Retirement planning can be a scary subject, with good reason: More than a fourth of non-retired people have absolutely nothing saved for retirement, and even many folks who have some retirement savings don’t have nearly enough. For some folks that means tightening their belts and figuring out how to survive on Social Security. But for a lot of aging parents, having nothing saved for retirement means they’re relying on their adult children to be their retirement plan.

About one-third of middle-aged adults are already supporting their parents financially, and most expect that to continue indefinitely. While most people love their parents and probably don’t want them to slide into poverty and sadness, there’s one obvious problem with serving as your parents’ retirement plan: You might go broke doing it. If you know that your parents will be looking to you for support when they can’t work anymore, there are steps you can take to protect yourself.

Start with the numbers

First, you need to know what you’re dealing with, and that means digging into your parents’ financial situation and overall net worth. Consider all of these possible sources of income and potential financial needs.

• Do a Social Security audit. If your parents worked, they’re likely entitled to Social Security benefits. If they haven’t already, have them create Social Security accounts and check into their benefit situation. Keep in mind that the longer they can wait to take their Social Security benefit, the larger the payouts. Social Security won’t be an enormous amount of money, but depending on your parents’ work history, it can be a significant amount that will definitely help defray the costs of supporting them.

• Track down their retirement savings. Even if your parents have long assumed you’ll be their retirement plan, they may have accrued some retirement savings automatically through their jobs. They may have even forgotten about small 401(k) plans they left behind at old jobs. Do a deep dive to uncover every single retirement account they have or once had, and make sure you know how to access them and what the balances are.

• Plan what to do with their property. If your parents own a home, find out what the situation is there. Do they still owe on a mortgage? Are there any open home equity lines of credit or loans? What’s the home's value? Selling can unlock a lot of cash that could be used to support your parents (while eliminating the associated costs of home ownership), while a reverse mortgage might be a way to let your parents age in place with an enhanced income.

• Make a budget. Once you know how much money your parents actually have, you can make a budget for them that will stretch that money as far as possible. Getting them used to living on a budget now will pay dividends later if you have to take a more active role in the day-to-day management of their lives. It’s important that this budgeting process includes how much you can reasonably contribute without harming your own finances—or your own future retirement. Knowing what your “number” is in the context of supporting your parents will be essential in every decision made, so you'll have to plan out your own budget as well, with your parents as a factor.

Consolidate your resources

Now that you have an idea of how much your parents (and you) can contribute to their own upkeep when they retire, you can start to think about how to lower those costs. A few scenarios to consider:

• Move them in with you. If selling their home is part of funding their retirement, or they don’t own a property, one of the easiest ways to lower their retirement costs is to have your parents live with you. There are obviously a lot of emotional and psychological factors at play here, but from a financial standpoint, it makes a lot of sense. Instead of trying to pay their living expenses on top of your own, a lot of those expenses would be shared—and you’ll also have control over those expenditures.

  This can especially make sense if you have space in your own home and your parents don’t need the support of an assisted-living facility or other resources (such as a nurse). But it’s important to formalize how they’re going to contribute to the household budget, whether that means paying rent or covering specific bills.

• Give them tax-free "gifts." You can give a certain amount of money to your parents every year without any tax concerns. The current limit is $18,000, so you can give that amount to your parents to help support them without having to file any tax paperwork. That can help cover their bills without any extra penalties for your income or assets.

• Create a money pool with your siblings. If you have siblings, you may each have a different capacity to help out. Instead of richer siblings paying for everything and lower-income siblings paying nothing, create a “pool” of money that everyone pays into according to their situation, and pay our parents’ bills out of that. It’s important to consider not just a siblings’ income, but also their direct costs—if your parents are living with you, for example, you might be paying more to cover higher utility bills and other costs, and thus you might contribute less to the pool to reflect that.

Find support

One of the most crucial things you can do to protect your own retirement once it becomes clear that your parents will need your assistance in theirs is to identify public programs that your parents can use to supplement their retirement. There’s often a stigma surrounding utilizing these sorts of government- and community-run programs, but this is why they exist in the first place—so take advantage.

