Ensuring Financial Security and Wellbeing for Aging Parents

As the Baby Boomer generation continues to age and their children approach mid-life, the responsibility of caring for aging parents is becoming increasingly important to consider.

The challenges of managing their finances in order to create a comfortable, secure retirement can feel overwhelming, especially for those who don’t know how or where to start. In addition to navigating their own financial challenges, caring for aging parents can prove costly in addition to being emotionally and physically demanding.

Consider the following steps in order to assess what help you might need to provide in the future. Taking action today could help avoid years of care or financial hardship for you and your family.

Start honest conversations

The first step to securing your parents' financial future is to have open and honest conversations with them. There is no substitute for understanding the wishes and needs of everyone involved.

Having these difficult conversations with parents about their future living arrangements, health and wellbeing can be highly emotional. To make these conversations easier, start now, hopefully before medical issues arise that will put everyone under stress. Be gentle in your approach and involve siblings and other family members in the discussion from the beginning.

Make sure to discuss their current financial situation, retirement savings, insurance policies, and estate plans. Understanding their assets is essential for creating a financial plan that addresses their needs and helps them reach their goals.

Create a financial plan

If their situation is very simple, the future plans may be more obvious. For situations that add complexity, it may be recommended that you meet with a Financial Advisor who can create a financial plan that lets everyone see how the assets and income sources can match the expenses, and work to make the necessary changes to fill in gaps.

As part of the process, a financial advisor can help to make certain the assets are correctly positioned, the proper insurances are in place, an estate plan has been created, and everyone understands the important elements of the plan. This process may allow for years of independence for aging parents as opposed to years of dependence on you. If your parents already have a financial advisor, ask if you can join them during their next meeting so you can get a better understanding of their financial plan.

Assess insurance coverage

Review your parents' insurance policies, including health, long-term care, homeowners, auto, umbrella, and life insurance. Ensure that they have ample coverage to protect themselves against factors like unexpected medical expenses, or to provide for their loved ones at the time of their passing.

Consider long-term care planning

As your parents age, the need for long-term care becomes more likely. Women are more likely than men to need long-term care and they typically need it for a longer period of time—long-term care can be even more important in cases of dementia.
Be prepared by researching long-term care insurance which can assist with funding home healthcare services, assisted living facilities or nursing homes. The insurance is expensive today, but can help offset the high cost of care in the future without draining their life savings.

Update estate planning documents

Ensure that your parents' estate planning documents, such as wills, trusts, medical directives, and powers of attorney, are current. Make sure that you have your own notarized copies of each. Also, check on beneficiaries of IRA’s, 401(k) accounts, annuities and life insurance policies. If the beneficiaries are not correctly listed, it cannot be corrected following a death. It’s important their wishes are clearly defined and carried out.

Encourage a healthy lifestyle

Promote a healthy lifestyle for your parents by encouraging regular medical check-ups, a balanced diet, and regular exercise. Staying physically and mentally active can reduce healthcare costs and improve their overall quality of life.

Explore Social Security options

Social Security is a vital source of income for many aging parents. It can provide a steady stream of income to help them cover their basic living expenses. However, there are a number of different ways to claim Social Security benefits, and it can be confusing to know which option is best.

Social Security options available to aging parents include:

• Retirement benefits: the most common type of Social Security benefit
• Disability benefits: available to people who are unable to work due to a severe disability
• Survivor benefits: available to spouses, children, and other dependents of deceased workers
• Benefits from a former spouse

Consider downsizing

Downsizing is one of the most important financial decisions that aging parents can make. It can free up home equity that can be used to cover living expenses, invest for retirement, or help with long-term care costs. It can also make it easier for parents to age in place safely and comfortably in a home more suited for their future needs.

This is an emotional decision and can be a hard step for many aging parents. The goal is to have this decision made while the choice is still voluntary rather than mandatory (due to rapidly declining health).

Some of the key benefits of downsizing for aging parents are reduced living expenses,
smaller homes that are easier to clean and maintain, safer homes with fewer stairs and hazards, and, if they choose to move to a retirement community, the opportunity for more social interaction.

Seek professional guidance

Future planning of this type can be a large undertaking, and the rules, emotions and regulations surrounding retirement and elder care can change. Seeking the guidance of a qualified financial advisor or specialist can help ensure that you’re making the best decisions for/with your parents.

Preparing your aging parents financially for their later stage of life requires a lot of planning and open communication. By taking these steps and seeking professional guidance when needed, you can help make your parents' golden years truly golden. Visit OneDigital's Financial Academy for more resources to help you manage money more confidently and reach your goals.

Investment advice is offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.