July 18, 2022
An old adage advises that we should never discuss politics, sex, religion or money. Nowadays, these topics are featured in the mainstream ad nauseum (including sex here in this blog). Yet, one of them is still considered taboo among older adults with a so-called “Depression Era” mindset: money.
Understanding Your Parents’ Mindset About Money
For many seniors, money matters are private, even (especially?) with their adult children. To folks who were raised when times were especially lean, money is to be saved for a rainy day – “waste not, want not” – and it’s best to keep a tight lid not only on the money itself, but also on conversations about it.
Many older people still wish to leave behind a “legacy” for their progeny, sometimes to the detriment of their own long-term financial needs. On the other hand, they may feel that discussing money with their children will result in greed on the part of their offspring or even a takeover of their finances.
Despite the obstacles, however, discussions with your parents about their financial prospects heading into advanced age are paramount, especially if they become incapacitated.
“While emotional barriers exist, families who frequently talk about finances are happier and have a better understanding of financial plans and goals,” reported a 2017 TIAA Family Money Matters survey.
Most importantly, such conversations ensure that there is a shared plan and financial resources for whatever lies ahead and that there are trusted individuals in place who will manage finances if elderly parents become unable to do so themselves.
Facts and Stats About Seniors and Money
The TIAA survey revealed some noteworthy discoveries about parents and adult children talking about money:
- Roughly 11% of parents are initiating conversations about money; 37% of adult children are.
- 25% of parents were happy to wait until their health declines to have financial conversations; 20% were happy to never have the discussion at all.
- 25% of children want to have conversations before their parents retire.
- 20% of parents believe their children are obligated to help them financially; 75% of children feel compelled to help their parents.
Data from the Federal Reserve Board’s Survey of Consumer Finances (September 2020) reveals the following:
- The median net worth for Americans in their late 60s and early 70s is $266,400; the average (mean) in this age bracket is $1,217,700. (Note that averages skew higher due to high net households; the median is far more representative of the typical senior household.)
- Most people in their 60s start tapping into their net worth to cover living expenses in retirement. Thus, many fall behind on their retirement savings trying to keep up with the cost of everyday living.
- Experts suggest that one’s retirement income should be 80% of their annual pre-retirement income. Others recommend that a total of $1 million should be set aside for retirement.
Opening the Door to Conversations About Money
However necessary it is, discussing your parents’ financial picture with them is likely to be fraught with emotions. They may feel their privacy is being violated, worried that they may be exploited or lose their financial independence, embarrassed for having less than expected, angry, anxious, manipulated, or even frightened.
Experts suggest several approaches to opening the lines of discussion, but all have one thing in common: proceed with sensitivity. However you choose to enter into discussions, lead with genuine care and concern, respect, careful language, and selflessness. If possible, team with other family members in formulating a discussion plan ahead of time. It’s crucial for everyone to be on the same page and present a united front. It may also be helpful to designate a certain family member as “leader” of conversations.
Here are some practical tips for starting the conversation – before mom or dad becomes physically or cognitively impaired.
Focus on their wishes
Emphasize to your parent that you want to respect their wishes, and the best way to do that is to have a clear view of their financial outlook so that you can safeguard their future and honor their intentions. Your parents will likely appreciate your concern and realize the importance of sharing their situation with you.
Make it impersonal
A neutral case in point makes for alow-stress entrée into important dialogue: Did you see that report on the news about how much money is needed to comfortably retire? Did you hear about that woman who was scammed out of her life savings? Better yet, if available, cite a real-life account of a neighbor or acquaintance who’s experienced financial hardship due to elder fraud, failure to plan, incapacity, etc. These general, objective comments can provide an easy segue into more personal conversations.
Let them be teacher
Encourage your parent to share their financial wisdom, perhaps with a teen relative or other young person. Ask them to share what has worked over the years or what they might have done differently. This will not only empower them, it will allow you to gauge their comfort level with the topic and likely open the door to questions about their plan for the future.
Be transparent about your own finances
Share your own monetary objectives with your loved one as well as any investments you’ve made or other financial moves. Solicit their advice, and leverage this into a broader conversation that includes their own plans.
More than likely, your parents have considered the possibility of their own incapacity, especially if they are widowed or have an ailing spouse. Now is a good time to approach these uncertainties with them in a loving manner that conveys genuine concern for their future. “Mom, we need to talk now about making sure your wishes and needs are met, whatever may come.” As scary as this discussion may be, chances are, your loved one will appreciate the opportunity to express their desires, concerns and a plan for the future. If you are willing and able to advise them, manage their finances or serve as their financial power of attorney, now would be a good time to share that as well.
What You Need to Know – And What You Don’t
Before we explore what you will need to glean from a discussion(s) with your parents about money, it’s important to know what you shouldn’t talk about.
Naturally, you may be curious about their intentions for your inheritance, if any. However, be careful not to question or even hint that you’re interested in what you may gain after their death. This will likely hinder, or completely derail, any productive conversations about money. It could also engender mistrust and resentment toward you.
Here’s what you may likely need toknow after you’ve begun initial discussions about your parents’ financial situation. The answers to the below “brass tacks” questions are necessary if you are going to manage their finances, if and when that becomes necessary. (For some seniors, relinquishing control of their finances to a trusted individual is a choice they make sheerly for convenience.)
If your senior has an appointed power of attorney and/or other financial manager, you should at least be familiar with who those people are and how to contact them.
- Do you have a durable financial power of attorney? What about a financial advisor, tax attorney, etc.? If so, who are these people, and how can they be reached?
- What are your approximate monthly expenses?
- Where do you keep your financial records?
- What are your financial institutions and any relevant account numbers and/or passwords?
- How do you pay your bills? Electronically? Via check in the mail?
- Where does your annual income come from, and approximately how much is it?
- Are you receiving any Medicare, Medicaid or Social Security benefits?
- Do you have any supplemental health insurance?
- What about long-term care insurance?
Talking with senior loved ones about the potentially touchy subject of money can be difficult, but it is ultimately very necessary. For some families, a move to a senior community with all the benefits of continuing care, community and every convenience is the best financial choice.
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