After they spent at least 18 years taking care of you at the beginning of your life, there's a good chance you'll end up helping take care of your parents at the end of their lives. They may need a little bit of help keeping track of when bills are due, or in planning how to tap into their retirement accounts. Towards the end of their life, they might need you to take full control over the management of their personal finances.
Even if your parents have not yet reached the point when they need help, it is never too early to start having conversations about their financial fitness as they head into retirement. That way, you have plenty of time to plan how you will take care of your parents as they get older.
Costs of elder care
If your parents were on an especially tight budget during their working lives and in the early years of their retirement, they might not have the funds available to handle their long-term care needs financially. That might be left to you to fund, and it can be expensive. For example, receiving long-term care in a nursing home or assisted-living facility usually costs between $3,000 and $5,000 per month. Those costs will vary depending on the type of facility and where you live.
If the cost of paying someone to care for your parents seems too high, the alternative is for you to take on the task yourself. If you have space in your home, invite your parents to move in with you so you can keep a closer eye on them and care for them as they age. Another option is for you to move in with them or near them so you can provide care while minimizing expenses.
The other major expense to consider is health care. Although Medicare provides for their basic health expenses, they will need to be ready to pay for additional costs. Supplemental insurance is one option, or if they have substantial savings, they can self-insure and be ready to pay for costs Medicare does not cover out of their savings.
Financial resources for elder care
Ideally, your parents will have saved enough money to pay for their eldercare. Between Social Security checks, their pensions, and withdrawals from other types of retirement accounts, some elderly parents have plenty of money to cover their expenses.
If your parents do not have enough income from typical sources of retirement savings, another option is for them to sell their home when they need to transition into an assisted living or nursing home. The income from the sale can play a large part in taking care of their financial needs. If they are not ready to move yet, a reverse mortgage is another alternative. It is similar to a home equity line of credit, but they will not need to make payments on it until they move out of the home.
Medicaid provides another way to pay for basic nursing home costs. Your parents will need to qualify based on their means, and they will have to spend down nearly all of their assets before they can qualify. They cannot give away assets to you or others to qualify because the government looks back five years in financial records.
If your parents are still working and healthy, you may want to consider long-term care insurance. This is difficult to obtain, but if they can qualify early and start making payments, it will cover the cost of long-term care when they are unable to care for themselves.
Managing your parents finances
Now is the time to start talking with your parents about where they stand financially and how they want their money managed. It is a sensitive topic, but your conversations now will allow you to understand what their needs may be in the future. In addition, in the event that you need to manage their finances for them, you will be more confident that you are following through with their wishes.
As far as the legal side goes, have them create a power of attorney for you as soon as you know you will be in charge of managing their finances. This is a simple document that needs to be signed and notarized, and it allows you to stand in for them in a legal sense when they are no longer able. Getting this done now helps you avoid lengthy court proceedings if something happens to them before they designate a power of attorney.
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