Eight Important Financial Questions to Ask Aging Parents
Many people would rather discuss anything, including politics , if it meant they didn’t have to talk about money. But financial conversations are necessary to avoid misunderstandings and financial mistakes, including between generations. That’s why you should talk to your parents about money as they approach (and enter) retirement and old age.
When you start asking financial questions of your parents, remember that you don’t want details like dollar amounts or who will inherit what. The purpose of these discussions is to ensure that your parents’ wishes are supported by a plan and to understand whether (and how) they want or need your support as they age. Their plan may also affect you directly if you have power of attorney, help pay bills, or intend to serve as a guardian in the future.
What are their wishes for their money?
The first question you might ask your parents is what they want to do with their money as they age. Do they want to travel? Donate it to a charity or organization they care about? Fund education for your grandchildren? Comfortable with covering long-term care costs? It can help to have ongoing conversations about how they can plan for their future and how you can support them in this process.
Do they have an estate plan?
An estate plan is something all adults should work on well before retirement because it determines what happens to your assets if you become incapacitated or pass away at any age, as well as how your health care will be handled. A good estate plan provides clarity about your parents’ wishes and can minimize both tax consequences and legal complications later on.
Estate plans typically include a will, a living will (which specifies the medical treatments you want and don’t want), a power of attorney (POA), and a beneficiary designation (more on this below). Some estate plans also include trusts, which direct how assets will be handled after death, and a power of attorney for children at age 18, which allows parents to participate in decisions (such as health care) for their adult children.
What are their assets (and what are they called)?
A key step in estate planning is to conduct a complete inventory of assets: real estate, vehicles, bank accounts, investment and retirement accounts, insurance policies, credit cards, valuable personal property, collectibles, business interests, etc. An inventory will also be taken. . include liabilities such as mortgages and other debts. This can help your parents anticipate inheritance tax issues and minimize future legal costs (by avoiding the probate process), for example by designating the estate as transferable or payable on death or placing it in a trust.
How do they fund their retirement?
Without asking for specific numbers, talk to your parents about how they pay for retirement expenses and what accounts they use to fund those expenses. This can help clarify how expenses will be covered as they age and what assets will be part of their estate.
Sean Williams, a certified financial planner (CFP) at Cadence Wealth Partners in North Carolina, also recommends discussing the current and future tax implications of funding retirement from different types of accounts, as well as what happens to those accounts when they are left behind. . For example, IRA beneficiaries inherit required minimum distributions and a tax burden that can be significant if you are still in your highest earning years, while non-qualified investment accounts can be inherited but do not burden you with capital gains taxes thanks to the increase basically .
Have they issued a power of attorney?
A power of attorney is an important part of estate planning because it authorizes someone to make legal, financial and/or medical decisions when you cannot act on your own behalf. There are many different designations and scenarios for a power of attorney , but if there is trust between parents and children, Williams recommends discussing a durable power of attorney, as it can help their agent act quickly in an emergency on everything from paying bills to arranging the final outcome. lifelong care. This conversation should also cover your parents’ wishes in more detail.
Do they have updated beneficiaries?
Every financial account should have a beneficiary , who will ensure that when you die, your assets go where you want them to go. Not naming beneficiaries (and updating them if wishes or circumstances change) can cause confusion and hurt feelings, and cost a lot of money and time to sort out. In many cases, parents can designate one or more primary beneficiaries to receive interest in the accounts, as well as contingent beneficiaries if the primary beneficiaries pass away or are unable to take over the asset.
How will care be provided and paid for?
Even if your parents are healthy, you should discuss plans for how they will receive care as they age and how that care will be paid for. Healthcare and elder care costs are rising rapidly and can be astronomical for older adults who require higher levels of long-term support. Fidelity estimates that the average 65-year-old could need $165,000 in after-tax savings in 2024 to cover health care costs in retirement (up 5% from the previous year). Meanwhile, long-term care can easily cost tens of thousands to six figures a year .
To support this conversation, the National Institute on Aging has guidance on financing long-term care , such as through public and private funding and assistance for caregivers of older family members.
How can you access important information when needed?
If your parents already have all the plans in place, that’s great, but you need to know how to access the information (or have a trusted person who does) if your parents become incapacitated or pass away. This may include the names and contact information of any professionals involved in financial planning and management, as well as legal representation. You should also discuss how to transfer logins for everything from banking to social media accounts. Consider using a password manager with a legacy feature that gives a designated contact emergency access under certain circumstances and/or the ability to securely share selected items with other account holders (if you help with day-to-day money management, example).
You can also encourage your parents to create a digital estate plan , which is essentially a will for digital assets such as photos, apps, and online accounts.
How to have a financial conversation with your parents
Conversations about financial matters should be approached with caution as these topics can be difficult and fraught with emotion, especially if money is not talked about in your family. One way to start the discussion is to ask parents what they want or hope for as they age, suggests Eric Roberge, a Boston-based CFP and founder of the financial planning firm Beyond Your Hammock . You can ask questions about how they see their later years and how they would like things to work out if they couldn’t make their own decisions.
“Phrasing it as, ‘I want to know what YOU want so I can support you,’ can be a more productive way to start a conversation that most people are understandably reluctant to have,” says Roberge. “Once you understand what your parents might have in mind for their ideal scenario, you can begin to hone in on specific plans or tactics you may need to implement to support what they say is most important to them.” . “
Another way to address this topic is to let your parents know that you are working on your property and planning for retirement. Sharing your own experiences can create common ground and highlight the importance of this process for both generations.
Know that you won’t be able to cover everything in one conversation—in fact, conversations about financial planning should be ongoing—and that it will likely be uncomfortable. Start with the simplest and most accessible theme and move on from there. Remember that you don’t need details right away, such as which beneficiaries receive which assets. Rather, the goal is to help your parents protect their financial well-being and their wishes.