Money Moments: 3 smart financial strategies when caring for aging parents
If you need to provide financial assistance for your parents or in-laws, it’s important to do so without risking your own financial well-being. Use these tips to better maintain financial security.
More Americans than ever are helping to care for their aging parents. In 2015, more than 34 million Americans gave unpaid care to an adult over 50. Here are some smart strategies to keep your own financial future sound while caring for a loved one.
Smart Strategy #1: Prep for large expenses
The golden years can be expensive. For instance, the U.S. Department of Health and Human Services estimates that about half of Americans who live to age 65 will require long term services and support (LTSS), with an average projected duration of two years and an average of cost of $138,000. Depending on a person’s eligibility, Medicaid or private insurance may help cover a portion of that cost, but many families end up paying for LTSS out of pocket.
Additionally, if you need to become a family caregiver for an aging parent, the cost to your own bottom line could be substantial. A study sponsored by MetLife found family caregivers who cut work hours or take time off could lose more than $300,000 in lifetime wages and retirement benefits.
Outsourcing that care isn’t any better. The cost can range from $1,500 per month for adult day health care to more than $8,000 per month for a private nursing home room.
Yes, these potential expenditures seem daunting. But knowledge is power. Understanding the costs your family may encounter down the road will help you work together now to be as prepared as possible.
Smart Strategy #2: Have a candid conversation with your loved ones about their complete financial picture
Having a conversation about finances with your parents or in-laws may be intimidating. However, understanding your parents’ financial situation is vital to properly plan for possible expenses down the road.
Try teeing up the conversation like this: “I’m hearing more and more about retirees who are facing unexpected financial hardships as they age, and I want to make sure you’re never in a similar tough spot. The more I know about your money situation, the more I can help you plan for the future.”
When you sit down to talk, try to cover the following:
While you’re at it, compile a list of your parents’ financial institutions and account numbers.
Smart Strategy #3: Secure your own financial future before lending a financial hand to Mom and Dad
All families are different and all circumstances will vary, but it’s really important you don’t jeopardize your own long-term financial security in order to help a parent. Take steps to safeguard retirement savings and maintain healthy financial boundaries.
If providing monetary care to your parents someday is important to you, establish a specific, interest-bearing savings account for that purpose now. Analyze your budget and come up with a comfortable amount to automatically deposit into the account every month. Then enjoy the peace of mind that comes with planning ahead.
Read more about how you can help protect your loved ones from elder financial exploitation.