Talking to Aging Parents About Their Finances
Do you know if your parents have a will? If anyone is trying to sell them an annuity? If they are paying all of their bills? If you answered no to these questions, it may be time to have a conversation with them. You may be groaning right now—who enjoys talking about money?—but doing this can help ensure your parents’ well-being.
Many of us struggle to meet our monthly obligations, especially seniors, who often face diminished retirement savings and high medical costs. Ask your parents if they have been unable to pay any bills or purchase essential expenses, like medicine or food. If so, help them explore ways they can revise their spending plan. Are there any expenses that can be cut or reduced, like cable or dining out? Is there any way to increase their income, such as through a part-time job or reverse mortgage?
Encourage your parents to contact the creditors/service providers for any bill they are struggling to pay. (If preferred, you may be able to talk to them yourself with your parents’ permission.) Many creditors offer hardship programs, short-term arrangements that allow you to make smaller payments. Utility companies frequently have payment assistance programs for limited-income customers.
For aging parents suffering from memory problems, bills may go unpaid simply because they forget. Handling the bill payments yourself is one possibility, but if you do not have the time, you may find it helpful to use the services of a Daily Money Manager (DMM). DMMs assist with financial tasks, such as opening and paying bills, balancing checkbooks, and organizing and filling out paperwork. Professional DMMs charge a fee for their services, but low-income seniors may be eligible for free assistance through a volunteer program. (You can contact your local Area Agency on Aging for more information.) Of course, since there is the potential for abuse, you should choose a DMM carefully and periodically check up on his or her work.
Long-term care costs
Some time in the future, your parents will likely reach the point where they are no longer able to live on their own without help. Unless you or a relative plans to care for them, they will have to pay for nursing home, assisted-living, or in-home care. It is not unusual for long-term care costs to exceed $50,000 a year, and Medicare and Medicaid only cover them in limited circumstances.
If your parents do not already have a plan for financing their long-term care, help them create one. Putting aside a set sum each month can help your parents amass a good chunk of change, but if they do not already have a significant amount of savings, it may be difficult to save enough now to completely cover their costs. Besides saving, another option is to purchase long-term care insurance. Many policies cover both nursing home and in-home care costs. The best time to purchase this insurance is when you are in your 50s or 60s. Since there are many different provisions to consider, you and your parents may want to talk with a qualified insurance advisor about what would best meet their needs. Long-term care insurance is expensive, so it can be tempting to go with whoever offers the cheapest policy, but avoid purchasing one from a company with questionable financial health.
Unfortunately, there are many people out there looking to take advantage of others, and seniors are popular targets. If someone is trying to sell your parents an annuity, timeshare, or other investment opportunity, review it in detail to see if it would make sense financially (it probably won’t). Explain to your parents why you think it is not a good investment. If they are getting calls from telemarketers, sign them up on the National Do Not Call Registry (www.donotcall.gov or 888-382-1222). Discuss common scams, such as the promise of lottery winnings if you send a check for taxes, and encourage them to talk to you before sending money to someone.
The majority of Americans don’t have a will. No one wants to think about death, but having a will ensures your property goes to who you want it to go to and reduces the likelihood of conflict breaking out between surviving relatives. If you are not sure if your parents have one, ask. Those with more complicated financial situations may want to have their will drafted by a lawyer, but others may be able to create one with the aid of a book or computer software.
Even if you know your parents have a will, you can talk to them about whether they feel it is up to date or if they want to make any changes. For example, if they left part of their estate to a sibling and he or she died, they may prefer now to leave their whole estate to their children. Also discuss if they have other estate planning documents, such as durable power of attorney for healthcare and finances.