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Dear Penny: Do I Tell My Mother-in-Law Her Retirement Plans Are Screwed?

by Robin Hartill, CFP®

Senior Editor

Updated October 7, 2022

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Dear Penny,

My in-laws are hardworking folks who have never had much money, nor have they been good at managing it.

By his mid-20s, my partner was already in a caretaker role with them both with some light money management and my father-in-law’s extensive health issues. This care is part of what made me fall in love with him. He’s been able to hold firm boundaries through the years, allowing us to help when needed but still enjoy our warm relationship with them.

Several years ago, an elderly family member became ill. This family member was close to my in-laws a long time ago, but they’d lost touch as everyone aged. When this family member’s power of attorney attempted to defraud her, my in-laws stepped in to manage her finances and her medical care since she has no other living family.

It quickly became clear this task went beyond my in-laws’ abilities. While they didn’t want our help, my partner eventually had to intervene. This family member was about to be homeless, and my in-laws were essentially clueless. My partner was able to secure federal benefits for this family member that covered large portions of her care. This took a lot of the strain from my in-laws, and we thought all was well.

But we recently learned my in-laws took out a gigantic loan to cover some of this family member’s nursing expenses before she died last year. Not only is the loan huge, but the interest rate is terrible. My father-in-law told my partner they inherited a few thousand dollars from her, but they decided to keep it rather than apply it to the loan.

My father-in-law’s health continues to be poor, and my mother-in-law is beyond overwhelmed. My father-in-law has long been the manager of the family’s finances, but he’s terrible at it and my mother-in-law doesn’t like to intervene. It’s possible she’s not aware of the details of the loan. She’s close to retirement age, but this loan on top of their monthly expenses threatens her ability to retire completely.

With some assistance, I think they could manage the debt and even determine if any of this family member’s federal benefits will cover a portion of it. But is there any way to present this information in a way that they’ll accept? I’m tempted to use some direct language with them, like, “Without refinancing this loan you won’t be able to retire.” But my partner worries that will just add to my mother-in-law’s already paralyzing anxiety.

What should they do first to manage this loan? Which financial services can we put them in touch with in the future so if they don’t want to come to us, great, they can go to this person?

-Loan, Loan Go Away

Dear Loan Go Away,

Your in-laws are adults who are allowed to make bad choices if they want. But unsolicited advice rarely goes well. Even when the motives are good, the person on the receiving end usually feels like they’re under attack. And if your mother-in-law already has severe anxiety, starting the advice by telling her that she may never be able to retire will make matters worse.

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Your partner needs to take the lead here because these are his parents. He should try to make this a conversation instead of a lecture.

He should ask his parents if they’d be OK with sitting down to discuss a few financial matters. Tough conversations are best had when no one feels ambushed. Ideally, the three of them would have this discussion together.

Your partner should ask his parents some neutral questions. How big is the balance? How much is the interest rate? What are the monthly payments?

You say you’re not sure if your mother-in-law is aware of the details of the loan. But I wouldn’t assume your father-in-law is fully aware, either. Sometimes when people are overwhelmed by debt, they have no idea what they owe or what it’s costing them.

Once your partner gets the facts of the situation, then he can ask his parents how they’re feeling. Do they feel worried about whether they’ll be able to repay the loan? What about after his mother retires?

If your partner is worried that his parents can’t afford the loan, then he should say to them something to the effect of “I’m worried about whether you can afford these payments, but I think you have options. Could we discuss them?”

The point is to keep the message judgment-free. Telling your in-laws that they’ve made poor money management decisions will only put them on the defensive. But I’d urge your partner not to shy away from this discussion out of concern for his mother’s anxiety.

If your in-laws are willing to discuss their options, your partner could suggest they meet with a financial counselor. Unlike financial planners and financial advisers, who typically work with wealthier clients, financial counselors help lower- and middle-income clients with basic money management. They often work with clients struggling with debt.

You can search the Association for Financial Counseling & Planning Education’s website for a financial counselor in your state. Many charge on a sliding scale. If your in-laws are open to the idea, your partner could offer to pay the fees.

Bringing in a third party may be beneficial here. A professional isn’t going to have an emotional stake in this game. Plus, sometimes people are more willing to listen to guidance when it isn’t coming from family.

Ultimately, though, managing this loan is up to your in-laws, not you and your partner. Respect their boundaries, even if you don’t agree with their decisions.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected] or chat with her in The Penny Hoarder Community.