Over the last few years, the baby boomer generation has struggled to adjust to a jarring new reality: the typical scenario where a parent leaves behind assets to their children is reversing at a rapid rate. Instead of sticking to the dream of sailing a boat around the world, many baby boomers find themselves canceling their original retirement plans in order to take care of their parents.
While we can thank modern medicine for improving our society’s average life span, many Americans who are now living longer are plagued by a lack of retirement funds to cover rising healthcare costs.
As a result, they become dependent on their children to help them, particularly as their health declines. This can throw many retirement plans for a 180-degree flip and completely upend the child’s life at a point when they had expected to be fully engrossed in their career. In many cases, baby boomers must either reduce their work hours or quit their jobs completely in order to take care of a parent”which unfortunately further diminishes one’s retirement savings.
Over the last 15 years, the percentage of adults providing personal and or financial assistance to their parents has tripled. And despite these growing numbers, less than one in five people take the steps to financially and legally prepare for this common issue.
Why? Well, imagine talking to your parents about the potential situation in which they can no longer take care of themselves. It’s just uncomfortable. But even so, the consequences of avoiding the topic altogether can be even more harrowing than the initial awkwardness of bringing it up early on. Once a parent gets injured or a condition worsens, you’ll suddenly find yourself in a situation where you must quickly scramble to figure everything out.
Let’s take a look at some very real and important numbers regarding health care expenses:
- In 2012, the average cost of assisted living was $2,500/month.
- Some senior care services, such as those that assist those with memory issues including Alzheimer’s, can cost up to $7,000/month.
So that’s an additional annual expense of $30,000 to $84,000 a year. Not exactly pocket change. The best way to prevent heart palpitations from these shocking costs?
First of all, communication is going to be key when planning the future care for your parents. Yes, it’s a difficult conversation to have, but it’s only going to be even more arduous down the road when your sound retirement plan suddenly goes up in flames. Trust us, it’s going to be much easier to act when you already have a plan to fall back on.
Here are some tips on how to include your aging parents in your retirement plan:
- Communicate: A good time to initiate the conversation is when your parents are still healthy and capable of taking care of themselves. Who knows, you might even find out that your parents are much more financially stable than you anticipated and won’t need to take any further action. But if not, you’ll want to make sure everyone’s on the same page when devising a plan.
- Take Care of Legal Documents: Make sure your parents’ wills, trusts, and other documents are up to date and in order. You’ll also want to create an additional legal document that designates power of attorney to make decisions on behalf of your parents.
- Consider Long-Term Care Insurance: If you’re going to be providing financial support, you might be interested in an insurance plan that can help you finance senior care. This type of coverage can help you make sure you don’t lose all of your assets to any nursing home or personal aid bills.
- Increase Savings: Talk to an advisor who can help you plan out your finances now so that you’ll be ready in the future. An independent financial planner will not only give you the best investment advice, but will also help you create a new plan for financial saving.