Dear Penny: My Dad Says I Owe Him $400/Month When He Retires. Is This Fair?

Within the last year as I've learned more about finances, I’ve realized that I grew up in a financially illiterate family, and so did my husband. Both of us grew up with poor but frugal parents, and our frugality has helped us manage so far. 

We have a credit card, but we pay it off every month. We've paid off our two used cars, and we pinched pennies to pay off our school loans before our two kids were born. We bought our first house in June 2020 and have a monthly payment of about $1,600, so the only debt we have is that mortgage. I am a stay-at-home parent and my husband's salary is $70,000 before taxes, insurance, etc., is taken out. We currently have about $13,600 between our checking and savings accounts, and my husband has a 401(k) through his employer with a 50% match, which we use.

But here's the rub: When I was in college, some of my financial aid fell through. I had to face the fact that I couldn't afford to go back after that summer. I was distraught because I was young and dumb and could only think about missing my friends and boyfriend (now husband). 

I don't remember how it got smoothed over, but it did. I was allowed to go back. Again, I was young and dumb and didn't give it another thought.

Much later, I learned my father took loans in his name to pay for what my financial aid didn't cover. He paid off those loans with his and my mom's retirement savings. I didn't realize this until it was already done. 

Now they are talking about retiring in the next few years. (The date keeps shifting, but currently they're talking about 2025 at the ages of 69 and 68.) They are missionaries living overseas and plan to move to the U.S. to the same state my brother and I live in.

Because they currently have about $6,000 total to their name (no debt, but no other savings), my brother — who is financially better off than I — bought a condo this year and is renting it out until my parents retire. My understanding is that he and his wife had to juggle things to make this work. But they decided this real estate investment would help fund their own retirement someday, not just provide a place for our parents to live.

My father now wants me to help pay for his and my mom's retirement since he helped pay for my college. The loans totaled $39,769, but he had to pay interest. At first he wanted us to pay back $45,000 split into monthly payments of $400 from the month they retire until the $45,000 is paid back after about 10 years or they both pass away, whichever comes first. 

Now he's saying because of inflation, he wants us to cover “about three days a month of our retirement living costs — whatever inflated dollar figure that happens to be — for the first 15 years of our retirement, or until death. Whichever comes first.” That’s a quote from his email to me. He got that figure by taking their current monthly income, averaging 21 work days a month, and dividing it by the $400 a month, which is 3.3 days of their current income.

We’ve plateaued at our current savings level since buying our house last year. I realize we have a few years to prepare for paying $400 or whatever it will be a month, but I'm at a loss for what to do or where to start. I'm also worried that we aren't saving enough for our own retirement. What if we end up with no options like my parents and hurt our own children's finances in the future? 

I've been trying to learn about bonds, Roth IRAs, and so on. I'm so overwhelmed by how little I understand. 

This isn't legal debt, but I still owe my parents. They won't be able to live in retirement without my paying them back. My brother has already done so much by preparing housing and a used car for them. I can't ask him for more. Plus, it's my fault my parents don't have retirement savings, not my brother's.

Can you please help me decide what our next steps should be? Do we hire a financial planner to give us custom guidance? Do I need to read books and take classes to understand how to manage all of this since Google results are going over my head? 

I’m considering taking a part-time job so its entire income can go toward paying back my parents, but I don't know if that's the right move either. I can't work full time right now because our kids are elementary-age, and paying for childcare would eat up nearly the whole salary.

And don't get me started on my in-laws, who live in a different state. My father-in-law is incarcerated. My mother-in-law is living on only Social Security in my sister-in-law’s apartment. My sister-in-law is single with two elementary-aged kids and is working full time while trying to earn a teaching degree. We are wealthy compared to that side of the family. We want to help them too, but we feel stuck!

-Overwhelmed