8 Tips for Successful Financial Planning With Aging Parents
Conversations about money are rarely easy, and stuff can get real when we're trying to discuss finances with our parents. But here at investor.com, we're here for you. Below are four tips for talking with your aging parents about money, plus another four tips for what to do if you find that your parents are struggling financially.
How to talk money with your parents
1. Schedule the talk
Raising the topic of money with your parents may be the hardest part. You don't want your parents to think you doubt their ability to manage money or that you're getting nosy about a possible inheritance. You do want them to know that you care, and that the family needs to plan ahead for a time when they may not be able to manage their money anymore.
So maybe don't start this conversation when your dad's about to plunge a Thanksgiving turkey into his new deep fryer. This isn't a spur-of-the-moment conversation at a big family gathering. That said, doing the dishes with your parents that evening, or a similar casual moment, may be a good time to broach the idea of setting a date for a money meeting.
Keep it simple, and don't be afraid to make it personal and to point out how these conversations can be challenging, such as:
- I find it hard to talk about money, but I'm hoping we can set up a time to chat, just to be sure we're all on the same page about your financial goals for the future.
If they ask for specifics, maybe say:
- One thing I'm wondering about is if you have an estate plan (or health-care directive or retirement plan or debt-management plan, etc.) in place. Can we set up a time next week to talk about this?
You don't want this money conversation to be like a Marvel movie, big on bombast, short on subtlety. Nothing will shut down the conversation faster than arriving at your first family money meeting with brokerage statements, spreadsheets and an attitude of "I know exactly what you should do." While this meeting may end up being a great opportunity to pitch your parents your favorite financial planning suggestions, it's important to start things off as a conversation — one where you mostly listen.
To that end, prepare some big-picture questions to get the conversation going, such as:
- I just wanted to check in with you about your money situation. How's retirement (or retirement planning) going?
- How are you feeling about your financial future?
- What are your goals for what you want to be doing in the next 5, 10, 20 years? How are your finances looking in terms of supporting your goals?
Once you've got a conversation going, you can get more specific, asking about financial topics, such as:
- What types of financial accounts do you have?
- Is there enough income to cover your retirement expenses?
- Is there any debt and if so, what are the details?
- What types of investments do you own, and does your portfolio align with your goals?
- Do you have an estate plan in place?
- Have you had thoughts on how to plan ahead for the possibility of long-term care?
- Are you managing your required minimum distributions from retirement accounts?
And so on. It's highly unlikely you'll cover all of your questions in one meeting, so plan to schedule additional time together. Also, be sure to take notes, and afterward make copies of your notes to share with your parents.
3. Stay calm
You may uncover some deep secrets during this conversation. This newfound information — e.g., "I claimed Social Security at age 62 even though I'm still working and have a more active, healthy lifestyle than my children do" — may make you want to scream at the top of your lungs, "Why?!?" (Maybe you're wondering about that strong reaction? It's because, generally, every year you delay taking Social Security past your full retirement age, your monthly benefit increases about 8%. If you don't need the money to live on, then delay claiming Social Security as long as possible, up to age 70, to ensure your retirement is as financially comfortable as possible.)
Here's what to do: Practice your poker face, stay calm and rehearse saying, "OK, got it. Tell me more."
4. Suggest hiring a pro
If you make some headway, but your folks aren't comfortable getting into the actual numbers, then recommend hiring a financial planner. Let them know you can help them find a good person for their situation. One way to find trusted advisors is to search on investor.com. Our tool makes it easy to see if an advisor has had any trouble staying on the right side of regulators. Advisors displaying our Trusted badge have undergone extra rigorous evaluation by investor.com and met strict regulatory requirements. You can use the search tool at the top of any investor.com page to enter the name of a financial advisor, or see a list of trusted advisors by state. Another useful tool is the XY Planning Network website, which makes it easy to filter fiduciary advisors by location.
What to do when your parents are struggling financially
Sometimes, talking with our parents makes us realize a sad truth: Their financial situation is more serious than we realized. That might mean offering some financial tips for parents. Read on for possible next steps. Don't worry — you got this!
1. Create a budget
If your parents are worried about making ends meet, then start with creating a budget together.
At its beautiful, simplistic best, a budget is simply a list of all the money coming in minus all the money going out, every month. Here are some basic budgeting tips from Consumer.gov to get you started. Once you know what's coming in and what's going out, you can start to set spending goals.
Having a budget in hand — even for just a single month — will give you a lot more insight into where your parents are at financially, plus help you see if there are any ways to increase income or reduce expenses.
2. Consider big-picture options
Two of the biggest expenses people have, generally, are housing and transportation. Is it time for your parents to downsize? If they own their own home, selling it could provide an important source of funds for the future. If they rent, can they save money by moving? For some families, parents moving in with their adult children can be a lifesaver.
Or, maybe your parents have two cars and only ever use one; it could be time to sell a car, or possibly start relying on other forms of transportation. Talk through the options with your parents.
3. Create a debt management plan
If debt is an issue, can you help your parents come up with a plan to pay it down?
Sometimes, simply writing it all down — "I'm going to pay $100 for 12 months, and then the debt will be paid off" — can help relieve anxiety and help people stay on track with their plan. Or, try this great, free debt-management tool created by Utah State University: PowerPay.
4. Suggest hiring a pro
All too often, emotions around money run deep. Throw in some tense family dynamics, and there's a good chance you won't make any progress on your parents' financial situation. If you and your parents are struggling to work together on their finances, then consider hiring a financial expert.
As noted above, you can search on investor.com to find advisors with our Trusted badge. The tool makes it easy to see if an advisor has had any trouble maintaining an ethical practice. Just plug in a name and see what pops up. If you don't know the names of any financial advisors, then peruse our list of trusted advisors by state. Another useful tool is the XY Planning Network website, which makes it easy to filter fiduciary advisors by location.
About the author
Andrea Coombes has 20+ years of experience helping people reach their financial goals. Her personal finance articles have appeared in the Wall Street Journal, USA Today, MarketWatch, Forbes, and other publications, and she's shared her expertise on CBS, NPR, “Marketplace,” and more. She’s been a financial coach and certified consumer credit counselor, and is working on becoming a Certified Financial Planner. She knows that owning pets isn’t necessarily the best financial decision; her dog and two cats would argue this point. Read more about Andrea.