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- Taking over care for aging parents can be an emotionally, financially, and physically taxing task.
- Have all estate planning documents in order, and consider a long-term insurance policy for healthcare costs.
- Talking to your parents and actively planning for their care before its too late is also important.
- Check out Vanguard Personal Advisor Services® to get the investment advice you need to help build the life you want »
Caretaking is both rewarding and challenging, no matter the circumstances. But when it comes to caring for your aging parents, things can get complex. These are the people who once ushered you into the world. It’s emotional, overwhelming — and unfortunately, it can be expensive, too.
While I am not a life coach or therapist, I believe those who are called upon with the crucial task of caring for elderly parents can benefit from planning ahead, both emotionally and financially.
As our parents enter their golden years of life, there are many uncertainties to be mindful of. For some, it may be running out of retirement funds too soon, and for others, it may be deteriorating health conditions. While some of these developments may be out of our control, there are a few things we can do to soften the impact.
1. Have all estate planning documents ready
Most individuals know about the most popular estate planning document, which is a sound will. However, while obtaining a will is an important first step, ensuring that both an advance care directive and financial power of attorney are in place is vital to caring for elderly parents.
An advance care directive is a document outlining your medical wishes if you are physically or mentally unable to make them known yourself. Clearly, this is a crucial document to have if you are making medical decisions for an aging parent.
Over the last few years, during the COVID-19 pandemic, we have seen a significant uptick in individuals obtaining advanced care directives. And it makes sense: we’re in the midst of a global health crisis, and this document has many uses.
An advanced care directive can ensure a patient’s wishes are carried out regarding organ donations, end-of-life decisions, treatment for pain, and the use of specific medical equipment such as dialysis machines.
But it’s not the only important document to secure. While the advance medical directive handles medical decisions, a financial power of attorney assigns someone to make financial decisions for you if you’re unable. As someone caring for an aging parent, you need this document in-hand in case you need to access your loved one’s funds for their own care.
The financial power of attorney allows you to make both everyday and major financial transactions, such as banking, paying bills, handling tax issues, addressing beneficiary transactions, and managing government benefits like Social Security and Medicare. You definitely want to have it on hand if you’re in charge of a parent’s affairs during their sunset years.
2. Prepare financially and physically for healthcare costs
An aging parent’s healthcare costs might be minimal — or astronomical. Given such uncertainty, you’ll likely want to transfer that financial risk to an insurance company rather than your own bank account.
With almost 70% of Americans turning 65 today needing some type of long-term care services, the average time of care being three years, and the average amount a person over 65 spends on long-term care services alone is $138,000. This can severely deplete one’s nest egg if no plan exists.
A popular way to mitigate this risk is by obtaining a long-term care insurance policy. These policies not only help with the financial burdens, but they can provide other services such as adult daycare and in-home care.
An often overlooked problem when caring for aging parents is the wear and tear on the caretaker. The average family member providing care to someone spends about 24 hours a week, and the average spouse or partner spends 45 hours.
Can you imagine the physical and emotional toll this can take on you if you are caring for your own kids or approaching the golden years yourself and no longer have the physical strength? Unfortunately, situations like this can severely wear down even the most devoted adult child.
While most people look at long-term care as a tool to mitigate their financial risk, it can indeed be so much more: it can give you the physical and emotional break you need.
3. Talk things through
Even with the sound planning strategies discussed in this article, lack of communication with loved ones will hinder any plan. While your parents are of sound mind and body, sit down with them and have these difficult discussions — don’t wait until it’s too late.
And if you are a parent reading this article who may need the care, please have a discussion with the person you have chosen to help you through this season of life. Too often, I see parents not wanting to have this discussion, and you may risk assigning someone to care for you who may not feel comfortable doing so.
While this conversation is hard to have, everyone needs to be on the same page, both the caregiver and receiver. And with the right amount of planning in place, even this difficult dynamic can be more rewarding than challenging.
Malik S. Lee, CFP, CAP, APMA, is a financial expert with nearly two decades of experience and is the founder of Felton & Peel Wealth Management. He works with emerging affluent individuals between the ages of 30 and 50 to create sound comprehensive financial plans. He is a Chartered Advisor in Philanthropy who helps individuals incorporate planned giving into their finances. He also works with retirees seeking to optimize their retirement distribution strategies through his proprietary approach called the Living Asset Allocation.