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6 Questions to Ask Your Aging Parents About Their Finances

Jul 23, 2018 4 min read Sheila Olson

Key Takeaways

  • Know your parents’ current sources of income.
  • Find out if they have supplemental health insurance.
  • Ask your parents if they have a will or living trust.

 

It may be a difficult conversation to have, but as your parents get older, you will need to start talking to them about their finances.

 

 

Three years ago, Bill and Ann Broward (their names and personal details are changed to protect the couple's privacy) learned a hard lesson about the state of retirement planning in America. Ann's mother, a widow in her early 70s, was diagnosed with Alzheimer's, and after much discussion, Bill and Ann took over caring for her, a decision Ann says she doesn't regret, despite the havoc it has caused in the couple's personal finances.

"I was pretty shocked to discover Mom had next to nothing set aside for retirement. We walked in at ground zero and had to make financial decisions on the fly. I mean, there was literally nothing in place to cover the type of arrangements we needed to make for her," Ann said of her experience early in the process."

The North Carolina, couple saw firsthand what the GAO recently reported about the state of retirement security in the U.S.: Nearly 30% of 55-and-older households have no retirement savings or pension plan and half of 65-and-older households rely entirely on Social Security for retirement income. Many in Ann's mother's generation are simply not financially prepared for old age.

Today, the Browards are part of the roughly half of Americans in the "sandwich generation" who simultaneously care for their own young families and provide care and/or financial support to an aging parent. Over the past two years, they've made radical changes to their own savings and investment strategies, both to enable them to continue to care for Ann's mother--and to ensure their own children won't have to make the same difficult decisions in the future should the couple need care as they age.

 

If your parents have investment income or a pension plan, get account details and find out where they keep important documents.

 

Ann puts it bluntly: "I wish we had known Mom's situation long before it became a financial crisis for us. I tell all my friends no matter how awkward it is, have those difficult conversations with your parents. Make a contingency plan. Hopefully, you'll never need it, but if you do — you'll be so thankful it's there."

 

 

 

Open the door to conversation

It's never easy getting your parents to open up about their finances, but it's a necessary step in the planning process. If you're unsure about how to begin the conversation, elder care experts recommend talking about your own situation to set the stage. For example, "Mom and Dad, I set up a health care power of attorney last week so that my husband can make decisions for me if something happens and I can't make them on my own. Do you have any arrangements like that?"

Alternatively, you can try a storytelling approach. Mention that you saw a report on the news about scammers targeting seniors for financial fraud and you want to help them protect themselves. From there, you can guide the conversation to specific questions about their finances.

 

Ask essential questions

Of course, you need to know your parents' financial specifics, but your conversation should also help you understand their needs and wishes, as well. Gathering this information up front lets you get the right plan in place so that you aren't scrambling to gather documents and make important decisions when a parent unexpectedly becomes ill or injured.

Here's a list of questions to guide your conversation and prepare you for making a financial elder care plan for your parents:

  1. What are your current sources of income?
    This is perhaps the most difficult question to ask, but it's better to know what you're facing now than be unpleasantly surprised later, as the Browards were. If your parents have investment income or a pension plan, get account details and find out where they keep important documents.

    This is also a good time to ask if they are working with a financial planner or other advisor — and to get contact information if they are.

  2. Do you have any health or long-term care insurance?
    Medical costs are a significant drain on retirement income. Find out if your parents have supplemental health insurance and get the specifics details. Ask to read their policy and make sure you understand what is covered.

    The average monthly costs for assisted living today hover around $3,600 according to a 2016 Cost of Care Survey — a figure that can rapidly deplete retirement savings. If your parents have insurance to offset these costs, be sure you know how much it pays and what the policy limits are.

  3. Have you made any legal arrangements that affect your care?
    In addition to asking if your parents have made a will or living trust, find out if they have a health care power of attorney or other legal instrument that spells out who will handle their financial affairs and make health care decisions if they become incapacitated. Ask where the documents are kept and if they are up to date.

    If they have not made these arrangements, ask them who they'd like to take the lead on decision-making if the unexpected happens. It's important to let them know that you will respect their wishes and support their choices so you can have an honest discussion.

    Remind them to complete the appropriate documents with their lawyers, doctors, insurance providers, and financial institutions to allow the person they select permission to access account information and make decisions on their behalf.

  4. What are your wishes for the future?
    This question opens the door to a range of issues you should discuss with your parents. For example:
    • How would you like to live if you aren't able to care for yourself at home anymore? Assisted living? With a caregiver in your own home? With a family member?
    • If your parents are married, find out how their plans might change should one of them die, and how it might impact their current financial situation.
    • Do you have preferences for end-of-life care? Your parents may have very strong views on life support measures they do or do not want; remind them to confirm their choices with a living will or other health care proxy.
       
  5. Where do you keep your important documents?
    If your parents don't already have a safe place to store all their paperwork, now is a good time to suggest that they find one. Ideally, your parents should keep all of the following information together in one place so that you or your siblings can easily access them if necessary:
    • Social Security, Medicare, and health, life, long-term care, and property insurance ID cards and/or policies
    • Financial accounts (retirement, pension, savings, checking, investments, loans, and credit cards) plus contact information for any advisors handling their accounts
    • Deeds and titles to any properties they own
    • Car titles and registrations
    • Tax returns
    • Utility bills and other service provider information
    • Wills, trusts, and other legal instruments
    • Contact information for family members and friends
       
  6. Do you see your doctor regularly?
    This question may not seem like a "financial" question, but it can have a tremendous impact on future plans. Do you parents have any chronic health conditions that they are being treated for? What is the long-term outlook? Do they take daily prescription medications? Are there other health care expenses such as physical therapy they pay on a regular basis?

    Be prepared to have a thorough discussion about your parents' health and well-being — and if you discover they are not getting routine preventive care, encourage them to establish a relationship with a primary care doctor and take steps to protect their health.

    Remember that your parents probably dread "the conversation" as much as you do, so you may have to broach the subject a few times before you are able to have a meaningful talk about financial matters. But the effort is definitely worth it.

 

What you can do next

As Ann Broward said, "It's not important who starts the conversation or how long it takes to get the information you need. Just get the ball rolling. You're not just doing this for you, although it definitely helps you make a plan. You're doing it for them, too, so you can be there for them when they need it."

Sheila Olson is a Charlotte-based freelance writer specializing in investing, personal finance, entrepreneurship, and retirement planning. She is a regular contributor at Investopedia and the Motley Fool and writes frequently for the banking and consumer credit industry.

 

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