Helping mom with retirement

Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005).

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NEW YORK (Money) -- Question: My mother is 50 years old and has no 401(k), IRA or any type of retirement account that she can rely on when she is no longer able to work. What type of plan can I set up for her so she can start saving money? --L.K., Lancaster, Pennsylvania

Answer: The issue of what adult children can and should do to help assure that their parents are financially prepared for retirement is one that's getting more attention as lifespans increase and we become increasingly reliant on our personal savings to fund our post-career lives.

Typically, though, this is the type of question I get from baby boomers who, already squeezed by simultaneously saving for retirement and paying school and other child-rearing costs, now face the prospect of also having to provide financial assistance to retired parents.

Indeed, a global study of intergenerational issues released early last year by The Hartford found that more than a quarter of Americans 45 and older say they are currently caring for both children and parents or older relatives. Given how badly the retirement savings of many retirees have been hit by the market meltdown, I wouldn't be surprised if that number has already increased or will over the next few years.

The fact that your mom is just 50 likely puts you somewhere in your 20s, which means you're grappling with this issue earlier than most people. Just as well, though, since it can give both you and your mom more time to try to work out a viable plan.

Basically, there are two separate, but related, matters you and your mother must address. The first is primarily financial, while the second deals more with personal and relationship issues.

The financial side is relatively straightforward. You've got to find some way for your mom to start saving on a regular basis. You say she has no 401(k), but is she eligible for one? If so, you need to convince her to sign up for it ASAP and contribute at least enough to get the employer's match, if there is one. This is her best shot at jumping on the savings bandwagon since contributions to her account are automatically deducted from her paycheck before can spend the money.

If your mom's employer doesn't offer a 401(k) or other savings plan, help her open an IRA. By going to Morningstar's IRA calculator, you and she can quickly see which type of IRA, if any, she's eligible for (traditional deductible, Roth IRA or nondeductible) and how much she can contribute. The maximum contribution for 2009 is $5,000, plus $1,000 for people 50 and older. By the way, assuming she's eligible, your mom can also make an IRA contribution for the 2008 tax year if she acts by April 15th.

If your mom can sock away more than the maximum contribution for an IRA account, she can always invest in tax-efficient investments such as index funds like those on our Money 70 list of recommended funds or tax-managed funds within a taxable account.

To increase the odds that the money will actually make it into an IRA or taxable account, have your mom sign up for an automatic investing plan that transfers a certain amount -- $100, $200, $500, whatever -- from her checking account to her investment account each month. Like payroll deduction, this option makes saving more convenient -- and more likely to happen.

The personal aspects of convincing someone to save -- especially a parent or other relative -- may be more difficult to deal with, however. You say your mom is 50 but has saved zip for retirement. So the obvious question is why?

Maybe she's just never put her mind to it, in which case showing her columns that offer tips on how to start saving or suggest possible ways to free up the bucks to do so might help.

It's also possible that she's never made enough money to be able to put something away consistently. Or perhaps she just doesn't want to. Maybe she's perfectly happy the way things are.

All of which is to say that, far from simply introducing your mom to 401(k)s, IRAs, automatic investment plans and the like, the real challenge may be getting her on board with the need to save for retirement. You may also have to prepare yourself for the possibility that she's just not willing to change.

Finally, you also need to consider that, even if your mom is willing to accept advice on saving for retirement, you may not be the best person to give it to her.

While you may see yourself as a concerned son or daughter just looking to help a parent in need, your mom might see a nosy or intrusive child. Or she might feel embarrassed about having to discuss the details of her personal finances with you. She could see this as an infringement of her independence. So after broaching the issue with her, you may find that you're better off having her deal with a financial planner whom you or she hires.

Clearly, you'll have to exercise some sensitivity when you approach your mom on this issue. But now is a good time to do it. If your mom is willing to save, then starting now will give her more time to improve her retirement prospects.

And if she demurs, at least you'll have plenty of time to think about how much financial help you might be willing and able to extend her in the future should she need it -- and allow you to adjust your own financial planning accordingly.

Have you found a way to pay for your child's college education without taking on too much debt? Did you choose a university based on its lower cost or loan programs, research scholarships, or just save up and pay in full? We want to hear from you. Send your stories to pwang@moneymail.com and you could be featured in an upcoming story.