For much of our lives, our parents have been the ones to bring up uncomfortable topics.
But once we become adults, sometimes it’s our turn to start sensitive conversations. One example is talking with parents about their retirement. Even financial professionals have experienced the challenges.
For a majority of adult children, making sure their parents are taken care of as they age is a major focus of their lives. Yet parents and children alike can ease this worry by talking about the future. These may not be easy conversations, but they can be invaluable for everyone.
You may not know if there is ever a right time to bring up the subject. It can help if you let them know that you only want the best for them. With this in mind, here are some guidelines to get past any awkwardness and let the conversation flow.
What’s the big picture?
It’s essential to have an overall strategy and look at your parents’ finances from a macro perspective before they make any decisions. It’s important to start with an understanding of your parents’ big picture of what they envision their retirement to look like.
Sometimes when parents look at their retirement reality, they discover a gap between their finances and their needs. How much do your parents plan to live on in retirement? At what age will they start collecting Social Security, and how much of their living expenses will it cover? What other forms of income of income will they rely on? Is there a pension, 401(k), or IRA available? What are the potential tax implications on their retirement income? With whom are you working to make sure you’re on a good track?
It’s important to know your parents’ medical coverage. Ask them if they will carry supplementary insurance beyond Medicare. Do they know that Medicare doesn’t cover long-term care, such as nursing home stays? It also doesn’t cover dental care. What funds will be available for unexpected costs like these?
You’ll want to talk to your parents about where they will live in retirement. Do they have a second (vacation) home? If so, should they keep it or sell it? Do they plan to age in place in their current home? If so, is there an outstanding mortgage on their home? Would they consider downsizing to a smaller home? Or, if they want or need to go to a long-term care facility, where would they like to live? What monthly budget do they have in mind for housing?
Who will be their voice?
Have you discussed wills, trusts and advanced directives with your parents? Do they have an updated will? Who is the designated executor of their will? No one likes to think about this, but in the event that they can’t manage their health and financial affairs, who will serve as their power of attorney?
Avert a future crisis
Not only does knowledge bring power — it brings relief, too. For both parents and their adult children, initiating these talks while everyone is in good health can avert a future crisis. When adult children know how their parents want to live in their retirement years, they can better support their parents in living as they wish.
At every step of the way, a financial professional can bring objective insights to these conversations. Remember that you don’t have to do it alone. There are professionals here to assist you and your parents with their retirement plans.
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