As parents, adults so often discuss what is wrong with kids these days. The younger generations are too wrapped up in video games and Facebook, they have little work ethic, or they are disconnected with politics.
Sure we can complain about all kinds of things that we think our children are doing wrong… just like our parents did with us.
When it comes to finances however, it just might be the kids that need to do something about the adults.
The University of Michigan conducted a survey in 1996 of people over the age of 50 and their progress toward retirement. They found over one third of respondents had saved nothing toward retirement. Of those that saved, the average was only 3% of their average income in the preceding decade.
What’s the impact?
Poverty among senior citizens may be as high as 19%! This will certainly have an impact on government safety net programs such as Medicare as fewer seniors can afford to cover their basic living expenses let alone exploding costs of health care.
There is also the potential impact upon adult children. While too few have adequately prepared for their own retirement, more and more are faced with financial liabilities of their parents.
Retirement calculators do not factor these costs, yet the can be huge. In 2007 the New York Times reported that the average out-of-pocket expense to care for an elderly parent was as much as $8,728 per year based on survey of 1,000 adults that are providing some care for parents age 50 or older. Only 2 of those surveyed had spent nothing. The remaining 998 were spending an average of 10% of their income.
Is it time for an intervention?
Frankly, it is pleasing to think that family is taking care of family. It is the right thing to do, but must it be this way? Our aging parents had an entire lifetime of opportunity to plan for their eventual retirement in most cases and could have properly prepared themselves.
Unless you are already faced with this situation, it may not be too late to limit or prevent the impact of parents with poor finances. It might be time for a financial intervention.
Talking money with parents has been a forbidden subject for many, but this doesn’t mean it must always be. As responsible adults we owe it to ourselves, our children and our parents to address uncomfortable subjects. How do we do it?
Breaking bread and breaking the ice
We have to start somewhere. Sitting down for a meal, when all are relaxed may be the best place to start. But don’t start by intruding on their situation, share your own. Explain to your parents what you have or have not done to prepare for your retirement. Share with them “your number” and how to calculate the resources necessary to finance your retirement.
Odds are that your parents will be proud of your responsibility and forethought. In most cases a few questions may be prompted by information you share. It is likely that they may then volunteer what they have or have not done.
Write a letter
No parent wants to be a burden upon their kids. If they are still reluctant to discuss their financial position, its likely because they know they are facing challenges. Another approach might be to write to your parents. Let them know their future is important to you. Share with them how much you appreciate everything they have done for you and your desire to return the favor.
Define the situation
Once you get your parents to open up, it is time to establish a clear understanding of their situation. Start with development of a financial inventory listing all their assets, liabilities, accounts and contracts.
Make sure all legal documents are up to date an in order including wills, power of attorney, living wills and insurance papers.
Once you have a clear picture of their current situation it is time to work with them on a sustainable living plan.
Establish a budget with your parents if they have not done so to make sure they continue not only to live within their means but also to ensure that their assets survive their lifespan.
Consider the rising cost of health care and potential impact of unexpected events. Clarify your parents preferences of how they are to be treated as they lose their physical or mental abilities.
Dealing with aging is a challenge both financially and psychologically. None of us want to deal with the inevitable mortality of our parents but taking the time to plan and prepare now will ease the emotional strain and financial burden in the future.
Readers: For me this is a first to consider, but before long it will be something we have to face. What other advice would you share to deal with aging parents?
photo by Ethan Prater
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