Planning For Our Parents

19338963_s You know, when Jill and I think about our financial responsibilities, our first instinct is to always look down our family tree at our kids, Maeve, Phoebe and Sophie. They are the focus of our lives, the source of many of our expenses and concerns, and oftentimes the subject of my Cutter Family Finance discussions with you. But, when we look up at our family tree, what do we see? Our parents. You know, the ones who spent so many years being financially responsible for us? Yes, them. Like many of you, we have additional financial responsibilities that we should not overlook.
Our parents are likely facing financial pressures and have financial questions that you could help them with, but I promise you, they won’t bring it up until you do. You need to take the initiative. And even then, they will likely avoid the issue, but understanding their financial situation as they continue to age is critical to both them and you. There are four things we should ask our parents about now that will significantly help them in the future.
First, where are the important documents? All parents have that clever little hiding spot that no one knows about where they keep all their important files and documents. (If you are lucky enough that your parents remember where that hiding spot is, then you are a step ahead of most of us). These are things like their Will, trust documents, health proxies, life insurance policies, powers of attorney, financial account statements and more. Knowing where these documents are kept is critical because a) you know your parents actually have the documents and b) you know where they are in case of an emergency.
Second is long-term care strategies and insurance. It can seem like an uncomfortable subject, but the earlier you talk to your parents about their long-term care and their strategy, the more comfortable it will be for all of you. If insurance is the solution, then help your parents understand that long-term care insurance is cheaper if they buy it when they are younger and healthier. Also, make sure you have an idea of what their end-of-life wishes are; what medical care they do or don’t want provided for them in the event they are unlikely to recover from injuries or illnesses. I know it is difficult, heck, I am right there with you, but it is critical to ask these questions and engage in an open dialogue that everyone will be relieved to have.
Third is their investment “strategy.” We have all had that “Aunt Ruth” who proudly tells everyone that she is set for life because she got that letter in the mail informing her that she won the jackpot in some sweepstakes and will receive the prize money just as soon as she sends in her bank account information. This is obviously a drastic example, but it’s important that you ask your parents about the investments they have made to ensure that they aren’t involved in anything risky. With the current economic and geo-political uncertainties, even legitimate investments may involve too much risk for them. Cutter Family Finance readers, I cannot tell you how many times I have been asked to give a “second opinion” on the family investment policy only to find significant risk and no strategy to manage downside exposure. You want to know what happened to your parents’ portfolios in the down years like 2001, 2002, and 2008. What is their strategy to avoid market downturns? Take responsibility here. Take care of them just like they took care of you.
Lastly, plan for their needs. Today’s financial planning trends show that most adult children intend to help care for their parents in the future. In order to plan for this care, it’s important to know what they will need. Ask them when they expect to retire (if they haven’t already), where they plan to live, and how much money they have saved. These answers will allow you to better prepare to give them the support they may need. Talk to your advisors to ask if you need to make any adjustments to your portfolio in order to be able to help your parents in the future.
Picture Isaac Newton sitting under that tree, pondering gravity. As you think about your portfolio and financial future, likely focusing on the ground below you, don’t forget to also glance upward at your family tree. That apple could be dropping unexpectedly quicker than you think. You’re going to want to be prepared to catch it.
Be vigilant and stay alert because you deserve more.