This article is the fourth part of my series “Helping Aging Parents with Money.” Read the first three parts here:
Part 1: Helping Aging Parents with Money
Part 2: How Caring for Aging Parents Fits into Your Financial Priorities
Part 3: How to Talk to Your Aging Parents about Money
Lately I’ve heard from many people who are worried that they will have to financially support their aging parents. Some people feel like they want to pay their parents back for all the support their parents gave them growing up. Others feel obligated to care for their parents out of a sense of guilt. Still others just love their parents and want to take care of them. Whatever your reason, it can be difficult to figure out how to best help parents who don’t have enough to pay for life in old age, especially when our own finances are in turmoil and there’s no way of knowing exactly what our parents will need.
I have lots of ideas below for ways to help your parents as they age, but there are two things to remember before you get started.
Take care of yourself first. You’ll be more helpful to your parents and less of a burden to your kids if you save for your own retirement before you help anyone else. Read more here.
Decide what is right for you. Each family has its own dynamics and needs. What’s right for one person isn’t going to work for another. Set limits so you can maintain your own life and sanity. Before you jump into helping, spend a little time thinking long term about what sort of assistance you’ll be able to realistically provide. This isn’t set in stone, but it helps to bring some intentionality to it.
You have many options for assisting your parents with money, ranging from helping them manage their money to assisting them with finding care resources to providing monetary support. Here are a few ways you can start planning now to help your parents financially:
Talk to your parents. Although many parents are hesitant to share their financial information (and struggles) with their children, it is worth trying. It might take a lot of patience and time to get them to open up. Be gentle and avoid simply telling them what they should do or expressing judgement about their situation or choices. Tell them you love them and care about them and you’re worried about them. Ask them how you can help. You can share your feelings, thoughts, and ideas, but it needs to be their decision. Aging is hard and can bring up complex emotions for your parents. Ultimately, you can’t control your parents. You can only control yourself and your actions.
Ensure they have the proper estate planning documents. At a minimum, they should have a will, an advance directive and healthcare power of attorney, and a durable power of attorney to take care of financial considerations. It is also a good idea to make sure beneficiaries of accounts are up to date. Trusts can also be helpful in transferring any wealth your parents may have. Talk to an estate planning attorney for assistance with these documents.
Help them downsize and/or look for a cheaper place to live. This could mean moving to a new location with lower taxes or living expenses. Or it could be a smaller house/condo/apartment.
Help them look for ways they can reduce their expenses. Sometimes those who didn’t grow up with technology are unaware of the ways in which they can spend less. For example, they might think that the only possibility for watching their shows and the news is to have cable tv. You might help walk them through different options. At a minimum, you can check how much they’re paying to see if you can negotiate lower prices for the same thing. Too often companies take advantage of older people who don’t have enough background to know what they really need and how much they should be paying.
For example, I recently helped my mom switch from expensive cable to a basic internet plan with Hulu Plus so she could still get her news and favorite shows. (link to article).
Figure out ways to help them stay out of assisted living. This might mean you go to their home every day if you live nearby or hire some help. Even moving to an apartment that doesn’t have stairs and installing support bars in the bathroom can help a person stay at home longer.
Consider having your parent(s) live with you. One of my friends recently bought a bigger house and created a separate apartment in the basem*nt for her in-laws so that they have a separate space. Money alone is a bad reason to have your parents move in. Don’t feel bad if you know this wouldn’t be a good situation for you.
Protect them from scams. Scammers famously target seniors in everything from investment schemes to phishing scams, to fake charities. My husband’s grandfather was constantly being sent free stuff from charities asking for money. Most of them were legitimate, but it can be hard to know for sure if you don’t know how to research it.
Help them review their credit reports. Go to www.annualcreditreport.com to download a free credit report from each of the three major credit agencies once per year. You’ll be able to make sure that no one is opening accounts in their name(s).
Create a budget or spending plan together. Sometimes helping them gather all of their financial information, listing out income and expenses is a good way to help them see if there is going to be a problem. You can show your parents the overall numbers and then help them brainstorm ways to solve any problems. Again, be kind and caring and help them come to solutions that work for them. You may not be able to, in which case you might have to step away and give yourself some grace.
