It’s a great accomplishment to see all your finances in order and you’re on your way to achieving financial independence come retirement. However, that might not last for long when you discover that your aging parents are lagging behind on retirement.
Looking after the financial health of your aging parents is actually one of the most overlooked factors when planning for retirement. Forgetting to check their finances regularly can cause your retirement journey to turn ugly because you might end up helping them with their finances or providing care for them.
Good news is you can help aging parents financially without breaking the bank by following these tips.
1. Start the Conversation
Starting the conversation with parents seems easy but most people say that it’s hard to discuss money matters with them. They are not comfortable sharing their finances with their children because first, they would think that they’re just after their inheritance or two, they are embarrassed to ask help from their children.
Delaying the conversation also means a delay in your retirement plan. So, there’s no point avoiding the money talk. Take the initiative to start discussing your aging parents’ finances and their future. Since it’s a sensitive topic, it’s best to be careful when talking about money.
Here are some tips to help you start money conversation with your parents.
- Be specific about your concerns
- Advocate independence
- Keep the conversation brief
- Make them feel that they are in control as much as possible
2. Assess their Retirement Readiness
After the talk, assess if your parents are ready for retirement based on the money they have saved for their golden years. Again, this is a touchy subject so tread carefully and let them know that you only want the best for them during retirement.
According to Go Banking Rates study, 28% of Americans 55 and above don’t have retirement savings and 22.4% have saved $300K or more.
Photo credit: www.gobankingrates.com
So, find out how much money your parents have saved for retirement. In case, they might not have enough, give them options on how to make the most of their savings or what they can do to boost their retirement savings.
3. Ask your Siblings to Help Out
Asking for help is not a sign of weakness. Get your siblings on board and even other family members to help out. It’s easier to make strategies work if there are other people willing to help out plus you can also pool resources.
Through understanding among siblings and teamwork, the feeling of bearing the burden of one adult child helping aging parents with their finances will be prevented. Spread out the responsibility among members, be it time or money so that you can also focus on your financial health.
4. Prioritize your Financial Wellness
You also need to plan for your own retirement so make sure that you have something left for your future. Make sure that what you give to your parents is within your means to avoid derailing your own retirement goals.
It would help to help your aging parents maximize their resources wisely first before you offer financial help. Help them use their retirement savings first to finance their daily expenses, care needs, and other expenses before you help them financially.
5. Look for Government Programs for Aging Parents
Taking care of aging parents are costly nowadays. Luckily, there are government programs such as Medicare and Medicaid that can help pay for the health care and long-term care needs of your parents.
Medicare is a federal health insurance program for people 65 and above and younger people with disabilities. This type of government program helps pay for hospitalization, hospice care, outpatient care, medical supplies and more. However, Medicare doesn’t pay for long-term care.
Medicaid is a government program that pays for hospital expenses, doctor visits, and home health care. It pays for long-term care but only for people who are eligible for benefits or those with low-income.
In addition to these government programs, you can also check what your local community offers.
6. Consider Getting Long-Term Care Insurance
Getting long-term care insurance is imperative nowadays considering that people are living much longer and will most likely require long-term care. 7 out of 10 of Americans 65 and above will need long-term care.
The expensive cost of a nursing home assisted living and other long-term care services is also another reason to get coverage for long-term care. According to Genworth’s cost of care survey, it would cost your parents $8,365 per month in a private room in a nursing home and $7,362 per month in a semi-private room in a nursing home today.
Through long-term care insurance, your parents can pay for their future long-term care needs without exhausting their savings and they will not become a financial burden to you.
7. Help Them Downsize Homes
It’s going to be challenging to ask your parents downsize their living arrangement even it’s already causing them financial strain. Most aging parents don’t live their homes because they’ve already grown accustomed to their home and the community as well.
Housing actually eats up most of your aging parents’ retirement savings. According to the Bureau of Labor Statistics, people 65 and up spend 35% of their savings on housing. If you can persuade your parents to downsize, they can save around $3,250 a year in taxes if they move from a $250,000 home to a $150,000 home.
8. Make the Most of Tax Breaks
Family caregiving is becoming common in American households today, which results in adult children struggling financially to support their own needs and their parents need as well.
If you’re providing care for your aging loved ones, you can take advantage of tax breaks given to family caregivers. You must be able to prove that your aging parents are your dependents and you must be paying for at least half of your parents’ living expenses. The 7.5% applies once you meet the qualifications.
9. Seek the Help of a Financial Planner
Considering hiring a financial planner to help you put your parents’ finances in order is a wise move. An adviser can help you and your parents create a plan that can maximize their assets. Also, a financial planner can help in asking the hard money questions and bridge the gap between you and your parents.
Aside from hiring a financial planner, considering other experts like a tax professional and elder law attorney can help secure your parents’ golden years.