ARTICLE | August 11, 2022
Authored by FMF&E
- Syracuse, NY
Knowing how to help your aging parents financially without incurring personal debt can be a challenge. You want to make sure they can live comfortably in their golden years, but you don't want to strain your own finances in the process. In this article, we'll discuss tips for helping aging parents financially without breaking the bank.
Assist with budgeting and financial planning
Your parents may need help with budgeting and financial planning as they age. Of course, it can be difficult to broach this topic if your parents don't initiate the conversation. Regardless, it is essential to be respectful and understanding. Many seniors are reluctant to discuss their finances with their children, so avoid pushing too hard or trying to force the issue. Try to understand your parents' point of view and let them know you're there to support them.
If your parents are willing to open up about their financial situation, it may help to sit down and review their budget. And if they don't have a budget, help them create one. A budget will give them a clear picture of their income and expenses and what money is available to save or invest.
Reviewing their investment portfolio to ensure it's still aligned with their retirement goals is also important. At this juncture, it's probably worthwhile for you and your parents to meet with their CPA or financial advisor. An experienced professional can help ensure that their portfolio is on track to provide the future income they need.
Talk about the importance of estate planning.
Estate planning can be challenging to discuss, but it's crucial to have these conversations with your parents while they are still healthy and able to make decisions for themselves. If something were to happen and they could not make decisions, you may have to go through the court system to be appointed as their guardian. This can be time-consuming and expensive.
At a minimum, your parents should have a Power of Attorney, Advance Directive, and a Will.
A Power of Attorney can empower a person of your parent's choosing to make decisions and act on their behalf if and when necessary. An Advance Directive will communicate your parent's wishes regarding medical care, and a Will stipulates who will be responsible for settling your parent's estate and how they want their assets distributed if they die.
Depending on your parent's assets and income level, they may benefit from more specialized estate planning tools, like trusts or business succession planning. An experienced CPA or estate planning attorney can help you determine which estate planning documents best suit your parents' needs.
Understand the cost of long-term care
At some point, you may need to consider services that help seniors who cannot perform some of the activities of daily living on their own or who have social, emotional, or cognitive problems that make it difficult to live independently. While there are many different types of care, here are a few of the most common.
Home Health Care
Home health care generally includes part-time services provided by a visiting nurse, physical therapist, home health aide, or other health care professional. Individuals who benefit from home health care tend to be independent and capable of performing most daily activities without assistance. In 2021, home healthcare costs averaged around $5,000 per month nationally.
Assisted Living Facility
Assisted living provides personal care in a housing setting where residents have a private room furnished with their items. Trained staff provide services during certain hours when residents need help with activities of daily living. Assisted living facilities usually limit the types of care they offer and often do not accept residents who require daily assistance with medication management, meal preparation or cooking, and other services. In 2021, assisted living costs averaged $4,500 per month nationally.
Nursing homes provide care to individuals who need assistance with basic daily activities and health and nursing care. Nursing homes vary in their services and the amount of care residents receive. Some nursing homes provide intensive, around-the-clock skilled nursing and medical supervision, while others offer less extreme custodial care for residents.
As of 2021, the average monthly cost nationwide for a private room in a nursing home was $9,034; this includes nursing services, personal care assistance with activities of daily living, medication management, and more. A semi-private room averaged $7,908 per month.
Adult Day Care
Adult daycare centers provide professional care for elderly adults who need assistance and supervision during the day. Typically, adult day care centers offer planned programs that enable seniors to socialize and enjoy structured activities in a group setting while also receiving health services as needed. Like nursing homes and assisted living facilities, services and the level of care offered differ from one daycare to the next. Centers that provide more comprehensive medical care are often costlier than facilities that only focus on social and recreational activities.
In 2021, adult daycare centers charged an average of $78 per day for up to 8 hours of structured activities and care. This cost typically includes meals, social activities, and basic health services. However, the cost increases for facilities that provide more comprehensive medical services like medication management or occupational therapy for those with health conditions.
Research resources available to your parents
Depending on their financial situation, your parents may benefit from local, state, or federal resources like senior centers, community resources, and government programs.
Senior centers offer a variety of services and activities for older adults. They can be an excellent way for your parents to stay social and get help with transportation, meals, and healthcare. Community resources such as Meals on Wheels which delivers meals to homebound seniors can also be helpful.
If your parents are over 65, Medicare can help cover hospital, medical, and prescription drug expenses. Also, your parents may qualify for assistance such as Section 8 housing, Medicaid, or food stamps if they have limited income. Each program has different eligibility requirements, so it's important to research the programs that best meet your parents' needs.
Consider long-term care insurance
While none of us like to think it will happen to our parents, as many as 7 out of 10 people will eventually need long-term care. And with costs ranging from $20,000 to over $108,000 per year, long-term care is expensive. While Medicare may help offset some costs, it will not cover the full cost of long-term care, so it's worth discussing long-term care insurance with your parents.
Long-term care insurance can help cover the cost of long-term care services, whether your parent needs in-home assistance or more comprehensive care, like a nursing home. There are many types of long-term care insurance policies, so it's worth researching or talking to an insurance agent to find the best policy for their needs.
This article is intended to provide a brief overview of ways you can help your parents plan financially for the future and is not a substitute for speaking with one of our expert advisors. If you would like help with financial and estate planning for your unique situation, please contact our office.
Our FMF&E team is eager to learn about you and your business! We are a Central New York based certified public accounting firm serving nationwide clients since 1980. Our experienced and dedicated team provides audit, accounting, tax and management consulting services to businesses located in throughout the United States. Our clients include many construction and real estate developers, credit unions, energy companies, manufacturers, professional service businesses and wholesalers and distributors.
FMF&E is a team of over 75 ambitious and highly motivated professionals of which 75% are Certified Public Accountants (CPAs). Certain professionals also possess specialty training in the area of business valuations (Certified Valuation Analysts) and merger and acquisitions (Certified Merger and Acquisition Advisor). Our growth has come from applying a strong results-oriented approach to servicing our clients.
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