Fear of being a burden is human nature, but it’s possible to overcome it. You can show your folks that they are financially stable and can afford to take better care of themselves with a review of their retirement cash flow and a projection of future income and expenses.

Begin by noting their sources of income and expenses—home, auto, vacations, medical. This is your baseline for projecting changes year over year. To forecast conservatively, use a higher inflation rate and make modest assumptions about their portfolio’s return and income from Social Security. You should include increasing expenses (e.g., medical), but don’t forget about medical benefits or long-term care insurance coverage, which may help protect the portfolio. Finally, show your parents that they can support themselves by extending the projection out to age 100—or even longer.

Review their portfolio to ensure that they have appropriately allocated among equity, fixed-income and alternative investments, and that they are managing withdrawals for tax efficiency, IRA distribution requirements and maintaining proper allocation. If your parents withdraw sums infrequently, see if they will take smaller disbursements on a monthly or biweekly basis, like a paycheck. This may reduce the psychological impact of withdrawing money.

Arrange semiannual reviews involving you, your parents and their financial advisor, and broach the subject of Mom and Dad’s withdrawal rate. Finally, consider discussing your own portfolio with your parents. It may ease their minds to see that you are in good shape financially.
Bernie Wolfe, Bernard R. Wolfe & Associates, Chevy Chase, Md.

Many who lived through the Depression share your parents’ fear. To overcome it, they need to be convinced that they are financially secure.

Have your parents run financial scenarios using different inflation, living expenses and rates of return assumptions. Ideally, a trusted advisor would assist with this, but running projections is easy to do on the Internet, and Mom and Dad might find it interesting—and empowering—to do it themselves. If the projections show that they have money at age 100, this may convince them that there is enough for themselves and their family. They could begin taking the more standard 4 percent withdrawal, which is reasonable and should leave assets for their heirs.

It may help to set aside two years of living expenses in a savings account, and let the investments grow separately. Tapping the investment portfolio periodically to replenish the savings account may reassure them.

Lastly, tell your parents how you feel. They may not realize that it is stressful to watch them not spend on themselves when they can—and should.
Christiane S. Delessert and Christopher Dalto
Delessert Financial, Waltham, Mass.

Try letting the numbers inspire your parents into additional spending. Certainly withdrawing less than 2 percent of their portfolio is considered safe at age 80—or age 60 for that matter. Recent studies suggest that an amount three times as much is sustainable.

My sense is that your parents adhered to one of the first tenants of building wealth and peace of mind: Pay yourself first. Most of us think of the strategy as only a means to accumulate personal wealth. Paying yourself first in the accumulation years also provides great peace of mind for people like your parents who appreciate financial and emotional security on a level most of us find difficult to understand. Now is also the time to use the strategy—just in reverse. Encourage Mom and Dad to increase their withdrawals to a conservative 4 percent. Moreover, consider directly depositing the 4 percent into their main checking/bill paying account. Many times when money is separated from the investment portfolio, folks are more willing to actually spend it.

Continue to share that you—their children—will be just fine regardless of the wealth that they ultimately pass. Lastly, don’t expect a quick fix. Our experience suggests that there is a couple-year period to become comfortable with any new spending plan.
Timothy W. Wyman, Center for Financial Planning, Southfield, Mich.