Are You Prepared For Your Parents' Senior Years?

Whether you are a man or woman, as long as you have parents that are still alive, you must give thought to what will happen to your parents as they approach their senior years.

I ran across an interesting and relevent article at New York Life that I feel I must share with you. . .

"Many poeple face their parents' retirement and aging without a second thought, assuming that Mom and Dad are in good financial shape and ready for the golden years. Making this assumption can be a serious mistake. You and your folks may think they are adequately prepared for retirement, but how far down the road have they looked?

With average life expectancy increasing, it's not uncommon for people to live 10-20 years (if not longer) after retiring. A great deal can happen in that time, and life's events don't always work out as planned. Culprits such as inflation and illness can wipe out a nest egg and undermine the financial independence of even the best-prepared retiree.

Inflation and illness can turn a nest egg into a goose egg. Inflation can seriously erode money's purchasing power over time. Even with an average inflation rate of 4%, retirees at age 60 with an income of $2,500. per month will have the purchasing power of $1,388. per month by the time they are 75 years old. In other words, the standard of living will be virtually halved in just 15 years. Many retirees today have found themselves searching for part-time jobs, in order to keep up the rising cost of living. But no one can work forever. And major illness can wipe out - in mere months - a nest egg that took years to build.

According to the Abstract of the United States, 45% of an individual's lifetime medical expenses are incurred during a final illness. That's only half the story. Research figures published by the New England Journal of Medicine indicate that 43% of those who turned age 65 in 1990 will enter a nursing home at some time during their lifetime. As people get older, the probability increases. With nursing home costs on the rise, according to the Congressional Subcommittee on Aging 70% to 80% of nursing home residents dep lete their assets within 12 months.

When retirees' savings are depleted, it adversely affects the next generation, too - usually at the worst possible time. Frequently, adult children of senior citizens are working to provide for their own households and futures. Too often, they become saddled with the cost of supporting their parents while still trying to meet their own household expenses. It's a tough balancing act to try to sustain.

Plan in Advance. This is why adult children must get involved with their parents' financial affairs, the sooner the better. Start with a meeting of the generations to discuss everyone's plans, wishes and concerns. Here are some topics to tackle and questions to ask:

Will your parents' retirement funds be adequate? Inflation and longer life expectancies may make retirement costlier than they have anticipated. What supplemental funds are available?

Who will manage their finances if they cannot? Discuss long-term financial plans, the location of records, and the possibility of establishing a contingent power of attorney to step in and help during an emergency.

What are their estate plans? When and how will they distribute their property, especially if they become incapacited? Are there any charitable endeavors or causes they wish to contribute to? Do they have updated wills and an executor who knows their wishes?

Are their risk management programs adequate? Without adequate health coverage, a single illness could wipe out an otherwise ideal retirement plan. (Some children cost-share their parents' premiums for Medicare Supplemental or Long Term Care insurance. They see it as a wise investment in their parents; future.) What about life insurance?

Do they have special medical requests, such as living wills, trusts, lifetime, gifts, etc.? Where would they want to live, if incapacitied? Discuss nursing home and home health care options.

Problem: Generally, parents and children feel uncomfortable discussing these matters. It's important to do this in a way that puts both generations at ease. One solution is to bring in the services of professionals, such as an attorney, tax advisor or insurance agent. These individuals are familiar with retirement and estate conservation issues and can provide objective and knowledgeable information of these topics."

Put your mind at ease . . . and make early plans.

Author:Hunter

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Last updated October 31,1999

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