Financial Planning for Our Aging Parents

Transcript of Interview: “Financial Planning for Our Aging Parents”

Mike Barnes: Finances and money—they are all subjects that are a little tricky sometimes to bring up with our parents but oh so important as we are trying to help them plan so that it’ll make their lives easier and, frankly, make our lives easier too.

Kim Barnes: Yeah, and unfortunately, in some ways, the earlier the better. I’m not saying like when you’re a kid you have to do it, but by the time you’re an adult and your parents, of course, your older adults—even though they may not even be retired yet—it may be time to just start bringing up the process, bringing up the subject, and then definitely by the time they retire, definitely have a grasp on things. It doesn’t mean that you’re in control of everything yet, but you have a grasp on things and you just need to start helping them plan financially and there is a plan in place.

Mike Barnes: Yes, exactly. So we have an expert to talk about today. Jeremy Self from Edward Jones joins us now. Jeremy, tell me how you involve especially your clients and yourself in trying to get things financially planned as parents get older.

Jeremy Self: Well, thank you for having me. Yes, so I myself have a parent who is aging, and I have already begun those conversations. My mom is in her 60s and she is in the place where she’s younger than her husband and he’s in his 70s. So there’s going to be a time—and I’m an only child—so there’s a definite concern about the future for her. We’ve just begun those conversations to say, “Mom, have you considered long-term care insurance? Have you considered these possibilities where maybe it’s a small permanent life insurance policy with a long-term care rider that will help you navigate through these times?” Because at the end of the day, we hope that our parents have some funds available, some cash available that they can actually use to meet whatever need is going to come. But we know health care is going to be a major expense in those later years, whether it’s assisted living or memory care or whatever that is. When that occurs, how are you going to make up the gap from what you just needed and necessary income to make it to now that added expense?

Kim Barnes: Right.

Jeremy Self: So that’s kind of some things that we want to talk about with our parents. I think one of the key things is that we would have a family meeting with our parents’ financial advisor. Usually, with my clients, I’m initiating that. I’m asking them, “Let’s get together with your kids and let’s have a conversation about what your goals are.” However, if your parents’ financial advisor hasn’t done that, then it might be good for you to actually initiate that conversation to say, “Hey, Mom, Dad, I’d love to know. I don’t need to know amounts. I don’t need to know anything about the details. I just want to know what the plan is for the future.”

Kim Barnes: Right, right. It’s not like I’m being super nosy because I want to know what you have, but it’s more of being proactive and coming from a proactive place. I do think that it can be tricky, especially if you have a situation like where Mike’s dad was always very private with finances. If you have a parent like that, it can be hard to sort of broach the subject. Do you have any advice as far as, I like the fact that as a financial planner, you might be the one initiating it, so then it kind of takes it off of the kid perhaps. But what would be some ways to approach our parents where they are very independent, they are taking care of business, if you will, but we know that we still want to, as we talked about with the POA in the video we did with that, make sure that you have that plan before you need it?

Jeremy Self: Right, right. You know, I was talking with Mike just before we got on and just talking about some key milestones that our parents might have in life that almost lend themselves to a conversation with them. At age 59 and a half, when they’re working, they can take in-service withdrawals from their retirement plans to put in an individual retirement account in their own name, which is not a big deal maybe, but it is a conversation piece. At age 62, 67, 70, those are all Social Security days, right, where you could be conversing about, “Well, what are you thinking about Social Security?” They may be open to a conversation about that. Age 65 is when our parents will actually be able to have Medicare benefits. I had a conversation with a Medicare salesperson recently where they said, “You know, if someone waits till they don’t need the prescription drug supplement—not a big deal, right? They don’t need it at age 65, but if they wait until age 75 and then all of a sudden they need it, they’re actually penalized by waiting.” Again, it’s just like, “Hey, Mom and Dad, I’d love to get some education on this myself about Medicare because it’s kind of confusing for me. Would you be open to just a little bit?”

Kim Barnes: Yeah.

Jeremy Self: “Would you be open to sitting down with a professional and having that conversation?”

Mike Barnes: I think that’s one of the biggest things. You have to go into it with the frame of mind that I’m not telling you, Mom and Dad, how to invest your money. I’m not telling you how to spend your money. I just want to make sure that you’re going to be planned out accordingly. So when you have to spend four or five or six thousand dollars a month for memory care or assisted living here in a couple of years, that you’re ready for that and that you realize that Social Security is not going to take care of that amount. So it’s going to be savings going to add on to that. It seems like you’re just going to need to convince your parents how to use their savings.

Jeremy Self: Yes, and I would add having conversations about, “Mom, tell me about your will. Dad, do you have a trust set up?” I think you shared with me you’ve had conversations with some attorneys about powers of attorney, and you have different types of powers of attorney. For us, we also think in terms of, “Is there a medical power of attorney in case one of our clients becomes incapacitated that someone’s able to make decisions on their behalf?” Furthermore, for us, we also have something that would be a good question to ask parents: “Do you have full trading authorization given to anyone on your accounts should something happen?” Those are all simply conversations that you can have with your parents, and it helps them to think through some of those details.

