By Dr. Angelica P Herrera
In many cultures and families, the answer is always YES. Your parents sacrificed and raised you to be an upstanding citizen (in most cases), and you may feel forever indebted to making sure they live a comfortable existence through their retirement, no matter what.
In countries such as Spain and China, adult children may be subject to fees and jail time if they neglect their elderly parents.
In the U.S., it’s still a choice, but there is still a strong expectation that adult children help out their aging parents.
Under what circumstances are you allowed to step back and question that expectation?
And to what extent can an adult child meddle in their parents’ finances and probe them about important decisions that may ultimately impact their own wallet?
If your parents are driving a better car than you are, you may feel more comfortable putting your foot down, without much guilt. My own parents raised their 3 daughters on a minimum wage salary, and still never took a penny from us for rent or food when we were twenty-somethings coming and going in between jobs and school to mooch off the little they had. Thanks to their careful budgeting and humble living, they are financially comfortable, and my sisters and I are ready to generously chip in what we can when necessary. But every family is different.
Some families don’t have siblings who chip in equally. In fact, deadbeat siblings are the biggest source of anger among caregivers who use care management services. Strained relationship with parents also adds a layer of complexity.
What if you’re just barely making ends meet to feed your own family? What if your parents are in a serious crisis? Do you chip in then?
There is no simple answer.
Over the coming years, more of the sandwich generation will feel the financial squeeze of caring for aging parents. Sadly, more seniors are retiring with little resources and often rely exclusively on a meager Social Security Income (SSI) or the charity of children and others. For example, in December of 2013 close to 8.4 million individuals collected SSI income, and for close to three-fifths of those recipients (a bit over five million individuals), this was their only source of income.
Careless decisions about housing and lifestyles may too be partly to blame, when seniors are living beyond their means.
The growing number of seniors falling victim to financial fraud and abuse has only made matters worse, often at the hands of relatives or corrupt financial advisors. More on that in a moment.
This article explores some of these assumptions and offers readers a few recommendations for preparing your family for critical decisions, such as where parents will live, appropriate lifestyle choices, at what age they should retire, finding part-time work after retirement, how to intervene respectfully.
We’ll also help you identify a few red flags that point to aging parents facing financial troubles, or living beyond their means.
MISCALCULATING THE COST OF RETIREMENT
Everyone is entitled to live out their old age the way they choose. However, some adult children may take exception to that, especially when they are their parents’ back-up plan.
The reality is that most people underestimate the costs of that cozy retirement.
Research suggests that there is roughly a $250,000 gap between what people actually have saved and how much they need for retirement.
A rough guide for desired levels of retirement saving at different age groups are:
– 30 years of age: $56,000
– 40 years of age: $112,000
– 50 years of age: $180,000
Many people fall under these numbers, for a number of reasons.
For example, minorities who worked in low-wage positions without access to a pension plan retire with even fewer resources.
For women, the situation is worse. Well-intended choices to be a stay-at-home mom, or be a devoted caregiver to an aging or disabled relative unfortunately leaves them with fewer lifetime earnings and savings. Disparities in wages between men and women is well documented, and the fact that women will outlive most men suggests that they need a heftier nest egg.
At the same time, many people get caught up in the challenges of living day-to-day and week-to-week, and put off saving for retirement for far too long.
Understanding the costs of retirement are an important factor in planning, as are minimizing costs.
People are often surprised at just how many different ways they can cut costs and save money, money that can help to contribute to the challenges of retirement.
LIVING HUMBLY, DOWNSIZING SENIORS’ LIFE
The biggest mistake that your parents can make is trying to remain in the same two-story, four-bedroom house that they raised you and your siblings in, at whatever cost. Financial and practical reasons may require that your parents downsize. If you find yourself doing more back-breaking work trimming trees and bushes in mom and dad’s backyard or paying for gardening services, it’s time to rethink whether their home still offers the same perks it once used to.
Are you folks having more difficulty trekking up and down the stairs, or worse, experienced a recent fall? If so, it’s definitely time to heed the recommendation to downsize. Falls are the number one reason that seniors end up in nursing homes, as a result of sustained injuries and need for round-the-clock care.
Help them sell the house, and move to more affordable living spaces – a small, accessible condo with neighbors to help keep an eye on them.
There are also practical implications of large homes and living in secluded areas. In an emergency, it may be more difficult to reach them, or get transported to a hospital. Seniors often experience social isolation, as they experience limitations in mobility and transportation options after they lose the ability to drive themselves about town.