There are the obvious programs like Medicaid and Medicare, or food assistance through the SNAP program, but there are more other options than you might think, so do your research. A good place to start is this site, maintained by the National Council on Aging, which lets you search in your area for specific support programs, including health care, transportation needs, or simple senior discounts that might be available. There are often a lot of valuable benefits out there that can save your parents—and thus, you—a lot of money.

Outside your local area, there are several programs run by the federal government that can help too:

• U.S. Department of Housing and Urban Development (HUD). If you can’t afford to have your parents move in with you, and they can’t afford where they’re currently living, HUD offers programs to help senior citizens find affordable housing.

• Utility assistance. Heating and cooling can be a significant expense, and attempting to keep costs down by not heating or cooling the home can be dangerous. Many local utilities have low-cost programs in place for seniors in need, so it’s worth a call to investigate this. There’s also the Low Income Home Energy Assistance Program (LIHEAP), which can provide assistance.

• Tax credits. If your parents have a very small income (currently between $12,500 and $25,000, depending on their filing status), they may be eligible for a federal tax credit, which can be as much as $7,500.

• Supplemental Security Income (SSI). If your parents are 65 or older and earn less than $1,971 per month, they may be eligible for SSI benefits. This won’t be a huge amount of money (it depends on actual income and other factors, but tops out at about $914 per month for individuals and $1,371 for couples), but it can help defray costs.

Additionally, many areas offer free transportation for seniors (sometimes specifically to and from medical appointments, but some municipalities also run free bus services around town) which might allow you to cut the expense of a vehicle from your parents’ budget.

Being your parents’ retirement plan is a lot of responsibility—and a lot of stress. But if you plan ahead and look into all the resources available, you can at least avoid going broke yourself in the process.

It’s never too late to start saving for retirement, but how early should you start? Whether your teen is lifeguarding at the local pool, scooping ice cream, or mowing lawns, summer gigs offer more than just spending money—they present a golden opportunity to kickstart a lifetime of financial security. The reason for this is compound interest, which we’ll run the numbers on below. If you’ve been waiting to invest in your retirement until you check off other financial goals (cough cough, students loans), let’s breakdown why you should consider setting aside at least some savings. And if you have a teenager who rolls their eyes at the idea of contributing part of their very first paycheck to their far-off retirement, here’s how you can explain to them why it’s so important to start saving as early as possible.

Why saving early is so important

Simply put, compound interest means the interest on an investment grows exponentially—rather than linearly—over time. What this means for a retirement account like a 401(k) or Roth IRA is that every little bit you contribute goes a long way, especially compared to a traditional savings account. The key is that with compound interest, how early you start saving usually outweighs how much you contribute. Even an investment left untouched for decades can keep growing.

Let’s take a look at some specific scenarios that show how compound interest works for you. These all assume a moderate 6.5% annual investment return on their retirement funds, which is around what most return on investment calculators will be set to automatically, and a retirement age of 66.

Scenario 1: Starting at age 35

• You save $1,500 per year from age 35 to 55

• Total amount invested: $30,000

• By age 66 (31 years after starting), your investment grows to: $186,138

• Compound interest earned: $156,138

Scenario 2: Starting at age 25

• You save $1,500 per year from age 25 to 45

• Total amount invested: $30,000

• By age 66 (41 years after starting), your investment grows to: $373,569

• Compound interest earned: $343,569

Scenario 3: Starting at age 15

• You save $1,500 per year from age 15 to 35

• Total amount invested: $30,000

• By age 66 (51 years after starting), your investment grows to: $749,029

• Compound interest earned: $719,029

These scenarios clearly demonstrate the incredible advantage of starting to save early:

1. Starting at 35: Your $30,000 investment grows about 6.2 times.

2. Starting at 25: Your $30,000 investment grows about 12.5 times.

3. Starting at 15: Your $30,000 investment grows about 25 times.

By starting just 10 years earlier (at 25 instead of 35), you more than double your retirement savings. Starting at 15 instead of 35 results in four times the retirement savings.

The teen summer job advantage

Now, let's put this into the context of summer jobs. If your teen saves $1,500 from summer jobs each year from age 15 to 19 (just five years):

• Total invested: $7,500

• By age 66, this grows to: $190,893

• That's over 25 times the initial investment.

