debt, but no other savings), my brother â€" who is financially better off than I â€" bought a condo this year and is renting it out until my parents retire. My understanding is that he and his wife had to juggle things to make this work. But they decided this real estate investment would help fund their own retirement someday, not just provide a place for our parents to live.
My father now wants me to help pay for his and my mom's retirement since he helped pay for my college. The loans totaled $39,769, but he had to pay interest. At first he wanted us to pay back $45,000 split into monthly payments of $400 from the month they retire until the $45,000 is paid back after about 10 years or they both pass away, whichever comes first.Â
Now he's saying because of inflation, he wants us to cover 'about three days a month of our retirement living costs â€" whatever inflated dollar figure that happens to be â€" for the first 15 years of our retirement, or until death. Whichever comes first.' That's a quote from his email to me. He got that figure by taking their current monthly income, averaging 21 work days a month, and dividing it by the $400 a month, which is 3.3 days of their current income.
We've plateaued at our current savings level since buying our house last year. I realize we have a few years to prepare for paying $400 or whatever it will be a month, but I'm at a loss for what to do or where to start. I'm also worried that we aren't saving enough for our own retirement. What if we end up with no options like my parents and hurt our own children's finances in the future?Â
I've been trying to learn about bonds, Roth IRAs, and so on. I'm so overwhelmed by how little I understand.Â
This isn't legal debt, but I still owe my parents. They won't be able to live in retirement without my paying them back. My brother has already done so much by preparing housing and a used car for them. I can't ask him for more. Plus, it's my fault my parents don't have retirement savings, not my brother's.
Can you please help me decide what our next steps should be? Do we hire a financial planner to give us custom guidance? Do I need to read books and take classes to understand how to manage all of this since Google results are going over my head?Â
I'm considering taking a part-time job so its entire income can go toward paying back my parents, but I don't know if that's the right move either. I can't work full time right now because our kids are elementary-age, and paying for childcare would eat up nearly the whole salary.
And don't get me started on my in-laws, who live in a different state. My father-in-law is incarcerated. My mother-in-law is living on only Social Security in my sister-in-law's apartment. My sister-in-law is single with two elementary-aged kids and is working full time while trying to earn a teaching degree. We are wealthy compared to that side of the family. We want to help them too, but we feel stuck!
-Overwhelmed
Dear Overwhelmed,
It's not your fault that your parents can't afford to retire. Responsibility for that rests on your parents' shoulders.
The money your dad paid for these loans would certainly be helpful to your parents. But it's unlikely that $45,000 would have been enough to buy a comfortable retirement, even if your parents had left it invested.
If your dad intended for you to pay back the loans for your college, he should have discussed that with you at the time. But I'm not sure that this was actually his intention back then. It sounds like your parents are panicked as their retirement is approaching. Now they're going back and trying to stick you with part of the tab, plus a nonsense inflation adjustment.
Your problem isn't financial illiteracy. You and your husband are doing a fine job of managing your money. The problem is that a $70,000 paycheck only goes so far. Your husband makes enough to cover your family of four. But that's not enough to pay for your parents' retirement or your in-laws' needs.
I don't think you should agree to help out your parents just yet. That doesn't mean you're vowing to never help them out. But you need to focus on your own savings first. Since you have two young children and you're dependent solely on your husband's income, building up a six-month emergency fund on top of retirement savings should be the primary goal.
You can be honest here: Tell your parents that you're not currently in a position to pay $400 a month, and you don't know if you will be in 2025. Say that you're grateful for their sacrifices. But make it clear that you didn't know they were raiding retirement accounts to pay for your education.
What you should avoid is giving your parents a full accounting of your finances. Expect every piece of info you provide about your income and obligations to be used to make the case that they need your money more than you do. Don't give them that leverage. 'I'm not in a position to give you $400 a month and I'm not sure if I will be four years from now' is sufficient.
Knowing that their daughter isn't a guaranteed source of retirement income can help guide their financial decisions over the next few years. Regardless of whether you choose to help out later on, don't base this decision on the level of support your brother is providing. This is about what you and your family are willing and able to give.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected] or chat with her in The Penny Hoarder Community.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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