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Whether you're just starting to take control of your finances or already working toward financial independence, you might also be thinking about a common financial fear – your aging parents and their money.
- Are they financially prepared for retirement?
- Is their retirement plan to keep working?
- Will they need your financial help?
The answers to these questions – and more – are on your mind.
Staying focused on your financial future is essential. But as parents age, they often need some level of assistance with their finances from their children.
According to the headlines, many baby boomer parents will need financial support because they haven't saved enough for retirement.
You may need to:
- Oversee activity on bank accounts or help them decide when to file for Social Security.
- Create a budget to help prevent them from taking on more debt
- Accompany them to meet with a lawyer to set up an estate plan
- Provide them with financial support to continue living independently
- Move your parent in with you for health and economic reasons
One bonus for all your effort? You can be proactive and start planning how to address some of these issues for your future too.
Helping Your Aging Parents with Their Finances
Your parents' physical, mental, emotional, and financial health will greatly impact how much you need to get involved.
It's essential to consider different ways you might need to help them with their money and with critical financial decisions.
While your parents may not need support with everything described here, some adult children must work through each topic with their parents.
Talk to Your Parents About Money
Some people grow up in families where money is a “taboo” subject. Other families might discuss money – and their lack of it – all the time.
No matter your past circumstances, it's time to have open and honest communication about money.
Whether or not your parents have struggled with money, this might be a challenging conversation.
Meeting them “where they are” concerning discussions about their financial health can require empathy and patience.
A parent may be embarrassed about prior bad choices they've made. Or they may have significant retirement savings and want to keep that private.
Explain that your purpose is to help them meet their goals and to help prevent elder fraud.
It's helpful if they don't feel judged or that their decisions will be questioned. If you have siblings, consider having a family talk.
To prevent parents from feeling attacked or confused by your bringing up the topic, give them some warning.
Mention you'd like to talk about their finances ahead of time instead of just springing the conversation on them.
Help Your Parents Manage Their Money
Once you've reached the point where you can talk freely about finances, help your parents take action.
If they need help tracking expenses or building a budget, show them options. Will they do better using an envelope system or tracking progress in a notebook or spreadsheet?
Where do they keep their savings and emergency fund?
Many older adults still use traditional banks and miss out on the benefits of high-interest online savings accounts. Help them open one of these accounts if it makes sense.
Look at CDs and their rates if they have a lot of money just parked in a savings account paying little interest.
- Are their investments with high-fee brokers?
- What about life insurance policies?
- Deductibles on insurance policies?
- Are they just paying the minimum on high-interest credit cards?
Once you have the answers to these questions, you can help craft a plan to help your parents make changes.
You might already be able to see how to save your parents hundreds of dollars (or more) each month.
Don't panic your parents by trying to do too much at once. Gather all the information you can to get their complete financial picture and take it one step at a time.
Moving past the point of talking about money is a big win. Each money move you make will improve their overall wellness as time goes on.
Help Parents Review Healthcare Options
Is your parent still working and using employee health insurance?
Does their employee benefits package include access to a flexible spending account for health care or other financial or tax incentives they aren't taking advantage of?
There may be ways to help your parents save money on their current insurance plan.
During the next open enrollment period, review all the insurance options available with your parents. Sometimes people stick with inferior or more expensive plans because they fear change and are overwhelmed by paperwork.
If your parent will be eligible for Medicare soon, do they understand the enrollment process and the costs they may incur?
What about the four different parts of Medicare?
They may face late-enrollment penalties if they fail to sign-up during their Initial Enrollment Period (IEP).
To learn more about Medicare and timelines for getting started, visit Medicare.gov for the most up-to-date information.
How will your parents pay for long-term care if they need it?
According to numerous reports, more than 50% of people in their mid-60's today will need some form of long-term care as they age.
Be sure you (and your parents) don't make the mistake of thinking Medicare covers long-term care. It doesn't. If they have long-term care insurance, that will undoubtedly help. But the majority of people don't have it.
If your parents meet the strict financial requirements to be approved for Medicaid coverage, it may cover some types of long-term care. Check Medicaid.gov for more information on how the program is administered in your state.
Ask your parents if they've thought about needing a greater level of healthcare in the future. It may be weighing on their minds.
The sooner you can help them start planning for what may lie ahead, the better you'll all sleep at night.
