It Is Not Just Your Kids Who Need Help
The balance of dependency will shift, and our children will be responsible for all the things that we once did for them: they will drive us to the store, make our meals, and so on. In fact, many of us are experiencing this firsthand with our own parents as we transition into the role of caretaker for them. This can be a very difficult and stressful job, considering parents don't often feel comfortable depending on us and still see us as the "behinds," whose diapers they used to change. But this evolution is something that often cannot be avoided.
One of the most important aspects of becoming involved in our parents' lives is understanding their finances. And for many, this should also include managing their finances. This can be a big sticking point, with our parents not wanting us to dictate their budget or expenditures, but it's important that we get involved early and often in our parents' financial planning.
Because some parents try to avoid discussing their personal finances with their children, it can be helpful to start the discussion by asking your parents for advice on your finances. That can give you a glimpse into the decisions they have made and allow you to offer bits of advice they might find useful, without bruising any egos. Once that window is open, there are a handful of things you should ideally discuss with your parents in order to help them plan for their future.
All parents have their super clever secret hiding spots where they keep all their important files and documents. If you are lucky enough to have parents who remember where those hiding spots are, then you are a step ahead of most of us. Therefore, it's important that you ask them where their important documents are located. This includes things like their will and living will, life insurance policies, information on their financial accounts, and any executed powers of attorney. Knowing where these documents are kept is critical because a) you know your parents actually have the documents; and b) you know where they are in the case of an emergency.
Another important conversation involves what many think is an uncomfortable subject: long-term care plans. But the earlier you talk to your parents about their long-term care and whether it is appropriate or not, the less expensive it will be for both them and you. Like any insurance, long-term care insurance is cheaper if you buy it when the policy owner is younger and healthier. Even with parents as young as 60 years old, planning for the financial strain that long-term care can present is a conversation worth having.
Social Security is another topic to cover. Most people are eligible for Social Security when they retire, but the important question is when it is most beneficial to start collecting that benefit. The point at which a person should begin to collect Social Security benefits depends on a few details, details you may want to ask your parents about. It's also important that you ask how much they have saved in various retirement plans, including any 401(k)s or IRAs. Also, ask if they can expect to receive income from any possible pensions. Potential funds available to them in these accounts can affect the point at which they should apply for Social Security benefits.
Lastly, you need to make sure someone is trackingand oftentimes questioningthe legitimacy of any investment opportunities they come across. We all have that sweet old aunt who proudly told everyone how she received that letter in the mail informing her that she won the jackpot in some sweepstakes and will receive the prize money just as soon as she sends in her bank account information. This is obviously a drastic example, but it's important that you ask your parents about the investments that they have made and ensure that they aren't involved in anything risky. Older individuals are often targeted by scammers, so you want to have that conversation. Even investments that are legitimate may involve too much risk to be worthwhile for them. As I have explained to you Cutter Family Finance readers in the past, successful investment strategies utilize downside risk management as a cornerstone.
Remember, many of us are part of that "Sandwich Generation," caring for both our aging parents while supporting our own children. And even if we are not responsible for the day-to-day needs of our parents, we all want to make sure that they are comfortable in their retirement years and have a solid plan for their future. To that end, there is a lot to discuss.