How Could My Aging Parents Affect My Financial Future?

Aging Parents

For retirees or those planning to retire soon, they may also play a role in another retirement: their parents’. Perhaps you’ve anticipated caring for an aging parent and already incorporated this transition into your financial plan, or maybe a parent’s sudden deterioration has thrust you into a caregiving role unexpectedly.

These four steps will help you cover your aging parent’s needs without throwing your own retirement planning off course.

1. Adjust to your new normal.

As your parents age, your relationship with them is going to change. The first time you notice that mom has trouble carrying grocery bags or dad can’t keep your siblings’ names straight will be unsettling and maybe even uncomfortable.

Try to be mindful that after raising you and providing for your family, adjusting to these changes is even more challenging for your parent than it is for you. Your parent might resist an extra helping hand, let alone a more serious intervention such as in-home nursing or assisted living. Keep discussions about care as positive as possible. Avoid negativity or being overly assertive that your parent might interpret as crossing a line.

2. Assign responsibilities.

Once it becomes clear that your parent is aging into a new stage of life, contact close family and friends and be open and honest about your parent’s condition. If your loved ones volunteer their time or financial resources, divide responsibility for your parent’s care as much as possible.

If some aren’t as forthcoming about pitching in, don’t be afraid to ask.

This is a difficult situation that’s going to trigger different reactions from different people. A shocked younger sibling who feels powerless might not realize how helpful covering a weekly grocery run could be. Other relatives and friends might be worried about overstepping their bounds if you don’t ask them to help.

3. Review your parent’s long-term care funding plan.

According to Genworth, 7 out of every 10 people will need to spend time in a long-term care facility at some point in their lives. Unfortunately, Medicare only covers short stays and rehabilitative care, and older adults who aren’t living at the federal poverty level will be ineligible for Medicaid. Even for high net-worth older adults, paying out of pocket can break a nest egg quickly. In 2020, the median annual cost for a private nursing home room was over $100,000. The median cost at an assisted living facility was over $50,000.

If your parent hasn’t earmarked any assets for long-term care and they are still in reasonably good health, investigate long-term care insurance. There are many types of coverage such as life insurance policies with a long-term care rider. Having this coverage could save you and your parents money in the long run.

4. Gather your parent’s essential documents.

As a caregiver, you’re going to need your parent’s documents, including a driver’s license or other photo ID, Social Security number, Medicare or Medicaid plans, banking and investment information, and insurance policies.

You must familiarize yourself with your parent’s estate plan. At minimum, they should have:

  • Last Will and Testament memorializing last wishes and establishing beneficiaries for assets.
  • Power of Attorney authorizing someone of your parent’s choosing to act on their behalf if they become incapacitated.
  • Healthcare Directive explaining how your parent wants to be cared for if they become incapacitated.
  • Living Will appointing someone your parent chooses to make important medical decisions if they can’t.

Have your parent introduce you to their trusted professionals (e.g. accountants, attorneys, financial advisors), so you know whom to call when needed. If your parent allows it, take the time to attend any meetings they have.

Being informed about your parents’ overall situation is one of your greatest assets. Caregiving responsibilities can make your own retirement transition even more complicated. Working with an advisor will help you sort through your financial options, so you can focus on preparing for your retirement and giving your parents the love and care that they need.

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