Unfortunately we are seeing an ever growing issue with some of our clients. The problem is not theirs directly but rather indirectly through their parents. For many people dealing with inheritances are not part of their plan. Instead the plan entails helping their parents with their worsening financial situation. The recession has done many things but maybe one of the largest impacts occurred when baby boomers had years of savings devalued by the 2008 recession. Some were lucky enough to stay invested and have enjoyed the return of their portfolio. Others, however, shifted their money to preserve what was left and have been faced with limited conservative options with interest rates near all time lows. It is not a new story to hear about baby boomers falling short for retirement. The question is what can be done if you are faced with handling your parents’ poor finances.
One of the first things you can do for you parents is have them check our their social security benefits. The Social Security is really quite useful and you can sit down with your parents and pull up their data by setting up an online account. If they are not already taking benefits you can walk through their options of when they can take benefits and how much they will receive. If you are dealing with a divorced or widowed parent be sure to fully understand their options since they may qualify for higher benefits through a former spouse. The publication What Every Woman Should Know is a great abbreviated resource to check out.
If your parents’ own their home there may be an opportunity for them to do a reverse mortgage to access some of their equity in their home as an income stream. This strategy really received bad press years ago because, as many things, they were not understood and oversold by zealous salesman. They can, however, be a great strategy. Research the options with your parents thoroughly and find a mortgage broker who really takes the time to help you understand the options.
Another issue you may face with your parents is the possibility of needing long term care as they age and become unable to do basic activities. It can be a hard conversation to have but may be necessary. They type of care your parent receives may be dependent upon the amount of money they or you have to put toward their care. A long term care insurance policy can help but your parents may not be able to afford it. You could purchase it and pay for it but you need to weigh the options to see if it makes sense for you to do so. In some cases it could save a lot of money but in other cases it may not. A good financial planner should be able to help you understand the options.
In some cases bankruptcy may be the best option. A bankruptcy attorney can help you and your parents assess the feasibility. It may be a very tough topic to broach with a baby boomer, but sometimes it may be necessary.
Matthew B. Brock, CFP®
6600 Rockledge Drive , Suite 410, Bethesda MD 20817 www.divergentplanning.com
Securities and Investment Advisory Services Offered through H. Beck, Inc., Member FINRA, SIPC. H. Beck Inc. and Divergent Planning are not affiliated.