Our world is getting older: By 2050, the Census Bureau projects that people 65 and older will be nearly 21 percent of the population. And as that cohort ages, their ability to manage finances diminishes, too. According to research by the National Endowment for Financial Education (NEFE), 47 percent of older people have trouble with bills—forgetting them, paying them twice—and 36 percent experience difficulty calculating simple math problems. When that happens, it's often adult children that need to discuss finances with aging parents.
But that can be a tricky conversation to have. "Some families communicate openly about money, some think they are open but aren't, and some that don't communicate at all," says Paul D. Golden, Media Relations Director with the NEFE. "What's important is knowing that no matter the dynamic, we have to start having the conversation because the decline in financial management ability is inevitable."
To discuss finances with aging parents and create a family plan that will honor their wishes and minimize difficulties and stress for both of you, follow these steps.
• Start those conversations early, but choose your words carefully. Parents are rightfully concerned about many things, such as loss of independence, when it comes to discussing finances. A delicate conversational dance that takes into account their fears and emotions may have more of a chance of success. "Say something like, 'I was talking to my own financial planner and thinking about my retirement, and it made me think that we should talk about your plans,'" says Maggie Flowers, Associate Director, Economic Security, the National Council on Aging.
Another way to bring up the discussion, suggests Flowers: Focus on the love of family. "The more that parents bring you into the conversations early, the more you can do what they want and fulfill their wishes, and the less they'll perceive that they're a burden on the family."
Experts agree there's no golden age to start discussing finances with parents—but the sooner the better, and assigning roles within the family can help too. "Research that based on cognitive ability and life experiences, the peak of financial decision making occurs at age 53. That's a good time to be preventative and proactive with finances," says Golden. And if an event such as a fall or death happens to a member of the family or a friend, says Golden, the better time to seize the moment. "Those events provide a perfect springboard to family conversations where you can lead with, 'What would we do if that happened to you?'" he says.
• Watch for signs of decline. There's no escaping biology: As we age, we're affected by short-term memory loss, and many aging people are also afflicted with dementia. The signs of cognitive decline may be gradual—not being able to track a conversation, the inability to recall information they've always known, repeating oneself, for example. But you may also notice changes in physical appearance, an unkempt house, or a turn in emotion and behavior says Carolyn Rosenblatt, RN, an elder law attorney who writes at agingparents.com.
"Short-term memory loss is often the beginning of cognitive decline, which is also a warning sign that their ability to manage finances is eroding," says Rosenblatt, who also wrote The Boomer's Guide to Aging Parents. "By age 85, at least one-third of us will be suffering from dementia. It's a progressive process that's often subtle, and the elderly become vulnerable to making bad decisions and to being abused."
One way to evaluate parents is to interact with them outside of a routine. For example, if you call them every Sunday at 10 a.m., call on a Tuesday at 2 p.m. "As we age, we can put ourselves together for an event and answer questions in a way that can make you feel they're doing fine," says Golden. "Defensiveness is understandable: You wanting to step in and manage money is the equivalent of taking away the keys."
• Work together to assemble records. After you've begun conversations, cooperate with your aging parents to assemble the documents the both of you will need to discuss and assist with finances. Those include the basics—a will—as well as other documents that offer information and assistance to caregivers. Start with:
- A healthcare directive/living will: "Every state has a version of this that appoints someone to speak for you if you can't speak for yourself about medical decisions," says Rosenblatt. "It allows you to reach the end of your life the way you want to."
- A durable power of attorney. It's a document that allows a trusted person of responsibility the right to step in in a decision making capacity for a person who can no longer do so, and may include rights to bank accounts, bills, and medical decisions. "It's the most efficient way to ensure that an adult child can watch over and attend to a parent's finances when they start to slip," says Rosenblatt.
- An estate plan. "It's not terribly expensive and there may be tax advantages, too," says Rosenblatt.
- An inventory of assets and accounts. Many people forget about savings accounts, stocks, insurance premiums. In fact, he says that completing an inventory, consolidating accounts, having those crucial conversations, and completing paperwork are the four pillars of helping aging parents with finances.
Throughout any hurdles in discussing finances with your parents, remember: Not having a plan is still having a plan. "Remind your parents that if they haven't talked to you, someone else will make decisions for them and it may not be the way you want them to go," says Golden. "And as children, we need to be open and understand that no matter how things end up, it is your parents' plan, not yours. Honor and respect that to give them a sense of security."