If they save $750 (half of the previous amount) each summer from age 15 to 19:

• Total invested: $3,750

• By age 66, this grows to: $95,446

• Still over 25 times the initial investment!

Even small amounts saved from summer jobs during the teen years can grow into substantial sums by retirement age. The key is to start early and let compound interest work its magic over many decades.

Of course, the best-case scenario is that you start saving early and never stop investing. But the scenarios above demonstrate how important time is as a factor, and how any savings at all—even if left untouched for years—can go a long way.

Motivating your teen

While retirement may seem like a distant concern to a teenager, these numbers can help illustrate the incredible opportunity at hand. Here are some tips to encourage your teen to start saving:

1. Show them the math: Use an online compound interest calculator to demonstrate how their money could grow. To run the numbers yourself, Investor.gov has a calculator that allows you to test out different saving scenarios that work for your financial situation.

2. Make it relatable: Discuss future goals like buying a house or traveling the world, and how early saving can help achieve these dreams.

3. Start small: Encourage them to invest even a small percentage of their earnings.

4. Lead by example: Share your own retirement saving strategies and experiences.

The bottom line

Encourage your teenagers and young adult children to contribute to a Roth IRA or 401(k) from their very first paycheck—and they’ll thank you later as they watch those numbers grow and grow. And remember that no matter your age, you can still take advantage of compound interest, too, even with a small initial investment. What matters is that you start to save and invest ASAP. Check out our guide to how much you should have saved at every age.

Target-date funds have become an increasingly popular investment choice, especially for retirement accounts like 401(k)s and IRAs. Their main appeal lies in their simplicity and hands-off approach to managing your retirement portfolio. These funds are not a perfect solution, however—and it's essential to understand their pros and cons before deciding if they align with your investment goals and risk tolerance.

How target-date funds work

Target-date funds are designed to provide a diversified and professionally managed portfolio that automatically adjusts its asset allocation over time. The "target date" in the fund's name refers to the approximate year when an investor plans to retire. The fund starts with a more aggressive asset allocation, heavily weighted towards stocks, and gradually becomes more conservative by increasing its bond allocation as the target date approaches.

The pros: convenience and automatic rebalancing

One of the primary advantages of target-date funds is their convenience. These funds essentially put your retirement portfolio on autopilot, eliminating the need for constant monitoring and rebalancing. As you get closer to retirement, the fund automatically shifts its asset allocation to become more conservative, reducing your overall risk exposure.

Additionally, target-date funds offer diversification across various asset classes, such as stocks, bonds, and sometimes alternative investments like real estate or commodities. This built-in diversification can help mitigate risk and volatility.

The cons: lack of customization and potential misalignment

While the convenience of target-date funds is appealing, it comes at the cost of flexibility and customization. These funds follow a predetermined asset allocation glide path, which may not align perfectly with your individual risk tolerance, investment objectives, or retirement timeline.

Furthermore, target-date funds often have higher fees compared to individual index funds or ETFs, as you're paying for the professional management and automatic rebalancing.

Another potential drawback is the lack of transparency regarding the fund's underlying holdings. Some target-date funds may invest in actively managed funds or employ complex strategies, which can make it challenging to understand and evaluate the fund's true risk exposure.

Are target-date funds right for you?

Target-date funds can be an excellent choice for investors who value simplicity and prefer a hands-off approach to managing their retirement portfolio. They can also be a good starting point for those new to investing or those who lack the time or expertise to actively manage their investments.

However, investors with more complex financial situations, specific investment preferences, or a desire for greater control over their portfolio may find target-date funds too restrictive. In such cases, building a diversified portfolio using individual index funds or ETFs and periodically rebalancing it may be a better option.

Ultimately, the decision to invest in a target-date fund should be based on a thorough understanding of your financial goals, risk tolerance, and investment knowledge. It's essential to carefully review the fund's prospectus, underlying holdings, and fees before making a decision.

Remember, target-date funds are not a one-size-fits-all solution, and their suitability depends on your individual circumstances. If you're unsure, consulting a qualified financial advisor can help you determine the best investment strategy for your retirement planning.