Dear Mom and Dad: Are your finances ready for retirement?
The need to discuss your parents’ futures with them, especially before a potential crisis or inciting event, is true for everyone.
Cameron Huddleston was 30 years old when she first suggested that her mother look into getting a long-term care insurance policy. Her mother was divorced, and Huddleston, a financial journalist, knew that a long-term care insurance policy could help offset the cost of any future care that might be needed. Ultimately, her mother couldn’t get coverage because of a pre-existing health condition, and the conversation just petered out.
“What I should’ve done was sit down with her and say to her, ‘Mom you can’t get long-term care insurance, so let’s look at your assets and see what kind of care you’d want,’” Huddleston said. “It didn’t even cross my mind to ask her that question.”
Four years later, her mother started exhibiting signs of memory loss. When Huddleston was 35, her mother was told she had Alzheimer’s, at the age of 65.
Huddleston immediately went into preparation mode when her mother started having lapses in memory — so by the time the Alzheimer’s diagnosis came, the family had taken care of the legal paperwork and laid the financial groundwork to ensure her mother would be well cared for.
While Huddleston’s experience may seem an outlier to many, the need to discuss your parents’ futures with them, especially before a potential crisis or inciting event, is true for all.
Initiating the conversation
“It can happen naturally. As naturally as premeditated can be,” said Huddleston, who wrote the book “Mom and Dad, We Need to Talk,” to help others navigate this potentially difficult transition.
How should you bring it up naturally? Huddleston recommends using general questions to ease parents into the conversation. “Mom and Dad: What does retirement look like for you?”
A natural point of pain in this conversation is that your parents have been the ones providing you with advice and guidance, and now you’re shifting the paradigm and asking questions that suggest you’re concerned whether they’re going to be O.K., Huddleston said. That shift can cause discomfort and tension.
Amanda Clayman, a financial therapist and financial wellness advocate for Prudential, advises that you tie the conversation to your own life as a way to maintain the original roles in which the parent is still the expert and helper. With this strategy, you’re not threatening the power dynamic, while also getting the insights you need.
For example, one script to follow could be: “My partner and I are working to combine our financial lives after the wedding. It’s tough figuring out things like life insurance, wills and retirement planning. How did you and Dad handle all that?”
Sally Hurme, an elder law attorney and author of “Checklist for Family Survivors: A Guide to Practical and Legal Matters When Someone You Love Dies,” suggests that adult children get together ahead of time to discuss how to talk to their parents.
Timing is a big consideration if all the siblings are going to be involved. There is, however, one time you should avoid: the holidays.
Do your parents have enough money?
The ultimate goal of the retirement conversation is to determine whether your parents have enough assets to sustain a comfortable lifestyle.
“Most people don’t plan and just eyeball what’s coming in from Social Security and look at their 401(k) balance and wing it,” said Liz Weston, a certified financial planner and personal finance columnist for the personal finance blog NerdWallet.
An initial way to avoid winging it is to use one of the many online retirement calculators. Weston suggests AARP’s for the Social Security benefits and NerdWallet’s and T. Rowe Price’s retirement calculators. Online calculators, though, aren’t enough.
“At some point you need a second opinion on your retirement plan before you retire,” said Weston, especially before a couple decides whether to take Social Security benefits early.
A way to ensure there is a plan in place is to get your parents to meet with a financial planner if they don’t have one.
This gesture can be particularly useful for adult children who don’t have the financial ability to support their parents.
Would you want to move in with us?
While multigenerational households are an expectation in many countries, only about 20 percent of households in the United States are multigenerational, according to a Pew Research Center analysis of census data. Sure, a multigenerational home helps stretch a parent’s retirement fund, but the decision has far more benefits than just money. Mainly, it reduces social isolation, which in turn can promote a healthier physical and mental state. You just need to be careful how you approach the topic.
“Ninety-nine percent of the time how children approach it is: ‘Mom and Dad, we’re worried about you. You can’t do as much as you think you can,’ and it’s all about taking away their freedom,” said Lisa Cini, president of Mosaic Design Studio, which provides design services for senior living, long-term care and health care institutions. “I think that’s the exact wrong approach. You need to move them from fear to freedom, not the opposite way.”
Outline the benefits to you of having your parents move in. Perhaps your parents can keep an eye on the kids or pets while you travel or help offset the cost of certain bills or help you handle meal prep during the week.
Other options to help your parents without moving them in could be aiding them in finding home help, visiting them more frequently to reduce the feeling of isolation or financially subsidizing their current housing.