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Discussing finances with your aging parents

Discussing finances with your aging parents may not be easy, but it's something you can't afford to put off.

The volatile economy hit Mike Dang's parents hard. When they began pulling money out of their retirement savings to cover costs, he grew concerned and decided it was time for a talk.

The New York City resident's primary goal was to get a clearer picture of his parents' finances. A regular contributor to his organization's retirement plan, Dang wanted to be sure his parents also were preserving enough of their money to live comfortably throughout their retirement years.

Initiating a dialogue with aging parents may not be easy, but it's important — and it's never too early to begin. Having a frank discussion about finances can help you determine if your parents' needs are being met or if they could use some help managing their money.

Why now?

"It's important to have these conversations early," says Paula Hendrickson, director of retirement plan consulting at First Western Trust in Denver. "When your parents are failing, that's hard enough. To not know how they would like things handled when it comes to health care or finances is much worse. If their health or minds fail, it's too late to have that conversation."

How to start

Lead by saying, "Let's talk about your wishes so we're on the same page," Hendrickson suggests. Plan to take your time over the course of several conversations to gather the information.

Dang touched base with his siblings first to let them know he was going to broach the subject of finances with their parents. After getting their input, he sat down with his parents. The outcome of that meeting? "My parents responded well because they trust me."

"I think most parents don't want to become a burden or outlive their money," Hendrickson adds. "But they also want their kids to know what they want."

What to address

For Dang, understanding his parents' finances meant learning all about their situation. He brought up topics he has considered while doing his own financial planning, such as:

  • What do you owe — on a mortgage, credit cards or other debt?
  • How much is in your retirement accounts and where are these accounts located?
  • What are your average monthly bills, and how do you typically pay them?
  • What insurance coverage do you have in place — including health and long-term care insurance?
  • What sources of income are available, and what amount do they provide each month?
  • What is the lifestyle you picture for yourselves once you are no longer working?

"I learned downsizing was not an option for my parents," says Dang. "They love their home." So together, they set goals to ensure that his parents could comfortably stay in their house.

Hendrickson also recommends determining what your parents have decided for durable and medical powers of attorney, wills, trusts and advance medical directives — and who administers these documents. "If these documents aren't in place or you don't know where they are, you will have to go through more hoops and hurdles to fulfill your parents' wishes," she says.

Patience and respect are key components of these discussions, and it likely will take more than one conversation to sort out the many details. But the results generally make the conversations worthwhile.

Consider your own needs as well.

A review of your parents' situation can serve as a reminder to make your own retirement planning a priority. A financial professional can help you decide how you may need to proceed.

Don't have a financial professional? We can help you find one.


Paula Hendrickson and First Western Trust are not an affiliate of any company of the Principal Financial Group.

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered, and is provided with the understanding that none of the member companies of the Principal Financial Group® are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company, a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.


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