How do I get my in-laws to save money?

(MONEY Magazine) — My wife’s parents, both in their early 50s, aren’t very good with money. They make around $80,000, but spend it instantly. One of them finally started contributing to a 401(k) this year at our insistence, but how can my wife and I convince them to save for retirement or emergencies? No offense to them, but we really don’t want them to move in with us in ten or fifteen years. –J.M., Virginia

Your trepidation is perfectly understandable, but you should be heartened by what you’ve accomplished already: After years of doing nothing to prepare for retirement, your in-laws have finally taken a first step toward building a nest egg.

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Ultimate Guide to Retirement
  • Getting started
  • 401(k)s & company plans
  • Investing
  • Annuities
  • IRAs
  • Self-employment plans
  • Pensions and benefit plans
  • Social Security
  • Insurance
  • Estate planning
  • Living in retirement
  • Getting help

And while your wife’s parents aren’t going to make up for years of foregone savings overnight, they still have plenty of time to improve their retirement prospects significantly — and reduce the chances of later having to settle in with you — if they start now.

So your goal at this point should be to keep the momentum going by persuading them not only to save more, but to come up with a plan that can give them a reasonable shot at being able to achieve a secure retirement within the next 15 or so years.

Ideally, you’d want to start by going to an online tool like T. Rowe Price’s Retirement Income Calculator and showing them what sort of retirement they can expect if they continue along the path they’re traveling now.

You can then run several scenarios that show how much they can improve their situation if they save more, invest differently or postpone retirement (although in their case, all three actions may be their only real shot at retiring with anything close to their present standard of living).

Are retirement calculators useful?

Be forewarned, though, this assessment is probably going to be pretty ugly. It will likely show that unless they really step things up, they’ll be in for a modest-to-grim retirement.

So you’ve got to consider: Would this sort of sobering news depress them, leading to a “Why bother?” attitude and a return to their free-spending ways?

Or might they see this kind of reality check as a challenge that could spur them to revise their spending and saving habits over the time remaining in their careers?

If you think a realistic evaluation is more likely to discourage than encourage, then maybe a different strategy makes sense. Instead of focusing on where they are, where they need to be and what they must do to get there, you could simply show them how much money they might accumulate by socking away different amounts per month between now and retirement time.

By going to our How Fast Will My Savings Grow calculator, for example, you could demonstrate that by saving $500 a month in a tax-deferred account like an IRA, they could end up with more than $145,000 in 15 years, assuming a 6% annual return. Up that amount to a grand each month, and you’re talking almost $300,000.

See if you’ve saved enough for retirement

Granted, those sums aren’t going to fund a grand retirement lifestyle for 25 or more years. But the idea behind this approach isn’t to get all nitpicky and dwell on the downside. Rather, it’s to show them that they can be a lot better off than they would otherwise be if they start making a concerted effort to save and plan now.

Once they begin to make some progress, you can then consider another pass at a more comprehensive evaluation.

Based on the fact that you seem to hold at least some sway with your in-laws, you could very well be the right person to deliver this message to them, and even help them work through some scenarios.

But if you feel you’re not up to the task — or you think a financial professional might have more success in coaxing them to step up their planning efforts –then you might consider setting up a session with a financial planner in your area who is willing to work on an hourly fee basis.

One way or another, though, you and your wife have to find some way to put her parents on track toward a secure retirement. Either that, or start getting that spare bedroom ready for long-term guests. To top of page

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