Financial Planning for Your Aging Parents
If you come from a typical family, finances were rarely discussed in detail even as you matured into adulthood, which was fine as long as your parents were fully capable of running their own lives. But, as your parents age, and with today’s life expectancies that could span another 20 to 30 years at age 60, there is a strong likelihood that they might lose their cognitive function over time. Not only will your parents fight it, they will try to deny that it is happening.
It won’t be until you see the past due notices in their stack of mail, or maybe even a default notice on their front door that you realize they aren’t able to keep up with the pace of their finances anymore. Worse, you might learn that they have fallen prey to a scam or are being taken advantage of by a stockbroker. Waiting until the problems compound will make life difficult for everyone. Preparing now to prevent these types of problems is a lot easier than trying to unravel them when they occur.
Now is the time to approach your parents and work through all of the issues they will face. While, you may encounter some initial resistance, once they understand that you are doing it out of love and to avoid unpleasant problems down the road, they will eventually come around, even if it’s gradual.
Ten Preparation Steps you can take Right Now
- Get your own financial house in order. Your own financial security is paramount. Unless you build your own financial capacity, you may not be able to help your parents in the way you want. Develop and implement your own financial plan that includes contingencies such as assisting your aging parents.
- Take your parents temperature. You know your parents, so you know how they might react to a conversation about their financial future. You could frame it in way in which you are asking for their advice for your own situation, and then talk about the “what ifs.” If you find that they haven’t prepared, then you need to start a new conversation.
- Discuss financial and estate planning goals. Talk with them about their vision of the future, including their life style desires and priorities. Find out what they would like to have happen with their estate when they die. Ultimately you should know how they have structured their retirement plan in order to pay for their life style. If they haven’t done so recently, they should have their retirement plan reviewed by an independent financial advisor.
- Make a checklist. Once you determine what your parents have or don’t have in place, you can work with them to ensure that they have the proper documentation and that everything is up to date. At the very least, it is important for you to know how to locate all documents. The checklist should include the following:
- Current will
- Living trust (have yourself named as trustee)
- Durable powers of attorney
- Medical directives
- Insurance policies
- Health records
- Tax returns
- Credit card and loan documents
- Bank and investment statements
- Social Security information
- Location of safe deposit boxes and their keys
- Contact information for all professional advisors
- Get them to go hi-tech. If you parents are like many seniors they are hi-tech hold-outs. Show them how using a program such as Quicken can simplify their financial lives by consolidating all of their accounts into a single view and managing bill pay and money transfers online. Show them the ease in which they can have all of their bills automatically paid each month.
- Explore long-term care insurance. If your parents are going to rely upon their assets to generate their required income, it would be important to have them consider long-term care insurance. With the cost of long-term care now exceeding $70,000 a year for a nursing home, it could quickly deplete their assets should they have to pay for it out of their own pocket.
- Enlist some help. If you have siblings, you shouldn’t go it alone. Involving your siblings will ease your burden and provide emotional support in dealing with your parents. You will also want to enlist the help of a profession advisor if your parents have one – a doctor, an attorney a financial advisor – that they trust. They can be instrumental in moving the conversation forward.
- Scout ahead for senior assistance programs. You should fully investigate all of the services and resources available to seniors in your area including government and community assistance programs. Go to www.eldercare.gov for a list of services in your area.
- Arrange for a complete financial plan to be prepared. The best course, if they haven’t yet done so, is to find a reputable, independent financial advisor to prepare a complete financial plan to include their retirement income strategy, estate planning and an investment strategy. Many independent financial advisors will prepare a plan for a flat fee. It may be a worthwhile investment on your part especially if you can be included in the process.
- Finally, it is important to respect your parent’s financial sovereignty and dignity. They spent most of their lives managing their finances and raising a family and they deserve to feel as though they have control. Most of these steps can be taken gradually, and over time they will feel more comfortable accepting your help.