How to talk to an aging parent about money
Seven in 10 adults say major barriers prevent them from openly talking about financial issues related to caring for an aging parent. That’s according to a study by the National Endowment for Financial Education (NEFE).
“Frequently there is defensiveness, denial, embarrassment and sibling rivalry when entering into a dialogue between adult children and a parent concerning their finances,” says Ted Beck, President, and CEO of NEFE. “Families need to come together, clear the hurdles that limit communication, and do what needs to be done with advanced planning before aging family members start to experience these types of events.”
No matter how difficult the conversation is, you need to have it. If the elderly are often reluctant to discuss financial decisions, even with their own family members, how do you start the conversation?
Experts say relating to your aging parents will help knock down barriers that make the conversation difficult. Secrecy and control are two walls that aging parents create. So, relate to those concerns on a personal and emotional level.
Don’t tell them you know how they feel because you’ve obviously never been their age. However, relate to them through your own experiences.
Think about a time when you struggled to give up control. How did you feel? Now, imagine you had to give up that task or activity because of your age. How would you feel then?
When you empathize and relate to your parents, walls will come down.
You can also ask for their advice. We’re always planning for retirement, so ask your parents for their best retirement advice. It’s an easy way to relate to your parents and to let them know you value their input. Plus, you’re gaining valuable insight that may help your own finances.
This approach will help your parents open up and share some of their financial success stories. Plus, it will provide you insight into their finances that they may or may not have shared with you previously.
If you have to, have the conversation over time. Approach one thing at a time. Slowly, you will open the door to their finances and financial future.
It’s best to start this conversation while your parents are healthy. It’s more difficult to have it after they begin to face health issues like dementia or Alzheimer’s disease. By that point, they may already be in financial trouble. Or it may be too late to protect some of your parent's financial net value after they become sick.
Financial decisions for the elderly
Start with a spreadsheet detailing all of your parent’s finances. This can be difficult if they’ve been investing for years and have accounts with multiple companies.
As we transfer away from paper records, it’s important to find out about accounts where there may be no paper trail other than the digital account statements. Ask about usernames and passwords so you can access digital files.
Organization is the biggest obstacle to financial planning.
It’s also difficult to see the big picture with many different accounts. Your parents likely opened those accounts at various stages of their life.
At Open Road Wealth Management, we use financial software to show you all your assets and liabilities in one spot regardless of where they are held. It shows you the bigger picture and helps organize you now and for the future.
You don’t have to gather your statements when you need them for benefit claims. Everything is updated daily, and a digital vault holds all your documents in one place.
Need some motivation to get organized?
Once you have your parents’ financial investments organized, it’s time to analyze their investments, financial goals, and strategies. If they invested over time, they may have used different investment approaches. Do they need to adjust their risk tolerance or investment strategy?
A financial advisor can guide you through these important financial questions every elderly person needs to consider.
Once you look at your aging parents’ investments, consider other financial vehicles like insurance. Gather the paperwork for life insurance and long-term care insurance policies.
You want to have everything in one place including policies that you may need to refer to later if you need to file a claim for something like long-term health care needs.
It’s easy to forget about a policy when your parent gets sick and you’re stressed. That’s why planning early is important. These policies, many of which may have been taken out years ago, can prevent significant expenses if you have to care for an aging parent.
Find personal documents needed for benefits
While financial paperwork is important, it’s not the only thing you need to track down.
You should also organize your aging parents’ life documents like Social Security cards, birth certificates, marriage certificates, military records, and mortgage paperwork.
You will need these to apply for benefits that your aging parent may be entitled to receive.
Also, find out who their doctors are and their medications. If they go to an assisted living facility, nursing home, or get home care you’ll need this information for their treatment.
Create a plan with a financial planner
Once you have all your documents organized, create a plan. What do your parents want to do with their money?
Do they want you to inherit the money?
What if they get sick? Will there be enough money to cover expenses, or will they have to go on state aid?
The answers to these questions are personal.
They depend on personal preferences and financial net worth.
Have your parents paid off their home, or do they have a reverse mortgage?
It’s best to answer these questions with a financial advisor, who can evaluate all assets, current expenses, and projected costs.
A Fee-Only planner takes a pre-determined amount of money. Consumer Reports recommends fee-only planners because there are no conflicts of interest. They don’t get commissions, and they are not paid for referring you to a financial product. Fee-only advisors are paid directly by clients. So, they refer you to the best investment vehicle rather than the one that earns them the most money.
A financial planner is a great asset because he’s not emotionally attached to the money. He can make rational decisions that are in your best interest. Too often we let our emotions control our financial decisions, and when we do that we may not make the best decision.
If your parents have a financial advisor, set up a meeting and attend it. You can review their investments, assets, liabilities, and asset allocation to make sure their risk tolerance is appropriate for their age and life goals.
If your parents don’t have a financial advisor, find an expert to help you. Interview several people, and ask your financial advisor these 10 questions.
Trade groups are always a good way to find an advisor. Whether it’s a Certified Financial Planner, National Association of Personal Financial Advisors, Fee-Only Network, or an XYPlanningNetwork advisor.
Your financial advisor does so much more than manage assets. He will make sure beneficiary designations are up to date and can help you see the big picture.
Create a healthcare plan
A financial planner can also guide you through basic healthcare decisions and scenarios.
Talk to your parents about how they want to be cared for when their health begins to deteriorate. With your input, let them tell you what they prefer.
Some parents don’t want to go to a retirement community or a senior living facility. They’d rather stay at home, and get home care through an aide.
If that happens, do your parents have a way to pay for it?
Also, establish a power of attorney. Someone who can make financial, legal, and medical decisions.
An aging parent needs a will and power of attorney for healthcare and financial decisions. You may also consider a trust.
If your loved one dies without a will, the state will gain control of their assets. NEFE suggests creating your own will, perhaps with legal advice, so you can avoid the one size fits all approach the state may take.
Consider your own financial interests
While this conversation is about your aging parent, it’s important to consider your own financial situation.
Roughly 30% of adults aged 40 to 59 financially supported their parents or provided personal care to their parent aged 65 or older, according to a study by the Pew Research Center.
That’s why it’s important to consider your own financial assets, investments, and liabilities at the same time as you’re working on your parents. Remember, relating to your parents is also a helpful way to break down any barriers and have this important financial conversation with your parents.
Ultimately, you will be financially affected by an aging parent. Prepare now so it’s one less thing to worry about if something does go wrong with your elderly mom or dad.
Elder care resources
Talk with an elder care specialist. These are good resources to find social service programs and other valuable support.
Explore elder care resources such as:
The Financial Planning Association has a good checklist for health, living arrangements, legal documents, insurance, and financial decisions that you should make with your aging parent.
Don’t delay. Have the conversation before it’s too late and you all pay a financial price.
