Sunday, July 23, is Parents' Day, which was established when President Clinton signed a Congressional Resolution into law in 1994 to recognize, uplift, and support the role of parents in raising children. At some point when those children are grown, however, it often becomes their responsibility to care for their aging parents. It is an uncomfortable discussion, but an important one – what sort of financial obligations will you have in caring for an elderly parent, and consequently, how does that change your retirement plans?
You cannot answer the second question without fully addressing the first. It is important to have an honest discussion with your parents about their wishes – and financial capabilities -- for their senior years. What sort of care are they comfortable with? Do they want to pass assets on to heirs or liquidate them for their own needs? If they do not have basic paperwork set up such as wills, power-of-attorney, and a healthcare proxy, try to convince them to address this immediately.
Next comes the most awkward part – the financial discussion. Ask your parents for permission to go over their net worth, debts and monthly payments, insurance (health, life, homeowners and auto) and income with them. This is important for two reasons: combined with their wishes, this tells you how much financial support you may need to provide, and their income will determine eligibility for tax credits and dependent status.
Make sure you have covered all sources. It is easy to forget about safe-deposit boxes, life insurance policies, or similar items. Also, consider their Medicare/Social Security situation to make sure they are taking full advantage of their benefits, and whether supplemental health or long-term care insurance makes sense for them. Make estimates conservative (high on debt/expenses and low on income).
If you run into complex estate issues or investment considerations, you may want to consult with a financial planner and/or an elder law specialist. It is also worth visiting www.Govbenefits.gov and similar websites to check for assistance programs for which your parents may qualify.
At the end of this awkward conversation (or two), hopefully you will have a good idea of what financial burden you will have. As for the effect on your investments and retirement accounts, consider the following:
Make sure no resources are being left on the table (unclaimed benefits or programs), do what you can through reducing other expenses, and leave any effect on your retirement plans as the last resort – first minimizing contributions if you can, borrow if you must, but never cash in.
You owe your parents the best retirement that you can afford, but don't shortchange your own retirement in the process. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.
Originally Posted at: https://www.moneytips.com/caring-for-your-parents-as-they-age
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