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Monday, March 07, 2011

How To Discuss Money With Mom & Dad

Do your mom & dad have enough money to last through retirement? Many children are worried that due to market losses over the past few years, their parents may not have enough to live comfortably through their "golden years".  Does this mean that son's & daughters will need to pitch in to keep them afloat? How do you have the "money talk" with mom & dad?


Don't wait until there's a financial crisis to bring up money with your parents.  It's best to know ahead of time if you're going to need to adjust your retirement planning to free up some money to help care for them.

Consider the following:
1) Is their current portfolio enough to last?

It's always hard to bring up the money topic with parents, as they may be private folks, or may just not enjoy speaking about finances.  You may try bringing up your own financial planning, and then ask if they've run their own numbers recently.  Mention that you want to make sure they'll be ok. You may even offer to go along with them to their financial advisor for a review meeting, or even offer to connect them with a pro you know.

2) Is their money secure, or is it at risk of loss?

As your parents age, it's important that they've not exposed themselves to excessive market risk.  Since they've got a limited period of time to recover from any large losses, they should review their "asset allocation" between stocks, bonds and the like.

3) Are they protected from the high costs of long-term care?

Nursing home care costs average between $69,000 and $78,000 per year!  Remember, these costs are NOT covered by Medicare.  Since over 60% of persons alive today will spend at least some time in a nursing home environment, it's essential to create a plan to cover these costs.

Ask your parents whether they'd prefer to have assistance of a home health aid if they were ill, or whether they'd like to move to a nursing facility.  Because many would prefer to age in place at home, it's critical to point out that home health care is usually even more expensive than in a nursing home.  How will they pay?

Unless they have around $1.5 million dollars invested, a large portion of their life savings is likely to be burned up each month due to the high cost of care.  Do your parents have long-term-care insurance? Have they created an asset protection plan with an elder law attorney?

While long-term-care insurance can be expensive, it is a lifesaver when one becomes ill.  For example, while a premium for a 70-year-old could be $3,000 per year, if he or she goes to a nursing home, that yearly premium will suddenly be covering $70,000 or so in costs!

Plus, there are new types of long-term-care insurance policies that are becoming popular that double as life insurance.  These policies ensure that should mom & dad not use up their long-term-care benefit, the remainder goes to their children as tax-free life insurance benefits!

If your parents do not qualify for long-term care insurance, perhaps they should meet with an elder law attorney to discuss their remaining options on how to protect their savings, while ensuring they always receive the health care they need?

4) Do they have important financial and legal documents completed and easily found?
  • Asset inventory
    • Should include passwords, safe-deposit boxes, and account numbers
  • List of debts and recurring expenses
  • List of important contacts
    • Estate planning attorney, financial advisor, accountant
  • Financial power of attorney
  • Health care power of attorney and living will
  • HIPAA Release
  • Will and/or revocable living trust
  • Medical history , medical insurance, and medication list

Just by broaching these topics with your parents, you'll be more informed and ready to respond when they need you.  And if you can get them to act, you might add to the comfort of their "golden years" as well.

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