Finances and the Aging Parent: A Roadmap For Family Harmony

My personal experience is that a family financial discussion can be among the most difficult topics to raise between aging parents and children. “Trust, but verify” is often an effective strategy that allows parents ongoing independence while giving children permission to review a parent’s finances and create an early detection system that identifies deteriorating health.  There is an industry that has developed to outsource elder financial management to an independent third party. This can be part of the solution. However, a third party doesn’t absolve the adult child from checking in to both understand their parents’ finances as well as to protect against an errant hire.

In my wealth advisory practice, I regularly see contention within families as they struggle to introduce financial oversight for their aging parents. This manifests in several ways, including between parent and child as well as between siblings who have a varying understanding of the need or how to best implement a plan. The ideal strategy is for the parents to take the lead with these discussions. Unfortunately, this rarely happens.

As a result of my personal experience, along with observing my clients’ efforts and failures, regarding elderly financial oversight, I developed a timeline to begin conversations with specific topics. 

This roadmap should be used as a guide. Because we all age differently, physically and cognitively, a chronological age for when to begin this process is only a suggestion and should be modified based on the family member.

Mid 50’s

• Long-term care insurance. High Premiums and the increased chance of a disqualifying health event make it critically important for parents to evaluate their retirement healthcare strategy in their mid 50’s. This decision needs to be driven by the parent.  While not perfect, a long-term care policy that can be used as life insurance if not required for chronic health care needs can be the best gift parents give to their children and their children’s marriages. A long-term care policy can avoid children from asking their spouse to direct part of their retirement savings to a spouse’s parent. 

Mid 60’s

• The first “official” meeting.
•  Discuss retirement goals and plans.
• Meet the Financial Advisor (or suggest finding one).
  • Review the retirement spending plan and, ideally, the Retirement Forecast.
  • Understand the retirement income sources (Social Security, pensions, etc.).
  • Review the health care plan (Medicare & Medigap insurance). This must be done at age 65, even if the parent is still working.
• Confirm that the necessary legal documents are in place to deal with incapacity and death.
• Suggest automating most bill payments through online banking
• Freeze all credit cards to avoid financial scams. The U.S. The Federal Bureau of Investigation (FBI) estimated seniors lost more than $1.7 billion due to financial scams in 2021.

Mid 70’s

• Require automation of all bill payments through online banking.
• Discuss whether any type of bill paying is becoming too much of a burden; look for credit card late fees that may start to creep into bills.
• Suggest reviewing monthly bank statements and credit card statements
• Review charitable giving (often seniors make charitable donations with money they don’t have).

Early 80’s

• Quarterly check-ins

How to Start Financial Conversations With Retiring Parents

While they are essential for ensuring a strong financial future, starting conversations with retiring parents about their finances can be incredibly difficult. The best scenario is when a healthy, retired parent raises the issue rather than it coming from the children. Choose a nondescript time of the year to start the discussion; Avoid holidays, family vacations, or other stressful moments such as tax season. Use an article such as this one as a guide, reading through various topics and letting the parent decide which one to tackle first. Keep the conversation short and consider chunking up the issues throughout several interactions. 

If numerous siblings are involved in caring for aging parents, I suggest the children get on the same page first before approaching the parents. Appoint one sibling as the conduit, who then reports back to the other siblings. Siblings may rotate this task also. Often, the toughest concept for adult children to understand is that they are helping manage their parents’ financial life, not protecting their inheritance.

In our society, we are taught from an early age that you don’t talk about money. For some families, this conversation around a parent’s retirement finances might be the first time the topic is even addressed. It will likely be a learning experience for both parents and their adult children. But effective, compassionate communication can help make the conversation a productive step toward avoiding unpleasant surprises.

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Jim Tucker, CFP®, CRPS® is a financial advisor located at 3100 Tower Blvd, Suite 117, Durham, NC 27707. He offers securities and advisory services as a Registered Representative and Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Jim can be reached at 919-381-5780 or at jim.tucker@tuckerbria.com