When you were a child, you depended on your parents. Now that your parents are older, they depend on you. That role reversal does not come naturally to the elderly. They are often uncomfortable seeking or taking advice from their children, particularly concerning financial issues.
Financial security after retirement is nevertheless an issue of vital importance. For the sake of your parents and for your own peace of mind, you need to be confident that your parents do not suffer a financial crisis as they enter their senior years. Here are some tips that will help you talk to your parents about their ability to pay for healthcare and living expenses when they are no longer working.
Keep it casual
Your parents are more likely to react with stress and resentment if all their children approach them in a group with a pronouncement like, “We need to talk to you about your money.” Nobody enjoys being accused of an inability to manage financial affairs. Even if your parents are beginning to show signs of memory loss and confusion, as manifested by unpaid bills or unopened bank statements, confronting them directly will only make them defensive.
Designate one child (the sibling with the best financial sense or the one who is in closest contact) to talk to your parents. That child might start chatting about his or her own investments and retirement plan during dinner before shifting the topic to the parents’ finances. Keeping it casual will make the parents feel less guarded and more inclined to open up about their plans and resources.
Offer to help
Your parents might have a computer that they use to search the web for recipes or to buy books, but they might not use spreadsheets or accounting software. Talk about the programs that you use to organize your own financial life. Tell them how easy it is to keep track of your money and bills electronically. Then offer to install similar software on their computer.
Volunteer to put all of their financial information into their computer and to update it each month. Show them how to print monthly reports that break down their investments, debts, and expenses. That will help your parents but it will also help you obtain a complete grasp of your parents’ financial situation.
Ask the right questions
After your parents are comfortable talking about their finances, you need to acquire some basic information. These are sensitive issues, but try to get as much detail as you can. Here are some questions you should pose:
- Do you have a Will? Do you know where the original Will is stored? When was it last updated?
- Do you have a Durable Power of Attorney? Explain that a Durable Power of Attorney designates someone they trust to make financial decisions for them if their doctor determines that they have lost the ability to make rational judgments.
- Do you have a Health Care Power of Attorney that addresses end-of-life issues, including the decision to allow or prohibit extraordinary measures to keep you alive?
- Do you have sources of income, including investment income and retirement or pension plans, in addition to social security?
- Do you have a financial advisor? Do you receive quarterly or annual reports from that person that detail your investment earnings and disbursements?
- Do you have health insurance coverage beyond Medicare?
- Do you have long-term care insurance that will pay for assisted living?
- If you are no longer able to live in your home independently, what are your wishes?
If it is obvious that your parents have a financial plan and a strong understanding of their ability to pay for their future needs, you may only need to check with them again every couple of years to make sure they are still on top of their finances. If your parents seem confused by your questions, do not know the answers, or are clearly in need of financial planning, you may want to steer them toward a financial adviser who welcomes elderly clients.