Financial Planning for Retirement

What’s in Your Parent’s Wallet? (And What That Means for You)

May 2nd, 2007
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Elderly Hands

Taking stock of your elderly parent’s financial situation usually requires initiating a potentially uncomfortable discussion—money matters are a touchy subject, especially when family comes into play. Elderly parents are often reluctant to share control of their finances. It may be simply that they just don’t know the details surrounding the state of their finances. No matter what the situation, try to include your parents in managing their finances. Eliminating their involvement may prove to be psychologically debilitating to them, as it can feel like a loss of control.

Show your acknowledgment and concern by sharing and exchanging information with your parents. This open dialogue will help with difficult decisions or changes that might need to be made. Oftentimes, an objective third party can help gather the necessary information without the intimidating family interplay.

The state of one’s financial affairs can incite many emotional issues. Familial rivalries, differing needs and relationships with the parent can all result in unproductive rifts that complicate the situation for everyone. Consider that your parents’ life experiences affect the way they think, and the decisions they wish to make. Please respect the fact that their financial resources are just that—theirs!

Create a Budget—Simple as 1-2-3

Calculate a budget by identifying all income and expenses. Don’t be intimidated by this task—you can complete it in three painless steps.

1. Review bank account records, investment information and old bills. These will give you some guidance. Order copies if necessary, and use the table below to guide you.

  Income Expenses
Present    
Projected    
Future Needs    

2. Now calculate your parents’ net worth. Inventory the assets from the most liquid (i.e, the easiest and least costly to access) to the assets that are more difficult to liquidate. For example, you may want to begin the list with checking and money market accounts and end it with assets such as real estate.

3. Follow this with a specific list of all debt and other unpaid liabilities. Be sure the asset values you use are conservative and pad the liabilities for safety.

Questions to Consider in Helping Manage Your Parents’ Finances

  • Are your elderly parents able to continue managing their finances on their own?
  • Do they merely need assistance with bill paying, necessary record keeping or organization?
  • Is a change in strategy required either because of their living situation and care needs, or market conditions?
  • Are they financially stable, having more than adequate income to meet increasing expense demands?
  • Do they have sufficient assets (or insurance coverage) to tap that would cover any increasing financial burden?
  • What is the present and future going to demand financially?
  • Will the cost of long-term care be a factor?

Be realistic! Identifying options and their costs begins here. A financial planner can help evaluate the situation and alternatives. Discuss with your parents the possible combination of government, insurance, community and family resources as financing alternatives.

Getting organized will lay the foundation for making sound financial decisions. Simplifying one’s financials through consolidation, as long as there isn’t a cost, can be very beneficial. Preparing for financial management will help you improve your parents’ quality of life.

In the coming months, I’ll address the sale of assets, tapping unknown reserves, and financing alternatives. With the wide spectrum of options you have, there is some combination that is suited to your parents needs and financial considerations, as well as your own. Everyone is different. As a financial planner, I’m keenly aware that appropriate solutions differ depending on the specific situation, the person, and timing of markets. Financial planning for the elderly must consider both present needs as well as the future implications in the decision-making process.

Helping to plan your parent’s future—

Suzanne Wolfson

Posted in Advanced Planning, Financial Planning for Retirement: Suzanne Wolfson, How-to's, Paying for Care, Planning for Long Term Care

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2 Responses to “What’s in Your Parent’s Wallet? (And What That Means for You)”
  1. Jane Says:

    Wow what a thorough assessment. I printed this out to take with me when I meet with my mom next week to discuss her finances. Just curious…why would I need a financial planner when I can just use this type of information online. Is a financial planner more for people who have a lot of different assets and money in different places? Its pretty cut and dry with my mom, I think.

  2. Suzanne Wolfson Says:

    Jane,

    A list is merely a guide, and it can be limited in assisting you with important financial decisions. There are so many variables that need to be considered like taxes, market variable, and evaluation of possible choices to meet needs. After all these years of assisting families and individuals I still find that a financial planner’s knowledge and wisdom can bring clients invaluable information and direction. Generic information does not always apply.

    Not all financial planners require their clients to have large portfolios—it is by no means only about asset management. Frequently I work with people who have only a home and a few other assets. This doesn’t affect their need for financial advice, both for now and for the future.

    What I am able to present in these blogs is actually very limited. After setting the ground work, however, I’ll be able to address more specific issues, options, and consequences.

    Thank you for your response,

    Sincerely,
    Suzanne

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