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How to Have the Money Talk with Your Parents

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Even if you began planning for your Golden Years at an early age, there is one thing about retirement that no one ever warns you about: You might be on the hook for some (or all) of your parents’ retirement.

How, you may ask? Well, there is a high probability your parentals will outlive their savings. The median household approaching retirement has a nest egg of just $10,000 to $20,000, according to the Government Accountability Office. Among folks who have saved for retirement, the median amount of their savings is about $104,000 for households age 55 to 64 and $148,000 for households age 65 to 74. That’s equivalent to a payout of $310 and $649 per month, respectively. That’s not even accounting for inflation.

And you shouldn’t count on Social Security to give Mom and Dad much of a safety net. Social Security coverage is minimal at best – this year, the average monthly benefit is $1,341, which equates to $16,092 for the year. That’s barely enough to stay out of poverty.

The average American caregiver is a 49-year-old woman. 

No wonder that the number of parents living with their adult kids rose from 2.2 million to 3.6 million from 2000 to 2007 – an increase of 64 percent – according to the National Association of Geriatric Care Managers, now known as the Aging Life Care Association. I didn’t find any updated data, but it’s likely this trend has continued, based on data from the Pew Research Center, which finds that fewer women ages 65 and older are living alone. “After rising steadily for nearly a century, the share of older Americans who live alone has fallen since 1990, largely because women ages 65 to 84 are increasingly likely to live with their spouse or their children,” the report says.

Have I completely terrified you yet?

That’s not all, folks.

Even if your parents don’t move in with you, there is also a possibility – a very good one, in fact – that you will be the primary caregiver for them at some point. An estimated 66 percent of caregivers in the U.S. are female, according to the Family Caregiver Alliance. Incidentally, the average American caregiver is a 49-year-old woman.

Of course, it doesn’t have to be so dire. Here are three questions to ask your parents about their retirement that can help the process go more smoothly:

1. Can we have “the talk”?

First and foremost, you have to have “the talk” about money. I am a financial expert, and even I know how it hard to do this. Family gatherings are often the most ideal time to sit down with your parents and siblings to have a deep discussion about finances, but it can be a challenge if folks are dealing with small children and packed schedules.

Another alternative: Set aside a time that’s convenient for the family and bring in a neutral person to facilitate the discussion, such as a financial adviser. You can find more detailed advice in “The M Word,” by Lori Sackler, which was written with the help of my former BusinessWeek colleague.

There is a stereotype in the U.S. that everyone pays off their mortgages by retirement. That perception is wrong.

2. What’s your healthcare plan?

Americans are living longer, which means they should be working longer, but poor health is one of the key reasons why people leave the workforce. One astounding statistic that I like to quote a lot is that you will spend more on healthcare in the last year of your life than you will in all the other years combined. That’s why it is crucial to find out if your parents have advance directives, documents that spell out what treatment they would and would not want during a life-threatening health crisis, such as life support or artificial nutrition. Ask them who has power of attorney should they need someone to make important healthcare decisions.

It’s also helpful to know whether or not your parents have long-term care insurance. The cost of living in a nursing home or assisted living facility can decimate their savings. The national median cost for an assisted living facility is $43,200 per year, according to insurer Genworth Financial. A private room in a nursing home? You’re looking at $91,250 annually.

Want some tips on talking to your parents about healthcare and other financial issues? Check out this article from Fidelity Investments.

3. Do you have any debt?

There is a stereotype in the U.S. that everyone pays off their mortgages by retirement. That perception is wrong. Some 47 percent of baby boomers still carried mortgage debt in 2014, according to recent research from the Pew Charitable Trust. The median balance? $90,000. In addition to mortgage debt, 41 percent of baby boomers carried credit card debt and 35 percent of them had an auto loan.

Those heavy debt loads can seriously derail a retirement plan, particularly for folks who are living on a fixed income. For some guidance on debt in retirement, take a look at AARP’s credit center. I also like Kiplinger for retirement advice.

People say that ‘money talks,’ but it’s funny how people don’t like to talk money. That said, the sooner you start speaking to your parents about their money, the saner you will be if and when you ever need to make decisions about their financial future.

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