How to Defuse a Financial Time Bomb
Sometimes the hardest subjects for a family to talk about are also the most important ones.
A great example of this is eldercare. How aging parents will be cared for, and how that care will be paid for, is a topic that most adult children and their parents would, understandably, prefer to avoid.
But it’s a topic that absolutely should be broached head-on. Why? Because avoiding a conversation about aging can lead to severe financial and personal impact down the road for senior parents and their adult children alike.
We’d all like to believe that we’ll live a long, healthy life and die peacefully in our sleep. And some of us will. But we shouldn’t bet our families’ finances on it. According to the Administration on Aging, about 60% of those over age 65 will eventually require long-term care. That means they’ll either need help in the form of in-home care, assisted living arrangements or nursing-home care.
And such care is expensive: In many cases it has not only eaten up the care recipients’ savings, but also created a significant financial burden for the adult children who chip in to care for Mom or Dad. Nearly a third of Baby Boomers now contribute financially to their parents’ care, according to the Pew Research Center.
How much do they pay? A 2008 report by the AARP Public Policy Institute found that caregivers paid an average of about $5,531 per year out of their pockets. But far more can be lost in wages and benefits when family members leave their jobs to care for their parents. According to The MetLife Mature Market Institute, caregivers who are 50 or older average more than $300,000 in lost wages, pensions and Social Security benefits over their lifetimes. And that’s not to mention the emotional and physical challenges of being a care provider.
Few parents would want to impose such a burden on their children. But in many cases, that’s exactly what ends up happening. Parents and their offspring avoid the subject of senior care for years, then a medical crisis hits and the children suddenly find the roles of parent and child reversed. So what should you do? My advice for seniors and their adult children is to talk. While the parents are still healthy and independent, discuss the future. A good way to start is to discuss where a parent would prefer to live should they one day be unable to adequately care for themselves. At home with professional assistance? In an assisted living community? In a well-regarded nursing home?
As you continue your discussions, you’ll be able to explore various options as far as how that care might be paid for. The key is to open a dialogue, even though it may be a bit uncomfortable. Having a clear senior care plan in place can create peace of mind and protect your financial future as well.