Some people stride into their retirement years with the same self-assurance they’ve demonstrated all their lives. They’ve got the retirement thing figured out, and they don’t need help from anyone. But others go into retirement never entirely certain they’re actually prepared for it.
If your aging parents fall into the latter group, you may want to step in with some assistance with their retirement process as soon as possible. Better to face whatever the issues are now, so you have time to prepare for any unforeseen problems! We have seen a surge in the number of our clients bringing their parents in for Workshops, as well as Financial and Estate Planning. BWFA has facilitated scores of these discussions, and can be an effective sounding board for you and your siblings on how to bring the family together to talk about assisted living, skilled nursing or the best retirement communities in the area for you to consider.
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GETTING THEM TO OPEN UP ABOUT FINANCES
As a first step, this can be a very difficult effort all by itself. Most adults are not at all comfortable discussing their finances with other people, least of which their children. The situation is even more pronounced among the elderly.
Justified or not, some elderly are concerned that their children are asking about the state of their finances because they’re concerned about their inheritance. Still others can’t cope with the idea of the role reversal — you are casting yourself in the role of the parent, which effectively reduces them to a child.
You’ll have to approach the subject delicately, assuring them that the inheritance has nothing to do with it. Your entire concern is their retirement, and how well prepared they are for it.
However, you approach it, getting them to open up and speak honestly about the state of their finances is one of the most important steps to take.
ASSESSING THE INCOME SITUATION
There’s no way to get around the discussion of retirement without digging deep into their income situation. And you’ll need hard numbers in order to assess it properly.
You may have to take a proactive role in order to get the necessary information. For example, offer to help them apply for Social Security if they haven’t done so already.
Also, offer to review any pension information they have, and take a look at any retirement investment accounts. Assure them that your concern is for them to have sufficient income to live comfortably in retirement.
If you see a deficiency in their income, be prepared to make suggestions as to what they can do. In fact, if they have delayed retirement up to this point, insufficient income could be the problem. But if you get on board with suggestions as to how they can maximize their income, or find additional sources, you may earn their trust.
TALLYING UP THE DEBTS
The elderly are carrying debt into retirement at levels never seen before, and it’s not just unpaid mortgage balances. There are often one or more car loans, and a generous amount of credit card debt. Unfortunately, the more debt they have the more reluctant they will be to disclose the full extent to you. Once again, you need to be persistent. Debt can be the Achilles’ heel of a would-be retiree.
If you determine your parents have an excessive amount of debt, you have to get directly involved. This can include negotiating with their creditors to lower debt levels, setting them up with a debt counseling service or, if the debt levels are high enough, you might recommend bankruptcy. This may be the only chance they will have to ever be able to retire.
CHANGING SPENDING PRIORITIES
Many of the elderly are naturally frugal, so your responsibility here may be minimal. On the other hand, if your parents have had difficulty managing money during their working lives, you may want to counsel them on how to change spending priorities. If you don’t think that you will have much impact, refer them to a third-party source. Elderly parents are sometimes more receptive to advice from strangers than from their own children.
Spending priorities have to change for retirement. For example, healthcare becomes a primary expense as you get older. Sure, your parents may have Medicare and even supplemental coverage, but a significant increase in medical expenses could consume a disproportionate amount of income.
They need to be prepared for this. Changing their spending habits will include cutting other expenses. For example, if they like “things”, they won’t be in a position to spend as much money buying them.
DOWNSIZING LIVING ARRANGEMENTS
This could be the most delicate of all discussions. The elderly are often reluctant to give up their homes, even when they can’t truly afford them (the evidence is found in the growing popularity of reverse mortgages). If your parents will be in a tight financial position, you should emphasize the need to move to a less expensive home.
That can involve selling their home, and moving into a smaller one, or even an apartment. Or it could mean moving from a larger apartment to a smaller one. Apart from the actual cost of housing, location will become increasingly important.
They should live in an area that’s close to whatever services they need on a regular basis. This will help them to de-emphasize driving, and perhaps rely more heavily on public transportation which can save them money.
CONTINUING TO SAVE
If your parents have not been very successful as savers during their working years, this can be a major topic. Even if the moment has passed on their ability to build an income-producing retirement portfolio, they still need to have money saved up for contingencies.
If income will be tight, they may find themselves needing extra cash to pay for unexpected expenses. This can give rise to the importance of a very large emergency fund. One or both parents may have to continue working for a time in order to build up the fund. But if their finances are otherwise stretched there will be little alternative.
AVOIDING FINANCIAL SCAMS
The elderly are among the favorite prey of scam artists. They are especially vulnerable if they don’t have a large amount of savings. The promise of making a “killing” on a small investment, can be a tempting way to make up for lost time.
You’ll need to educate your parents about this reality, and stress the importance of getting advice from a trusted source, a fiduciary, and someone who has their best interests at heart.
If your parents lack the financial resources to afford a comfortable retirement, you have no choice but to get involved. Problems that they’ll have down the road may very well fall on you. Your intervention now could help to eliminate some of those problems later.
WE’RE HERE TO HELP! Here at BWFA we strive for a comprehensive, holistic approach to client service. This means that we understand that in order to fully serve our clients we must consider all those seemingly disparate factors and relationships that make up your “whole” lives. We do this through personal client interactions, seminars on a wide variety of topics, and the ability to offer advice and personalized solutions to anything at all related to your financial well being. Please contact us about your concerns for aging family members, or anything else going on in your lives. We’re here to help!
Robert G. Carpenter | President & CEO | firstname.lastname@example.org