A wild card in any financial plan is the aging process. Longevity coupled with incapacity can decimate a family’s resources, forcing adult children to contribute to their parent’s support and jeopardize their own retirement.
Long-term care insurance can mitigate the financial obligation, but only when the insured is unable to perform two of six specific activities. Seniors who simply need help getting to doctors’ appointments, remembering to take medications, fix meals, shop, clean, pay bills and myriad daily challenges, do not always qualify for benefits under a long-term care insurance policy. Yet their needs are no less real.
When aging parents become dependent on adult children, financial planning becomes more entwined. Now there are two or more families working toward the same goal of meeting the parents’ needs without compromising the adult children’s financial well-being. Although each family may want to keep their finances separate, holistic planning may allow resources to be shared or conserved for the benefit of everyone.
The goal in any integrative financial plan is to dissolve the boundaries between what belongs to the parents and what belongs to the children, and consider strategies that build and conserve resources for all.
Assemble Resources–Caregivers often underestimate the time required for caregiving and the impact on their work. They go into it providing only a small amount of care and then gradually take on more and more responsibility, incurring significant losses in career development, salary and retirement income, and substantial out-of-pocket expenses. Ideally, you’ll want to begin thinking about this while everyone is still healthy so you can emphasize the importance of planning ahead.
Planning Ahead–According to a USA Today/ABC News/Gallup Poll, 41% of baby boomers who have a living parent are providing personal care, financial assistance, or both. Of those boomers who are not providing care for parents now, 37% think they will someday. And about half of them say they are concerned about their ability to do so.
Living Arrangements–Housing options for older parents who are basically healthy but need help with certain activities due to frailty or forgetfulness include: (1) staying in their own home, (2) living with their children, or (3) moving to an assisted-living facility. Each family must decide which option is best based on costs and quality of life.
Costs may include home modifications to enable the parents to get around safely, plus the cost of bringing in outside housekeepers or caregivers. Compare these costs with the cost of an assisted-living facility. Then decide which arrangement would work best for everyone.
Providing Care–Before making any moves, analyze the long-term consequences of the various options and try to strike a balance between financial and emotional considerations.
The occasion of a parent needing help gives families an opportunity to integrate their financial and life plans for the benefit of all. You may wish to obtain professional advice to help evaluate everyone’s resources and determine who will be responsible for which costs. A professional can help map out a strategy that makes sense from a tax and estate planning standpoint.
Planning for your parents now enables you to create a sound financial plan to cover future retirement needs.
Reesa Manning is a Senior Financial Advisor, specializing in retirement income distribution at Integrated Wealth Management. For more information, call Reesa at (760) 834-7200, or [email protected]