I first learned of this concept from Mitch Anthony, author of “The New Retirementality.” He wrote that many of us have aging parents. Some of our parents are set for life with plenty of financial assets. Others are not so set. Many are living on subsistence incomes patched together with social security, limited savings, and part-time work.
Most of us feel grateful to our parents. I know my parents always did what was in my best interest. When looking out for me they didn’t always make decisions to maximize their own income or profit. Also, a high income was harder to come by in the 1960’s and 1970’s. As a result, my father ended up having virtually no financial resources for his advanced years.
I helped my father in many ways financially. My favorite though was the Parental Pension. I owned shares in a REIT mutual fund. I simply had all distribution checks sent directly to my father. I didn’t miss the income or loss of growth at all. It really was a noticeable bump in his quality of life though.
The example Mitch Anthony gave in his book involved two adult children. They had generous incomes and assets and wanted to help their father. They each contributed $30K to the Parental Pension to get it started. They invested the $60K into a mutual fund that had returned almost 15% over many years. They set it up to write a check for $500 each month to their father. The fund only needed to return 10% to produce the $6K per year. They both agreed that if the funds declined, they could add more in later.
Sometimes an extra $250 - $500 per month coming in provides peace of mind. It can provide a margin of safety. It can contribute to savings or an emergency fund, cover necessities, or even add a few special treats or luxuries to their life.
After a nine-year bull market this may be a time to consider this option in your life. Do you have an aging parent who would appreciate a little more income?