How to Support Aging Parents Without Derailing Your Retirement

You’re working hard, saving for retirement, and maybe even helping your kids launch—but now your parents need help, too. For many couples in their forties and fifties, the financial squeeze is real.

It’s a season of life that can feel both meaningful and overwhelming. You want to be there for your parents, to honor everything they’ve done for you. At the same time, you’re navigating your own financial goals, career demands, and family responsibilities. It’s not about choosing one priority over another—it’s about finding a path forward that supports your loved ones across generations with compassion and clarity.

When you’re balancing elder care and retirement planning, it’s easy to feel stretched thin—financially and emotionally. The good news? With thoughtful planning, you can care for your family and stay on track for the future you’ve worked so hard to build.

Remember to Put Your Oxygen Mask on First

This isn’t just about the rising cost of care; it’s also about the emotional weight of setting financial boundaries with the people who raised you. That can be hard, even when you know it’s what’s best for everyone in the long run.

Supporting your parents doesn’t mean covering every cost yourself. Instead, look for ways to help them make the most of the resources they already have, whether that’s retirement income, home equity, or other assets. The goal is to preserve their dignity and quality of life while protecting your own financial stability.

As the saying goes, you need to put your own oxygen mask on first. Prioritizing your financial well-being isn’t selfish. It’s a necessary step toward being able to care for others with confidence and resilience, both now and in the years ahead.

Consider a Rental Setup That Works for Everyone

There often comes a time when the family home simply doesn’t fit anymore. Perhaps it has stairs that have become difficult to navigate or bathrooms and entryways that aren’t designed for changing mobility needs. The yard and upkeep may have once been a source of pride, but now feel overwhelming or even unsafe. And if your parents live far from family, especially potential caregivers, distance can add layers of stress and complication during an already challenging season of life.

In these situations, a move may be the best solution, whether to bring your parents closer to family or simply to place them in a home that better suits their needs. One option to consider: purchasing a small condo or townhouse and setting it up as a rental. Rather than gifting the home outright, you can charge fair market rent, ideally covered by your parents’ Social Security or other retirement income. This approach helps maintain their independence, eases day-to-day challenges, and gives you a long-term asset that may come with potential tax benefits.

Use Existing Home Equity Wisely

If your parents already own a home, you may be able to strategically leverage the equity it’s built up over time (especially considering the rapid rise in home valuations in recent years). As they age, consider how the equity in that home can be used to provide for their future care needs.

With your parents and the help of an advisor, explore potential options including:

• Home equity loan or line of credit (HELOC)
• Selling and downsizing
• Possibly moving and renting the home for extra income.  

Home equity can be used to fund part-time care, pay for home modifications, or cover other expenses.

Tapping into your parents’ existing equity also helps preserve more of your own savings. Rather than covering care costs out-of-pocket, you’re using the assets your parents have already built to support their quality of life.

Use Other Resources Strategically

When deciding which funds to draw from first, try to follow a thoughtful order that balances tax efficiency with long-term planning.

For example, start by making full use of your parents’ guaranteed income sources, such as Social Security or pension payments. These benefits typically can’t be passed on and are meant to support their needs during retirement, so it makes sense to use them first before tapping into other savings or investments.

Withdrawals from retirement accounts like IRAs or 401(k)s are taxed as ordinary income. However, depending on your parents’ overall income in retirement, they may fall into a lower tax bracket than you, especially if you’re still working. Strategically drawing from their accounts now could reduce the long-term tax burden on your family and preserve more of your own assets.

If you eventually inherit your parents’ tax-deferred retirement accounts, you could face a significant tax bill. Under current rules, most non-spouse beneficiaries must empty inherited IRAs or 401(k)s within 10 years—and all withdrawals are treated as taxable income. If you’re in your peak earning years when this happens, those extra distributions could push you into a higher tax bracket.

Rather, it may be a more tax-efficient option for your parents to spend those funds on their own needs now. Meanwhile, other assets—like taxable investment accounts or real estate—that may qualify for a step-up in basis at death can be preserved as part of a more tax-efficient legacy plan.

What to Do When Assets Are Limited

Not every parent enters retirement with a cushion of savings, home equity, or reliable income beyond Social Security. When resources are tight, it’s important to explore alternative strategies that can still provide the care and support they need.

In some cases, Medicaid may offer essential help with long-term care costs. However, eligibility comes with strict income and asset limits. To navigate this, families sometimes use tools like irrevocable trusts to preserve assets while still allowing parents to qualify for benefits. The key is timing: these strategies often need to be in place at least five years before care is required, due to Medicaid’s look-back rules.

If your family is in this situation, consider consulting a financial advisor or elder law attorney. With the right guidance and early planning, you can help ensure your parents receive the support they need, without creating additional financial strain on yourself or your family.

Don’t Neglect Your Own Needs

It’s easy to fall into the mindset that you need to do it all, especially when you’re caring for an aging loved one. But if supporting your parents starts to derail your retirement savings, the entire family could end up with fewer options down the road. You’re not helping anyone if you end up financially vulnerable in your own later years.

Keep contributing to your own investment accounts. Have enough cash on hand for upcoming needs. And whenever possible, rely on your parents’ resources, rather than your own, to cover their expenses. Protecting your financial future is part of protecting your family’s stability.

Remember, You Don’t Have to Do It Alone

Balancing your own goals with the needs of aging parents is no small task. It takes time, heart, and a plan.

This article was originally published here and is republished on Wealthtender with permission.

About the Author