If you were born between the years 1981 and 1996, you are considered a Millennial. If you’re part of this generation, you’re probably more concerned about building an emergency fund, paying off student loans, starting a family, buying a home for the first time, traveling the world, or determining how to start saving for retirement.
These are all common financial planning goals for individuals in this age group and are important to address. However, there is one imperative, impending financial concern that is so crucial to account for, yet most people are unaware of it or avoid it entirely:
Will your parents need your financial support when they get older?
If you are part of this generation, your parents are most likely pushing 55+. Your family may or may not have a financial plan in place, but regardless, it’s important to discuss these issues with them to determine their future needs in case you may have to be more financially involved later. You may potentially be responsible in aiding them with their medical expenses, caregiver expenses, or other health costs in the future.
This long-term planning issue could possibly have a major impact on your future financial well-being, such as reducing your retirement savings. Your parents shouldn’t be the only ones you take into consideration for this concern— you should plan to potentially accommodate for any loved one.
It may be challenging to think about your parents or loved ones getting older, but the financial impact of having to support them makes it even more important to have an open discussion with them sooner rather than later.
Some questions you may want to address include:
Is their retirement plan on track? It’s not enough to ask what types of retirement accounts your parents own; it’s more important to find out how much money they have saved so far and how it’s being invested to make sure the money outlasts them.
How are they meeting their healthcare expenses? It is wise to be proactive and ask about your family’s health history and how they anticipate affording future medical costs. Also, consider talking to them about their plans to acquire Medicare benefits (if needed) and their anticipated Social Security benefits. They can get their estimated benefits statement by creating an account directly through the Social Security website.
How does your family want to be taken care of in the future if they need daily medical assistance? Do they want to be in a nursing home, assisted living facility, or have a home caregiver? The cost of care varies by state, but according to the U.S. Department of Health and Human Services, in 2016 the average cost of professional assisted living care nationally was $43,500 annually, the cost for a health aide was $20.50 per hour, and the cost for nursing homes was as high as $92,400 annually. If these types of costs are not planned for, the financial blow can be detrimental to you and your family.
Do they have the proper estate planning documents in place? When was the last time they updated their wills or Power of Attorney documents for health and finances? Who’s the executor of their estate? Are their accounts titled properly so that it doesn’t have to go through probate? These are very important questions to ask your family to ensure that the management of their estate is processed smoothly at the time of their passing.
THE BOTTOM LINE:
It’s important to talk about money, even when it’s hard.
As difficult as it may seem to talk about money with your family, there are ways you can approach them.
You can gently mention that you’re working on your own financial plan and want their input. Then, ask if they have any experience working with a financial planner or how they have approached their own financial planning. This should open the conversation without coming off too nosy or threatening.
If they already have a financial planner, it may be a good idea to meet with him or her. If your family has never created a financial plan before, you can suggest meeting together as a family with your own financial planner. In my experience working with clients, when you open this type of dialogue, it helps build trust and awareness amongst all parties.