For many families it’s the elephant in the room – aging parents whose cognitive abilities have begun to slowly deteriorate. It can prove particularly troublesome when it comes to matters of managing their wealth. Even faced with potentially impaired decision-making capabilities, many advanced seniors are exceedingly reluctant to even discuss financial affairs with their children, let alone turn over the financial reins.
Welcome to the latest generational Catch-22: older parents for whom money matters are a taboo topic, surrounded by their adult children who balk at broaching the topic for fear of appearing to be more concerned about the money than the parent’s well-being. It’s a silent dance that plays out in family after family, despite the fact that fear of running out of money in retirement and becoming a burden on their children remains the single greatest concern for a lot of aging parents.
For many seniors, these are well-founded concerns. According to the 2016 retiree healthcare cost estimate from Fidelity Benefits Consulting, a 65-year-old couple retiring in 2016 will need an average of $260,000 (in 2016 dollars) to cover medical expenses throughout retirement, up from $245,000 in 2015. And that amount could be considerably higher depending on the possible need for long-term care.
Opening the door to dialogue
Despite the apprehension, it’s critical that you have a financial conversation with your parents before it’s too late. At a minimum, you need to know where their Will and any other important legal documents (e.g., a living will and/or power of attorney) are kept and ensure that they are valid and up-to-date. Ideally, you should also have a list of key financial contacts with phone numbers and account numbers (and online passwords if applicable) for:
- Bank and investment accounts
- Insurance policies
- Mortgages and loans
- Lock boxes
- Any income sources such as Social Security, pensions and annuities.
In addition, try to compile a reasonably accurate medical history for your parents, along with any prescription medications they take.
If you have siblings, involve them in the conversation from the outset, broaching the topic to your parents together so as to avoid any potential for distrust that you might be trying to “take control” of the family’s finances. As a conversation starter, consider using a real or made-up story about a friend who went through a nightmare time because they had no financial information when their parent was unexpectedly struck ill. This can be reinforced by discussing the steps you’ve personally taken to make sure your own children never have to face the same difficulty.
As a last resort with parents who remain unwilling to discuss financial matters, implore them to at least write all the above information down and store it in a safe, secure place where you will be able to access it when and if the need arises. A little bit of planning and preparation can go a long way towards easing an already emotionally difficult time and avoiding any familial tensions or ill will. Don’t wait until a parent’s physical or cognitive impairment becomes so great that they are no longer deemed legally competent to turn over the financial reins. It’s a difficult conversation, but one that you shouldn’t put off any longer.
Talk to your financial advisor about steps he or she recommends for having “the talk” with your parents.