Kim Barnes: I was going to say, for some people out there—no offense to anyone—but for some people out there, when you’re in your 50s and your parents are in their 80s and things are going downhill so to speak and they haven’t done anything at all, what’s the first thing that I probably need to do financially with my parents’ finances? What do you think one of the most important things is?

Jeremy Self: That’s a good question. I’m going to have to think about it for just a moment.

Kim Barnes: Or even just like the first few things that you’ve really got to make sure, if nothing else is figured out, what things do you need to have in place to protect their finances and make sure that they can use what they have?

Jeremy Self: Yeah, I see what you’re saying. So I think the first thing is to ask them for permission to be added to their accounts as someone who has authorization. Because otherwise, you don’t know—do they have $10,000 remaining or $100,000 remaining? You need to be able to know and understand that financial picture, especially if you’re being depended on to pay the bills and things like that. Then the powers of attorney as well, the financial power of attorney, and even having that medical power of attorney. I think about even for my son who’s in college in another state—we had to get all of those things taken care of for him: a living will, a medical power of attorney, a financial power of attorney. Because if anything were to happen to him, he’s an adult in that state, and we wouldn’t have any access even though we’re his parents. The same is true for us when we have aging parents. We have no say in what happens to them unless we have those documents in place.

Kim Barnes: Right, absolutely. Well, I think so, so when you’re thinking of their finances, what are the couple of—and I know that this is where it gets tricky because each situation is going to be different—but what are the things that you should be asking them about? Is it their, do they have life insurance? Do they have a trust? Do they have their will? What are some of those…

Mike Barnes: Basically, everything needs to be wide open. There can’t be any secrets financially at this point, you know, when the parents are retired and getting to the elderly stage. You just can’t have the secrets.

Kim Barnes: Right, no hidden bank accounts.

Mike Barnes: Yeah, no hidden money. It’s not like the kids are trying to take it, just that we need to know about it as we’re planning for how you’re going to live out the rest of your years, which hopefully is a long time. But the longer, the more expensive it’s going to cost.

Kim Barnes: Right, and I guess too, so that you can find you can use those resources that, if your parent has had, you know, enjoyed being able to have accounts at lots of different banks because they thought it was sort of fun, if we don’t know where they are or had life insurance policies or whatever, if we don’t know about them, it makes it really difficult for us to be able to help use that money on their behalf.

Jeremy Self: That’s exactly right. 

Kim Barnes: It’s just really getting a good picture of what is their financial picture. The thought of having it when there is a financial advisor involved probably also helps it be a little bit more objective, if that’s the right word, where it’s not like I’m trying to get all the information. It’s like, “Hey, we’re trying to put together this plan for you.”

Jeremy Self: It can be, and I would add having a team of people that can work with your parents and with you is so critical. Having the attorney, the financial advisor, the CPA all working together is so important. Here’s why: I tell this story anecdotally. I had a friend who was the executor on his father’s estate. His father had been remarried. His son and all their kids were supposed to get all of the invested assets if the father was to pass away, and the spouse was going to get the business. The father had a financial advisor for years. He retires, a new financial advisor comes into the picture. He transfers firms. He sends the father a load of documents. One of the documents was a transfer on death document that had his spouse listed as the person to transfer it to. So the executor’s understanding of the estate is that all the investments go to the kids, but the father, unbeknownst to the estate attorney and the kids and the CPA, signs a transfer on death document that now the stepmom basically gets all of the invested assets.

Kim Barnes: Whether the dad actually did it on purpose or not, right? I mean, sometimes as you get a whole stack of papers and you think you know what you’re signing and you don’t really know necessarily.

Jeremy Self: That’s right. So that’s why I would just say having a team approach is incredibly helpful. For you as a child of a parent, being able to have that conversation to say, “Hey, let’s pull everybody together so that everyone’s communicating and on the same page.”

Kim Barnes: Going back to that open communication.

Mike Barnes: Exactly. Very good advice.

Kim Barnes: Jeremy, thanks so much. We really appreciate it.

Jeremy Self: Thank you. 

Mike Barnes: Yeah, I guess what we’re talking about is definitely communication and having it so that not that people have secrets, it’s just that a lot of people are kind of private about their money. My dad never really thought that you needed to know because they’ve just been taking care of it. But when you get to the age where you may need some help from your kids, then you have to have that talk. If you need to include, whether it’s attorneys, financial planners, definitely talk to someone to get that advice if need be, because I think we all need it.

Kim Barnes: Right, and every situation is different.

Mike Barnes: Yeah. All right, well, this is one more interview that we’ve done, and we’re going to be doing many more. If you have a topic or issue that you’d like us to cover, just let us know.

*This transcript is auto-generated. Please excuse any typos or mistakes.