The “Middle Generation” of Your Financial Responsibility

We have written a few articles recently about parents trying to help their children become financially responsible adults. We’ve talked about young kids, high school aged kids, even early adult aged kids. Many people think that parents are so vigilant about their kid’s financial future because they love them and want them to be successful.

But deep down, all of us parents know that a few decades down the road, the tides will turn, and it will be those same kids that will be charged with protecting the parent’s well-being.

We all know that somewhere down the road the balance of dependency will shift, and our children will be responsible for all the things that we once did for them: drive us to the store, make us our meals, and so on. Most of us are experiencing this first hand with our parents as we shift into being the caretakers for them. It can be a very hard and stressful job, considering parents don’t often feel comfortable depending on us, and still see us as the behinds they used to change diapers on.

One of the most important aspects of becoming involved in your parents’ lives is understanding and managing their finances. This can be a big sticking point on what I just described, with our parents not wanting us to dictate their budget or expenditures, but it’s important that you get involved early and often in your parents financial planning.

Some parents try to avoid discussing their personal finances with their kids, so it could be helpful to start the discussion by asking your parents for advice on your finances. That gives you a window into the decisions they have made, and allows you to give them bits of advice you think they would find useful, without hurting any egos. Once that window is open, there are a handful of things you need to discuss about your parent’s financial situation and plans in order to comfortably and responsibly plan for their future.

All parents have their super clever secret hiding spots where they keep all their important files and documents.

If you are lucky enough that your parents remember where these super clever secret hiding spots are, than you are a step ahead of most of us. It’s important that you ask them where many of their important documents are located. These are things like their will and living-will, life insurance policies, information on their financial accounts, financial power of attorney and more. Knowing where these are kept is critical because a) you know your parents actually have the documents and b) you know where they are in the case of an emergency.

Another important piece can seem like an uncomfortable subject, but the earlier you talk to your parents about their long term care, the less expensive it will be for both them and you. Like any insurance, long-term care insurance is cheaper if you buy it when you’re younger and healthier. Even with parents as young as 50-years-old, planning for the financial strain that long-term care can present is a conversation worth having.

Social Security is blanket that covers a lot of people in their retirement plans, but it’s important for your parents to determine when they should be tucked in.

The point at which a person should begin to collect Social Security benefits depends on a few details, details which you should ask your parents about. It’s important that you ask how much they have saved in various contribution plans such as a 401(k) or IRA. Also, find out how much they can expect to receive from a possible pension. The funds available to them in these accounts can drastically affect the point at which they should apply for Social Security benefits.

Lastly, you need to make sure someone is tracking, and oftentimes questioning the legitimacy of any investment opportunities they come across. We all have that sweet old aunt who proudly told everyone how she received 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 their investments that they have made and ensure that they aren’t involved in anything risky. Older individuals are often targeted by scammers, so it’s an important conversation to have.

Even investments that are legitimate may involve too much risk to be worthwhile for them.

When it comes to your parent’s future there is a lot to discuss, and often times, these are more pressing and timely discussions than the ones we’ve been highlighting are needed for our children’s future. Many of us have two generations, one above and one below us that we are concerned for and it’s important to make sure you get a good head start on both.

This content created by Rick Durkee in conjunction with Fusion Capital Management.