Starting a conversation with your parents about their finances can be daunting. However, most adult children get involved with their parents’ financial situation at some point. It’s helpful to understand their situation and goals so that you can help them achieve their goals and find the care they need later in life.

Most people are unsure of how to start the conversation, when to have it, and what the outcome should be. Read on for how to get your parents talking about their finances, and what you need to know to help them in their later years.

How to Have the Conversation

Ideally, conversations surrounding retirement and finances should happen when your parents are in good health both mentally and emotionally. You will want to ensure that it is not too emotionally charged with plenty of up front notice.

Additionally, it should be noted that your parents might not be ready to talk about finances. Ensure that you approach the conversation from a place of wanting to help. This will aid in both you and your parents feeling comfortable having financial conversations. You may want to have some suggestions on hand such as having the conversation alongside a financial advisor so that everyone involved is on the same page. A financial advisor can help explain your parent’s financial situation to you and make suggestions for how to allocate or transfer funds in the future.

Questions to Ask Your Parents

Regardless of whether you enlist a financial advisor to help you and your family, there are some questions that you may want to ask your parents. Here are a few examples:
 

What Is Your Retirement Plan?

You should ask your parents how they are funding their retirement. It’s smart to understand what they have set aside for retirement and what liabilities they still must pay off.

If your parents worked throughout their lives, their companies may offer a pension plan. You should have a good understanding of if their pension, 401(k), or Individual Retirement Account (IRA) will cover their expenses in retirement, or if they plan to supplement their Social Security benefits with other investments. It’s a good idea to understand if they are maxing out their retirement savings and how these investments will pay out and if they have someone managing their assets.

If your parents have not saved for retirement, you should inquire how long they plan on working and how they intend to fund their retirement. There are many things that they can do to boost their financial well-being and be better prepared for their retirement years. Many people think that they can fund their retirement on credit cards or by selling their large assets such as their homes. However, if they sell their home, do they have a plan for where they will live?

Where Will You Live in Retirement?

Retirement can last several decades. Many people choose to downsize their home, move to a retirement community, or travel in retirement. Retirement looks different for everyone and you need to know where your parents will live when they are done working.

If your parents decide to stay in their home, you should find out if they still owe on their mortgage. You may want to ask how they will make their payments when they stop collecting a salary, and if those payments are manageable for them. Additionally, they may not be able to take care of the home and yard themselves after a certain age and should factor in this expense as well.

If they decide to downsize, you should ask what type of housing they will seek out. Many people choose to move to 55+ communities to be around more people their age. Sometimes people choose to move to condos or other similar facilities where the upkeep of the yard and exterior of the home are no longer their responsibility.

This is also a good time to have a conversation about long-term care. Long-term care insurance helps to cover the cost of nursing homes, assisted living, or in-home care should your parents ever need it. Long-term care can cost thousands of dollars a week, and the insurance typically costs a few hundred dollars a month. While this may seem like a large expense now, it can pay dividends in the amount you and your family save on skilled care and housing in the future.

Are Account Beneficiaries Current?

Make sure beneficiaries are setup correctly on all bank accounts, brokerage accounts, retirement accounts, and pension plans. Normally this would be the spouse, then the estate, or a designed non-minor child who can be responsible for the estate.

Has Important Paperwork Been Setup?

Key documents that an estate lawyer should setup include: a will, power of attorney and medical advanced directives.

Do You Have Important Paperwork Organized In Case of Death?

It’s wise to understand how your parents’ important documents and information are stored and handled. Important information should be kept in a safe place and only trusted individuals should have access to it.

Many people hire legal and financial advisors to handle their financial affairs. You should have a comprehensive list of any executors to their estate as well as the location and access information for any documents, accounts, or other records.

Remember that the logistics conversation isn’t about the numbers of what is in the bank accounts or who’s name is on what. It is simply about making sure that legally everything is squared away in the case that they are no longer able to make decisions about their finances or other information.

If their information is messy or distributed amongst many professionals, this may be a good time for your parents to streamline who is handling their legal and financial information. It is better to take the time to organize these things now than to wait until your parent is sick and unable to have meetings or make decisions on their own. This will ensure that their information is available to those who need it, when they need it.

See the Wealth Meta In Case of Death Template for ideas.

What Happens if We Are Faced with the Worst-Case Scenario?

You must understand your parents’ wishes when it comes to medical care, financial disbursement, and even how they would like to be buried. While it can be uncomfortable and emotional, you should know if your parents need to do any planning for these scenarios beforehand.

If one parent survives the other, the surviving parent may be responsible for covering monthly payments or have other financial burdens. You should understand if each parent will have the ability to cover their finances on their own. 

Additionally, you should gain an understanding of how your parents would like to handle any future health issues. If one were to fall terminally ill, either physically or mentally, how will the other be expected to care for them? For example, will they hire help to be with them 24/7 if one parent loses their mobility? Will they always live together, no matter what, or will one of them move to an assisted living facility if they fall ill? Again, these conversations can be difficult and emotional, but it is better to be prepared if a decision needs to be made quickly in the future.

What Will Happen with Your Estate?

An estate is all the money and assets that a person owns. It’s integral to know how your loved ones want to be remembered, and how their estate will be distributed after their death. This typically involves a division of their assets amongst family members, a trust, or charities that the person supports.

While a will helps to give clarity as to how your parents’ assets will be divided, it’s also helpful to have a conversation with them about what to expect and how you can ensure that this division goes smoothly after they pass on. If your parents do not have a will, you can encourage them to create one and have it notarized.

You may also want to discuss how they want their funeral to be held, or how they want to disburse their money according to their values. If they are religious, they may want a specific type of burial or celebration. If they are deeply involved in charity work, they may want to leave a gift or trust to an organization. By understanding how they want their estate to be handled at the end of their life, you can help to ensure that their assets are allocated appropriately.

The Bottom Line

You care about your parents and want to ensure that they enjoy their retirement. By helping them to plan for retirement, end of life care, and their estate, you are showing them that you want to help them. When both you and your parents have your big questions answered, they can better focus on living a prosperous life in retirement.

If you have further questions about helping your parents plan for retirement, you may want to enlist the help of a financial advisor. They can not only give advice financially but can oftentimes give suggestions for other professionals that your parents should speak with such as long-term care insurance agents, notaries, and lawyers to help execute their estate.