Assist Parents with Considering Housing Options
Begin the discussion about housing “needs vs. wants” in terms of housing and then consider different scenarios.
Aging In Place
Your parents may have talked about downsizing but were hesitant to leave the house they love.
- If your parents own their home, do they still have a mortgage?
- Will they be able to afford it (and any costly repairs that might be needed) down the road?
- If they have mobility issues in the future, will it still be accessible?
If they need money but want to stay in their home, there are options to consider, such as:
- Buying your parent's home and renting it back to them or allowing them to live their rent free
- A Reverse Mortgage – Make sure everyone understands the pros and cons of adding this as a potential option
While aging in place in their own home (or in your home) is an option for your parents, you might also consider looking at communities allowing seniors to transition from independent to assisted living and on to nursing care if necessary.
The continuity of services for people as they age and need more help is a real benefit of this living situation. But the cost may be prohibitive for many seniors.
Subsidized senior housing complexes may be an option if your parent meets the income requirements.
If you have space in your home for your aging parent, you may consider moving them in with you. This will allow you to support them more in various ways – including financially.
Multi-generational living can benefit everyone, but it isn't something you should take lightly. Everyone would need to agree on this plan.
Having plenty of space for privacy and time apart is essential to avoid problems down the road.
Research Community or Government Resources
If you haven't spent time looking into the benefits and resources available to seniors in your area, you might be surprised by what you find.
A quick online search of your state, county, and city with the term “resources for seniors” should yield helpful results.
For example, the New York State Office for the Aging has a website full of articles, links, and resources to programs for senior citizens. There is also a link at the top of the homepage to regional Offices for Aging across New York State.
Your aging parent may be able to access:
- free meals
- transportation to shopping or appointments
- health screenings
- home monitoring devices
- caregiving services
Even if they are reluctant to use them (or refuse at first), it's important to know the programs exist and what they are entitled to.
Senior centers also provide activities and a support network to keep aging parents socializing and engaged with others. Charitable organizations may also offer resources to seniors in your area.
If your parent was in the military, you are probably familiar with their Veteran's benefits. If you have questions, contact your State Veterans Affairs Office and schedule an appointment with a Veterans Benefits Advisor.
The resources provided aren't just for your aging parent either; You may find support groups for families or respite care for caregivers.
Keep in mind a lot of information about resources for seniors is online. If your parent doesn't have access or has trouble navigating websites, they'll likely need help.
Hire Financial or Legal Professionals
You've started money conversations and helped your parents take action to make necessary changes and updates to their finances. But it isn't your job to become an expert either.
While a deep dive into your parent's financial situation has helped you learn a lot, there's also a place for hiring people who do this for a living.
If you don't understand investing well, hire a fee-only financial planner to review your parent's portfolio.
While you can talk about your parent's wishes, consider hiring an experienced attorney to set up their estate plan and update documents such as wills, powers of attorney, and health care directives.
The profits from selling their home, moving into your home, and monetary gifts can all create tax issues.
Consulting with a tax professional before making significant decisions could save your parents time, stress, and money.
Ask trusted family members or friends for recommendations on financial professionals. And don't be afraid to ask questions about fees.
Help Parents with Direct Financial Support
Even with all the other assistance you may have provided, there could still be reasons you need to give your parents money.
In late 2018, Experian reported that people aged 55 to 73 carry an average debt of over $95,000.
Your parent's debt may be weighing on everyone's mind. But it would be best if you also were very careful about putting their needs ahead of your own.
Do everything you can to help your parents financially, but save for your future too. Otherwise, your children or other family members may need to provide you with financial assistance down the road.
Consider a no-interest loan to your parents if they can pay it back. Just keep in mind you may never see the money again.
If you have siblings, talk with them about what they can do to help support your parents too.
Financial Assistance for Your Parents
You might feel overwhelmed after reading through all the ways you can support the financial well-being of your aging parents.
While saving for your own retirement, you may be “sandwiched” between children you're supporting and parents who need your help.
The burden will also be greater on you if:
- you are an only child,
- you are struggling with money,
- your parents are resistant to help,
- any of you have serious health issues
Helping your parents with their personal finance matters may feel like you're working another job – but it's important.
You'll learn a lot, and if you have children, you'll model empathy and care for those you love. It could also be an excellent opportunity to teach your kids about money.