How I Would Address Common Financial Questions for My Own Parents

About once a month or so, a client across the table from me will ask some variation of the question: “Well, what would you do for your parents in this situation?

Note that this is way different than asking, “What would you do personally in this situation?” 

Why? Because we are all willing to take on more risk for ourselves. We are willing to “roll the dice” a little knowing that the risk can lead to temporary discomfort, but potentially enhance long-term success. We are MUCH less likely to extend that discomfort to our parents. Typically, we want to do what is “safe” – what is proven, prudent, and dependable.  

And I ask myself this question frequently. Is this what I would recommend for my own parents, financially? 

To give you a closer look inside my head… Here’s what we’ll do.


Let’s Look Into Common Financial Questions & How I’d Address Them For My OWN Parents: 

  1. Should I Claim Social Security? 
  2. How Many Stocks Should I Have? 
  3. How Much Money Can I Take From My Portfolio Each Year? 
  4. Can I Retire Now? 


1. Should I Claim Social Security?:

I generally like waiting to claim social security until full retirement age. Especially if you still have earned income.

However, if you retire early and find that you must take large portfolio-withdrawals to fund your living expenses, it can be worth claiming earlier in order to relieve the stress on the portfolio. We can talk numbers all day, but in the end… a). I don’t know what is going to happen with your investments and b.) I don’t know how long you’re going to live…

With that being said, you really just have to do what makes you most comfortable.

It’s a game of peace of mind –  not a game of numbers. 


2. What Should My Asset Allocation Be? Or… How Many Stocks Should I Have?:

Back in the “old days” an average allocation for a retiree was 60/40. Today, I see a lot more retirees’ portfolios closer to 70/30. Why? Bonds had been providing minimal return the last decade (well… until now). So, for many of my clients who have risk tolerance and need the return to succeed, I really like a 70/30 portfolio. Now, I know you, mom and dad. You are fairly conservative folks. I would suggest a 60/40. 


3. How Much Money Can I Take From My Portfolio Each Year?:

There is an old rule of thumb that with a balanced portfolio, you can safely draw 4% of your portfolio and then inflate that forward for 30 years. For my parents though, I want them to live a fulfilling life – one where they don’t have to penny pinch in retirement. Instead of 4%, I am comfortable pushing that up to 5%.  

If your parents had a $1,000,000 portfolio, 4% would mean they could withdrawal $40,000/year vs a 5% withdrawal of $50,000. Think about how much more your parents could do with that extra $10,000. Obviously, there is a tradeoff that they won’t have as much buffer at the end of their life and there would be a lesser “financial legacy.” Those are some of the reasons I do not recommend 5% to all my clients. It really depends on the family. 


4. Can I Retire Now?:

I look at the prior question. Can 4-5% of the portfolio plus fixed income from pensions and/or Social Security cover your expenses? Yes? Great. Do you have plenty of cash on hand outside of your portfolio to cover your first couple of big expenses like a car, roof, furnace, etc.? If so, awesome.  

But… You really shouldn’t retire until you know how you’re going to spend your time. An object in motion stays in motion, and we want our parents to stay in motion, don’t we? I have more thoughts here 


There are so many more financial questions I get that I would love to address another day. There are some questions that I answer differently from client to client because I know they are different people with very different needs. Thankfully, my clients really let me get to know them, which allows me to give more nuanced advice. So, while I will never get to know you like I do my own parents, know that it’s a sincere goal of mine to understand your needs as best as I possibly can, so I can give you the best answer I possibly can! 


Disclaimer: None of the previously stated are recommendations. Everyone’s financial situation is different – Speak to your advisor.