Take over managing their checkbook and then give them an allowance, potentially even in cash. Some seniors are more willing to do this than others. My mother took over her mother’s checkbook when it became evident that mistakes were being made, and honestly, I think my grandmother was happy to not have to deal with it.
Help them sell items that they don’t need. It can be hard to part with items one has collected over a lifetime, but if your parents are amenable it can be a way to bring in a little extra cash. And sometimes, the point is not to get money but rather to simplify life or reduce the amount of “stuff” to be dealt with later.
Buy your parents’ house and “rent” it to them. Because there are many tax implications of transferring wealth (including property) you’ll need to have an expert help you avoid extra taxes. The benefit of doing this, even if your parents pay you rent, is that it can help free up some of their money to pay for expenses rather than having it all tied up in their home. Check out this article for more detailed information.
Note: this is essentially the same as doing a reverse mortgage except that the house
isn’t lost to the bank in the end. Reverse mortgages might help in a pinch, but they aretypically not the best solution if you can avoid it.
It is also important to consider family dynamics and whether siblings will be upset if you take the family home. Sentimental feelings about the home can be powerful.
Consider having your parents purchase long term care insurance. LTC is not right for everyone. It is incredibly expensive, only covers around $160/day (depending on where you live) for up to three years, and the premiums can go up over time. If your parents can afford it and have a high likelihood of needing long term care, it is something to seriously consider. However, those who have enough money to pay for LTC insurance might also have enough money to just cover the costs directly. There are also some policies that combine long term care and whole life insurance so that heirs receive some money back if their parents do not require long term care. Either way, work with your parents to come up with a plan.
Look at an annuity. Annuities are essentially an insurance policy against outliving your income. When you purchase an annuity, you turn a set amount of money into a series of regular payments. Annuities have a number of downsides, including high fees, lack of liquidity, lower returns, and potentially higher taxes for those in a high tax bracket. Therefore, they are best for people who have a modest amount of savings and are looking for a steady supplement to social security that will last until death. Make sure the annuity will pay you for life and try to find one with lower fees. Annuities are often pushed on people who don’t need them, so it is best to work with a fee-only financial advisor who can help you evaluate your options when buying an annuity.
Help brainstorm ways your parents could bring in additional income. I listened to a touching story on NPR awhile back about an elderly gentleman in Mexico who had sold his business and downsized to working in a grocery store because it was easier and he didn’t need so much income. The pandemic caused him to stop working. He got bored being stuck at home, so his children helped him start a cooking show on YouTube and he’s become quite the sensation.
Obviously YouTube cooking shows take a lot of work and are not for everyone. The pointis that older people are often unaware of the possibilities for making money from home. There are many ways to make extra money these days. It might involve teaching courses, writing, renting out a room in your home, or driving for Lyft. Help your parent learn about online work possibilities or check this list of side gigs for more ideas.
Hire a professional to help them go through their finances. Financial coaches and many financial advisors can help people sort through the information and get an overall picture of their financial situation. From there, advisors and coaches can make recommendations on actions that might help. Be sure to get buy-in from your parents before hiring someone to help them! The advantage to this is that it might be easier for your parents to work through their finances with an objective third party than with their own children.
Get extra help. Many states have resources to help elderly people and caregivers. In Minnesota, we have the Senior LinkAge Line. Nationally, you can get help and information from AARP, the Social Security Administration, Medicare, and Medicaid.
If, for whatever reason, you are unable to help your parents, the government provides a social safety net. For those with no assets, Medicaid will pay for nursing home care. Some places have senior apartments for those with low income. Veterans have access to long term care and many other benefits. It’s important to research what is available in your area and state.
Caring for your parents as they age is hard, but it is a reality many of us will face at some point in our lives. The most important thing with any of these suggestions is to work with your parents to find what is right for both of you. Above all, take care of yourself financially, physically, and emotionally. You’re no good to anyone if you’re not caring for yourself.
Read more in this series:
Part 1: Helping Aging Parents with Money
Part 2: How Caring for Aging Parents Fits into Your Financial Priorities
Part 3: How to Talk to Your Aging Parents about Money
