From The Blog: Financial Planning For Aging Parents

Being a caregiver comes with its own set of unique challenges, one of which is managing your loved one’s finances. From healthcare costs to potential income loss, the financial landscape constantly evolves and it can be overwhelming to balance finances on top of other caregiving duties. It’s important to take a proactive approach to understand your loved one’s current financial situation and their current and potential needs, and create a comprehensive financial care plan for your loved one.

Understanding the Financial Needs of Aging Parents

The financial implications of aging can come on unexpectedly, while others change over time. Healthcare costs inevitably increase, and at some point you may have to make decisions on long-term care. Additionally, most older adults are on some form of fixed income, such as Social Security or a pension plan, that must be managed carefully to ensure funds can cover monthly expenses for as long as needed. Make sure you have a clear picture of your parent’s financial situation so you feel prepared to make informed decisions.

Assessing an Aging Parent’s Financial Situation

To fully understand the current state of your loved one’s finances, start by gathering essential documents:

Income and Assets (checking/savings, investment accounts, retirement accounts)
Bills and Debts (mortgage/utilities, auto loan, credit cards)
Investment Accounts (stocks, annuities, retirement accounts)
Insurance Policies (life insurance, disability or long-term care insurance, Medicare/Medicaid)

Assess their income, assets, debts, and monthly expenses. If necessary, make adjustments where you can to accommodate for future costs. This foundational step sets the stage for informed decision-making.

Creating a Financial Care Plan

Once you’ve assessed your loved one’s finances, it’s time to get a plan in place. For older adults, financial care plans include more than tracking just income and expenses. You’ll also want to incorporate details of their healthcare coverage, including key numbers like deductibles and out-of-pocket costs. Create short-term goals like setting aside a certain amount each month to cover Medicare’s prescription coverage gap later in the year, and long-term goals like determining a plan for long-term care.

Accessing Financial Resources and Benefits

Don’t forget that a multitude of governmental and community resources exist to help older adults with their finances, especially for those living on a fixed income:

Medicare
Medicaid
Social Security
Veterans Affairs (VA) benefits
Supplemental Nutrition Assistance Program (SNAP)
Heating and utility assistance
Your local Area Agency on Aging

Be sure to explore these options for your loved one, but know that eligibility criteria and the application process varies for each program.

Legal and Estate Planning

A critical component of a healthy financial plan is estate planning and appropriate legal documentation. If your loved one already has a will, review it with them to ensure all information is accurate, and make changes if necessary. For older adults, it’s also crucial to discuss advance directives, power of attorney, or even guardianship or conservatorship if needed. These topics are sensitive, so make sure you approach the conversation from a place of trust and patience, empowering your loved one to make decisions that feel right to them.

End-of-Life Healthcare Costs

The cost of end-of-life care can overwhelm caregivers during an already difficult time, so planning ahead can make a big difference both emotionally and financially. Make sure you know how much Medicare, Medicaid or other health insurance will cover certain expenses, along with the approximate amounts you’ll be expected to pay out of pocket. For costs that aren’t covered by health insurance, this is where long-term care insurance, life insurance, and personal savings can help.

Balancing Your Own Financial Responsibilities

As you navigate through financial planning for your loved one, don’t forget about your own finances. Many caregivers incur ongoing expenses, covering everything from the cost of basic needs to the monthly costs associated with long-term care. Stay on top of your monthly budget, make adjustments where you can, and leverage the above-mentioned resources to reduce your costs. There are even Medicaid programs that offer financial assistance to caregivers, which can be especially helpful for those who reduce their work hours or leave the workforce to care for a loved one full-time.

Monitoring and Adjusting the Financial Care Plan

The dynamic nature of caregiving means that you’ll have to monitor and adjust your loved one’s financial care plan periodically. Even as your loved one’s needs change, continue to involve them in financial discussions and decision-making, for as long as they are of sound mind. If you feel overwhelmed or unsure about the right steps to take, seeking professional financial advice will help you understand your options and make the right choices for your loved one.

Conclusion

Ultimately, there are no simple answers when it comes to taking on financial planning as a caregiver. Be sure to encourage open communication and collaboration among family members throughout the process to understand and address the finances of your loved one. You’re not only ensuring your parent’s well-being, but also fostering a supportive and informed family environment.