Are you ready to start taking care of your parents?
Americans are living longer these days. I recently heard on the radio that the oldest person in America had just passed away at age 116. As baby boomers, we’re experiencing a new phenomenon that will last many generations to come: the likelihood we will have to provide some form of care for our parents.
This has implications for all of us, including my client, who I’ll call “Jack.”
Jack had a typical life. He was in his 40s, worked hard and had a wife who stayed at home with their three children. Jack made a very good living, was careful with financial planning and was able to comfortably save for his primary goals of retirement and education funding for his children.
Jack’s father and mother retired early. While his father was not a rich man, he was far ahead of his own father (Jack’s grandfather) and his own personal expectations. Then, at age 60, Jack’s father was diagnosed with Alzheimer’s disease. Over the next 10 years, he stayed relatively sharp of mind and body, but the family was starting to see the effects of the disease.
About a year ago, Jack’s father had to be placed in a nursing home due to a worsening mental condition. While Jack had always been committed to his own financial and goal planning, he now realized the government was not going to cover the cost of his father’s care and that the expense would soon exhaust his father’s retirement nest egg. As luck would have it, his mom was now starting to face her own health-care needs.
Jack was faced with a harsh reality. By the time his mother would require assisted care, Jack would be contributing toward his parents’ long-term care and supporting his children in college. Based on his quick calculations, he figured he’d be able to support his children’s education as he promised (part of his financial plan) and contribute to his parents’ care (not part of his financial plan) at a cost of more than $200,000 per year. But now Jack had to rethink his own retirement plan, which had been so assured just a few years earlier.
He also wanted to make sure he understood his choices about his own elder care instead of leaving that burden to his daughters.
As a typical investor, Jack’s goals were concentrated solely around the growth of his investments. But life is not one-dimensional. and we need to ask ourselves some tough questions.
Building a solid financial plan includes factoring in health and economic crises, such as unexpected unemployment. Although you can’t predict the future, you can prepare for it by keeping in mind some investment basics:
• Financial planning is not just about picking the right stock or mutual fund. Put together a comprehensive plan, on your own or with help, that articulates where you are today and what you need to do to reach your goals. Be sure to take into consideration your parents’ financial situation and what type of financial assistance you are ready to provide, if necessary.
• Talk to your parents about their financial plan. My experience is it’s never easy to talk to your parents about money. Consider involving a person trusted by your parents (lawyer, accountant, close friend) as well as other siblings, and be prepared to cover specific points
• Do not expect the government to cover the cost of long-term care for your parents. Medicaid laws are getting tougher, with the expectation that the burden for elder care will be placed squarely on the family. Unless you plan for the inevitable, you reduce any choices you have toward the care of your parents
• Understand that good comprehensive financial planning will cost money. You can pay now or you can really pay later, so shop around for the right financial planner. Look for a financial planner who charges a fee for planning services, but does not have a financial interest placing you in specific products
• Be prepared to take care of yourself. Start planning today so you don’t become a burden to your own children. Also, be sure to have frank discussions with your family about what steps you have taken for your care. Not only will it mitigate your own concerns, but you will be teaching your children a valuable lesson they can take with them to incorporate into their own financial planning.
James Toye, manager of the Manchester TD Ameritrade branch, has more than 20 years of financial services experience in New Hampshire. He can be reached at email@example.com.