This post was formerly sponsored by LifeStation, an in-home medical alert company that promotes peace of mind among adults with health and mobility issues and their loved ones.
Millennials have decades before we plan to retire, but the upcoming retirement boom will most certainly affect us. After all, some of our parents are starting to retire in droves. And if your parents are nearing or in retirement, then it’s high time that you talk with them about finances. Here are five questions millennials need to ask their parents about retirement planning, sooner rather than later.
1. How Will Your Health Affect Your Retirement?
Nearly 40 percent of individuals who retire earlier than expected attribute the decision to a change in health, according to a study by the Center for Retirement Research, and an additional 26 percent retire early due to existing health issues.
If your parents are exhibiting some negative health signs, you’ll want to ask them about how that affects their retirement planning. For example, do they expect to live independently, even with health issues? If so, ask if they’ve considered a medical emergency response system. Alternatively, if they plan to move to an assisted living facility in the future, have they stowed away enough cash to pay for it?
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Looking at Different Options
It may be uncomfortable to discuss a hypothetical in which your parents cannot fully take care of themselves, but doing so will give you all peace of mind about how you’ll pay for the future as well as allow you to plan thoroughly for the years after your parents have left the workforce.
Fortunately, regardless of whether your parents choose to “age in place” or move into a facility, there are ways to ensure your money is spent well.
“For home health care, you can look for companies that offer hourly rates, so you are only paying for what you need,” says Paige Nealer, marketing director of the continuing care retirement community The Nugent Group. “This works best if family members can be with the elderly parent in the evenings and on weekends.”
“In terms of personal care, it may be best for your parents to first move to independent living and join a continuing-care retirement community,” Nealer adds.
“There is an entrance fee for these communities, but they can save you money in the long run by absorbing the costs of home maintenance, home health care, and other costs of living on your own.”
This can be especially helpful in the event that a parent’s mobility is impaired by unexpected illness.
Is Early Retirement a Possibility?
If your parents are willing to discuss finances with you, you may want to ask whether their health problems may push them into early retirement.
Millennials with parents who are retiring earlier than expected may be able to help them brainstorm ways to cut costs or increase income during the retirement years, while ensuring their parents are afforded the necessary living assistance.
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2. Will I Need to Move Out Soon?
Fifteen percent of millennials live at home, according to a Pew Research study. More often than not, this arrangement works out for everyone involved.
However, plenty of retiring baby boomers have most of their net worth locked up in their home. To shore up their nest egg, your parents may be thinking of downsizing to a smaller home where there may not be room for you. Millennials who live with their parents need to have a frank discussion about whether they will still be welcome when their parents retire.
While it may be inconvenient to find your own place — and start paying a higher rent — it’s the responsible decision, and one that can save your parents possibly thousands of dollars as they shift to a smaller house.
3. Can You Afford the Financial Help That You’re Giving Me?
More than six in 10 parents help out their adult children financially. Most of the time, parents aren’t paying rent for their grown children. That said, they may be helping them out with educational expenses, allowing them a free ride on their cell phone plan, or covering a medical bill from time to time.
If you’ve made a habit of getting interest-free loans from the bank of Mom, or you’re getting help paying down your student loans, it may be time to ask whether your parents can afford to continue helping you. It could be that they’re more than happy to assist you in special circumstances.
On the other hand, your parents may be helping you at the expense of their future retirement.
Plus, by remaining reliant upon money from your parents, you could be doing yourself a disservice in terms of your ability to build future financial independence. If your parents are approaching retirement age, consider gradually reducing the amount of money you’re accepting from them.
“Financial literacy is a marathon, not a sprint,” says financial advisor Jessica Grande of Levatus Wealth Services.
“Start slow and build your own wealth — you don't need to just dive into financial independence to be considered successful. Start with a ledger of income and expenses to determine your budget and how much you need, then gradually scale back how much you receive from your parents until you’re fully independent.”
When your parents near retirement and face a reduced income, you’ll want to discuss how this change will affect their yearly budget — and how you factor into that.
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4. What Do You Need in Order to Optimize Your Health During Retirement?
Retiring can be shockingly difficult for some people to handle. If your parents plan to retire soon, ask what they will do afterward. Be sure that they have plans to stay physically and socially active. They may qualify for perks such as a discounted gym membership through the Silver Sneakers program, which is a great way to get physical and social activity in the same venue.
Even if your parents face mobility challenges, they’ll need a plan to optimize their physical, emotional, and social health. Will you or your siblings need to take them to doctor’s appointments, or will your parents still do that themselves? Do they have close friends who will visit regularly?
If your parents have anxiety about their health, you may want to suggest a few safety nets. For example, an at-home medical alert system will give your parents access to trained care whenever they need it.
Spending just a few extra dollars every month may offer considerable peace of mind when your parents are adjusting to limited mobility.
Many cities or towns have low-cost community centers for older people. As many services for senior individuals are provided or subsidized by your state government, consult your state’s Office for the Aging website to find local social health resources in your own backyard, or do a targeted Google search of your area to see if there are any private senior centers nearby.
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5. Do You Have a Will and an Advance Health-Care Directive?
Families who talk in detail about parents’ estate and medical planning have greater peace of mind, according to a survey by Fidelity. More than 60 percent of parents with adult children want to have these detailed conversations before they retire or early in their retirement. Hopefully your parents have a long life ahead of them, but it’s good to start conversations early about what will happen after they die.
A simple question about making wills can get your parents thinking about their health, their finances, and how the family can get on the same page. This discussion should include assessing the size of the estate, and where exactly it should go.
Essential Steps in Estate Planning
“There are three things you can do to be financially smart when it comes to estate planning,” says attorney John P. Farrell. “Define your estate planning goals, including where you want your property and assets to go; list your assets, things like real estate, investments, and checking accounts; and choose your beneficiaries, which could include people like your spouse and children, but could also include a nonprofit organization such as a charity.”
These steps seem relatively simple, but they can spare the family the extended grief of squabbling over inheritances when parents pass. Additional considerations you’ll want to take into account including advance health-care directives.
“In addition to the last will and testament, basic estate planning pillars include a financial power of attorney and an advance health-care directive,” Farrell indicates. “I call them disability documents because they are often used when you become disabled and can’t make decisions on your own.”
“They allow a trusted family member, perhaps a spouse or adult child, to make decisions for you if you ever become disabled and unable to make them yourself,” he adds.
Keep in mind that your parents may be able to revoke or change the individual who has power of attorney at a later date, provided they are still mentally competent. So if your parents think their wishes would be better carried out by a different individual, they’ll want to enlist the help of an attorney or public notary to have the POA altered.
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While discussing death is depressing, and a discussion of a parent becoming medically incapacitated is borderline macabre, these are important discussions that need to happen so that your loved ones can have their final wishes carried out.
Additional reporting by Connor Beckett McInerney.