From the birds and the bees to why your pet goldfish is floating belly up in his bowl, your parents have had their share of uncomfortable conversations with you.
Now that they’re edging toward their golden years, it’s your turn to help them navigate an awkward topic: their finances. The sooner you get up to speed on their financial health, the better equipped you’ll be to help them live out their lives without money panic — plus help prevent the headaches and heartaches of estate planning that can tear families apart. Our guide breaks down what to ask and when to bring it up, as well as the right approach to take to get the conversation started.
Get started with a free financial assessment.
Get started with a free financial assessment.
If Your Parents Are in Their 50s
It's time to start getting the lay of the land. You'll want to ask them:
How are your savings and retirement accounts looking? No need to grill them down to the dollar amount. But considering that a quarter of adult children support their parents financially, and nearly 30% of households headed by people ages 55 and older have neither retirement savings nor a retirement benefit plan, it’s important to have an idea where their funds stand.
In the best-case scenario, they'll be fiscally sound with retirement savings in the form of an IRA, 401(k) and/or a pension. But since only 24% of baby boomers are confident that their nest egg will sustain them through retirement, talk to them about ways they can free up money, such as downsizing their home.
Do you have a will in place? Spring the W word on them, and your folks might become defensive, says Lee Baker, CFP®, owner and president of Apex Financial Services in Atlanta and president of AARP Georgia. So ease into it by mentioning your own estate planning: “Hey Dad, I met with my financial advisor yesterday to talk about putting a will together. It made me wonder, do you and Mom have one?” If the answer is no, offer to help them secure a lawyer.
Who did you designate to carry it out? If they have a will, find out who is the executor, successor trustee (if they set up their estate as a trust) and durable power of attorney (the person who takes over their legal and financial affairs should they be unable to do so). "Frequently, parents will appoint a child to one of these roles without their knowledge, which can be disastrous," says Richard Kahler, CFP®, author of "Wired for Wealth" and president of Kahler Financial Group.
If they’ve named you as one of these, tell them you'll be better able to handle their affairs if they keep a list of the professionals you'll need to reach out to when the time comes, such as their accountant and insurance agent. An updated list of account passwords will help you out, too.
If Your Parents Are in Their 60s
Now you've got to get down to the nitty gritty with these questions:
Where do you plan to spend your retirement? Whether they downsize to a smaller home in their current neighborhood, move into a retirement community elsewhere or intend to stay put, all of these options have different financial implications, and you'll want to talk to them about making sure they can afford whichever one they choose, Kahler says.
Have you thought about a living will? This is the kind of touchy topic you might want to gently mention and then circle back to for more details later on, says Baker. But you need to know their wishes concerning their health if they are unable to give consent, plus who they've designated as their health care power of attorney (the person who makes health decisions for them if they're incapacitated). If they didn't set one up, help them find a lawyer who can get it going.
Do you have long-term care insurance? By age 65, approximately 70% of people can expect to use some kind of long-term care, according to the U.S. Department of Health and Human Services. Long-term care insurance can help make assisted-living facilities and in-home care more affordable by reimbursing you for a percentage of their costs. A good policy can save bundles, so if they shake their heads no, explain the benefits. "Sixty is the time to consider long-term care insurance, but by age 70, it's often too expensive," says Kahler.
Are your beneficiaries up to date? People notoriously don't keep track of who they've named as beneficiaries on insurance policies, trusts and wills, says Kahler. If your parents can't remember, help arrange an audit of all beneficiaries on their financial documents. You — and they — want to make sure their assets go to the right people, not someone they are long estranged from.
Of course, everyone's retirement timeline and financial situation is different, so use this list as a starting point for kicking off these important conversations with your parents.
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Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.