If you’re like most adult children, you don’t know much about your parent’s financial situation — from what regular income they have and what expenses they pay each month to where they keep past years’ tax returns and if they have powers of attorney for finances and health care.
As your parents start to cope with declining retirement assets and rising health care costs, you can support their financial independence and avoid family conflicts down the road by planning for their long-term care needs.
Dealing with Money is Difficult
Dealing with money is difficult — from compound interest and inflation to Medicare and Social Security — and it’s easy to make financial and advance care planning mistakes. Here are five common financial planning mistakes and how you can avoid making them so that you can help protect your elderly parents’ finances and estate.
Mistake 1: Skipping Out on a Financial Adviser
If your parent doesn’t already have a financial adviser, find a certified financial planner who is willing to meet with you and your parents at least once a year to review and tweak their finances.
Ongoing planning and maintenance are important to ensure a comfortable retirement.
Stress that you don’t want to take over your parent’s finances, but you want to ensure that the adviser fully understands your parents’ situation and family dynamics.
Building relationships with financial and legal professionals and ensuring a will and living will are in place and up-to-date are excellent ways to help protect your parent’s financial interests.
Mistake 2: Refusing to Acknowledge a Person with Dementia’s Declining Ability to Monitor Money
If your loved one has been diagnosed with Alzheimer’s or other dementia, it’s likely that financial planning has been pushed aside because of the stress and fear this topic evokes.
But people with Alzheimer's may experience changes in judgment or decision-making. For example, they may use poor judgment when dealing with money, giving large amounts to telemarketers.
That’s why it’s important to stay alert for signs of memory loss so you can help your loved one identify scams and avoid risky financial behavior.
Of course, it can be tough to discuss memory loss and financial troubles with a loved one, so the best way to minimize the difficulty of this conversation is to bring it up well before memory loss becomes an issue.
Mistake 3: Thinking Medicare and Social Security Will Cover the Cost of Assisted Living
It’s time to learn the truth about financing: Medicare won't pay for assisted living beyond short-term rehabilitation, and, according to the Social Security Administration, the average benefit for a retired worker is about $1,230.
To pay for long-term care, most families will use a combination of self-funding, government assistance, and long-term care insurance. So it’s a good idea to research various ways to pay for long-term care.
Mistake 4: Choosing an Assisted Living Facility Base on Cost
Assisted living communities come in all different shapes and sizes, and pricing structures vary widely. A community with a low price tag may mean you’re compromising the quality care they receive or the amenities they are able to enjoy.
Alternatively, communities that are steeply priced do not always offer the programming or care services your loved one will need to age in place.
Rather than being too focused on the financial aspect of the community, make a list of “must haves” and “would be nice to haves” to compare communities, then dive into understanding the pricing structure of each community.
Mistake 5: Not Planning for Future Care Needs
It's important to keep in mind your loved one's future care needs when choosing an assisted living. Right now, they may only need help with remembering to take their medications, but in the future, they may need to receive help with bathing, grooming, and cooking.
Look for an assisted living that offers services for your loved one's current and future care needs. Also take into consideration the financial impact of needing to increase services may have on your loved one's finances.
Start the process early and allow for plenty of time to do research, visit communities, and be confident in the decision your family has made.
It's never easy getting your parents to open up about their finances, but it's a necessary step in the advance care planning process.
For more tips about how to begin the conversation, download our eBook Getting Your Affairs in Order: A Guide to Advance Care Planning and Emergency Preparedness.