What You Can Do for Parents Who Need Financial Help
Once your parents approach their 60s or 70s, it’s normal to start worrying about their finances. Do they have enough saved for a long-lasting retirement? Can they afford essential costs, medical care or even the cost of a nursing home in the future? These concerns weigh even more heavily if your parents have few assets to begin with.
“It can be stressful to figure out what to do with aging parents who don’t have enough money,” said Ryan Chang, Northwestern Mutual Financial Representative based in Los Angeles, CA. “I recommend starting by getting together with your brothers and sisters and talking with your parents about their finances and their goals. From there you can work towards planning and making decisions as a family.”
Here are a few tips for helping parents with limited resources.
RESEARCH GOVERNMENT PROGRAMS
Even if you and your siblings are able and willing to help your parents financially, the first step should be to research income- and age-based programs that may be able to help cover some of their essential costs.
The most well-known programs are Medicare, which helps cover some medical costs primarily for those over 65, and Medicaid, which provides medical coverage for people of any age with low income — but that’s certainly not all. There are often additional county, state and other programs that may help provide food, housing assistance, health care, supplemental income, and even transportation to bring elderly residents to places like the grocery store. You might be surprised by how many options your parents may be eligible for.
BE DELIBERATE ABOUT FINANCIAL ASSISTANCE
Most government programs are designed to help those who demonstrate financial need, so if you’re considering helping your parents out, make sure you’re not hurting their chances for aid — agencies will look at your parents’ income and assets to determine eligibility.
For example, depositing money directly into their bank account would be counted as part of their assets, which might put them over the financial need qualification cutoff for some programs. Direct cash gifts can pose the same problem.
If you want to help cover their living expenses it might be wiser to take on some of your parents’ living expenses directly. Covering prescription copays, groceries and other costs can preserve your parents’ eligibility for need-based programs since cash doesn’t exchange hands.
CONSIDER OTHER FINANCIAL SOLUTIONS
If you’re willing and able to provide financial support to your parents and are not concerned about eligibility for government aid, then you may want to look into financial solutions that can help provide regular cash flow quickly. One option is an immediate income annuity: you pay an insurance company a lump sum up front, with a parent as the beneficiary. They would then receive a pre-determined amount of money, typically for the rest of their lives.
“It can give your parents peace of mind knowing they have a predictable amount of money coming in every month, and that they don’t need to come to you every time they need to buy something,” said Chang.
If your parents have permanent life insurance policies, they might also consider tapping the cash value as a source of funds for retirement. Doing so will lower the policy’s death benefit, but depending on their situation, that tradeoff may make sense. If they own their home and are unable to make ends meet, a reverse mortgage may also be a solution.
The best option for your parents will depend on your family’s situation, and a financial advisor or representative can help make personalized recommendations and help plan for future needs like long-term care. What’s most important is to coordinate with your family members and create a plan — one that best suits your parents’ needs and takes advantage of the best options available to you.
