A good step one is to figure out how much your parents spent LAST year. You may be surprised to find they are more frugal than expected, and the cash squeeze will be less brutal than expected. More likely, you'll be able to quantify the problem and say to them "it looks like you have an $xx,xxx shortfall in your annual budget if you continue spending like last year while retired." This is also a good way to get them thinking about an annual budget, which will be critical when they are on such a tight income. Mint or Personal Capital might work to pull in transactions for last year, and once set up can provide a quick overview. Don't shy away from talking about how failure to adhere to the budget results in running out of money in year 20xx. If they get it, the "collectible" problem will solve itself.
Then, it's time to see if you can knock off four figures of spending through frugality:
-optimize their health insurance configuration, as noted above
-go down to one car, if that
-shop for cheaper homeowners & car insurance
-review all subscriptions, payments, entertainment services, cable, premium internet, rented modems, cell phone plans, etc. and cancel or downgrade all you can
-look for ways to get their prescriptions more cheaply, such as through mail order or Walmart
-check their restaurant, fancy grocery, or alcohol / tobacco habits and offer to help if necessary
-identify and create replenishment budgets for things like roof, car, water heater, HVAC, etc. replacement, based on the age of each item.
-go through their house and car(s) looking for preventative maintenance items where failure causes double the damage. Is the timing belt due for a change? Is the water heater due to spring a leak any day now? Is the HVAC condensation line clogged? Are there leaks beneath the sinks, or wood rot visible from the crawl space under the house? Are there termites or rats, or are squirrels in the attic?
-they will need your help selling their collectibles on eBay ASAP. All that shit needs to go yesterday; it's an emergency!
-if they are donating to charity or church, it's time to stop before they become the charity case
Talk to them about what a fallback plan might look like:
-Could they live with a roommate?
-Reverse mortgage?
-Can they downsize and live a couple of years off the extracted home equity?
-Can they move in with you?
-Could they move in with you while earning rent from the house?
-Do they have life insurance (if not, it's too late now) or annuities
Keep their investments in conservative instruments. Now is not the time to do a WallStreetBets YOLO move to add risk. Also, most companies paying decent dividends on common stock are the ones that are shrinking and self-liquidating, like oil companies. Those dividends will be cut. If there is some small amount of breathing room in the budget, I might consider preferred stocks, although these can be volatile during corrections. I have a handful of 6% yielding preferreds on some shaky REITs, and that probably represents the limit on risk/return at this age.