Obviously, your parents may have an emotional attachment to the home. The thought of plucking them out of their comfort zone and familiar quarters may seem like an uphill battle met with resistance. However, with the right approach, you can encourage your parents to consider a move. I have colleagues who devote their careers to helping seniors make smooth transitions and downsize, in the most respectful way. One of her suggestions is that you transfer symbolic, treasured items and make sure they are prominent in the new location. Most importantly, she advises that you make sure your parents are directly involved in choosing their new living quarters.
If parents are reluctant to leave their ample home because they are still trying to keep up with the Joneses, that’s another story. While the idea that You Only Live Once (YOLO) and the concept that FOLO (Fear of Missing Out) are commonplace among young millennials, it’s a less appealing quality for seniors on a fixed income.
Life is short, and you don’t take your money to the grave. We get that. But, if we can encourage seniors to live more frugally, it’ll open up to doors to save for nice vacations and to explore new hobbies.
Another growing trend among seniors is the option of finding roommates.
A friend of mine, who hit the age of 50 this past year, embraced this concept. She shared that she was relocating partly to begin arrangements for a comfortable retirement, where she and other close female friends could share a home and take care of each other.
It’s a valid way of supporting each other, sharing expenses, and taking care of each other. Villages that emulate this arrangement are popping up everywhere. Let’s not forget that co-habitation and living among many neighbors was a fairly common practice less than a century ago, and still prominent in many cultures and communities outside the U.S.
Couples would also do fine to consider sharing with other couples and splitting the costs of rent, mortgage, and utilities. The movie All Together (2011) cleverly and entertainingly sheds light on this cultural phenomenon.
DISCOURAGE YOUR PARENTS FROM RETIRING EARLY
Retiring early is very appealing, especially for people who really hate their job, or may be experiencing significant health issues.
For some people, retiring early is a good decision. For example, those who already have a great deal in retirement savings, those who are able to dramatically cut down in costs and those who struck it rich, can often survive early retirement well.
Additionally, people who are sick or have injuries that prevent them from working may find that they have no alternative to retiring early.
However, that’s not true for most people.
Instead, people tend to take early retirement because it is an easy way out, their job isn’t fulfilling, they think that they have worked enough or simply because they feel that they deserve it. Many older adults may have been laid off, and are fed up with unemployment and reluctance from employers to hire a more mature person.
There are many other reasons too, but in general, people tend to not think through the challenges of retiring early.
In particular, there are two big financial challenges.
First, by retiring early, the amount of time a person works for is significantly decreased. This also minimizes how much they can save for retirement.
At the same time, retiring early means that people have a longer period of time without work. This costs more.
So, retiring early gives less potential for saving and involves more costs. This means that many people cripple themselves by retiring early when they really do not need to.
At the same time, retirement has its own non-financial challenges.
For many people, retirement can get boring. It can also be a socially isolating time, as many people got a lot of their social contact through work.
Some of these issues (both financial and otherwise) can be reduced through part-time work.
HELP MOM AND DAD FIND PART-TIME WORK
Every year, more older adults are needlessly laid off prematurely, forced into early retirement, or have their role minimized on account of ageist perceptions in the workplace. They are presumed to be less valuable and as having little to offer.
They may be wrongly perceived as reluctant to learn new technology or get on board with new changes. What’s more is that companies mistakenly believe that new college graduates can perform the work of someone with 20+ years of experience, at half the salary.
There are, however, real reasons that older adults may exit the workforce. The growing severity of a chronic illness may prevent them from performing their job.
Sadly, few human resource departments have the know-how to implement provisions under the Americans with Disabilities Act or The Age Discrimination Act of 1975 and seniors are either unaware or too exhausted to exercise their rights. It’s often hard to prove wrongdoing.
I’m reminded of the time when I had to frequently take my Mazda in for repairs to the dealership.
The older gentleman who typically helped me had disclosed that he was having a few challenges managing his diabetes, but was working toward it. One day, I was surprised to find that he had been fired.
His co-worker shared that he was always falling asleep at work. It’s a shame that the company didn’t see the connection between his fatigue and his disability (diabetes), and made appropriate accommodations.
When seniors do decide that they want to return to work, few employers are interested in hiring them, even on a part-time basis. Those that manage to land a part-time job, often take on more menial work, in industries or areas completely outside of what they did at a younger age, and at much lower compensation.
It may feel demoralizing, but the key is to encourage seniors to find less stressful positions that bring them just enough income to supplement their social security to pay their bills, and have a little play money.
Seniors report that having the light-weight job gives them an opportunity to stay socially engaged as well.
Finding jobs for seniors can be challenging, especially as many workplaces discriminate against seniors, even though this discrimination is often not intentional.
One good option is retail. This is a field that is frequently hiring and gives seniors the opportunity to interact with others. Typically retail jobs will also offer a flexible schedule, which can be beneficial for seniors. A good first step is to visit local stores and look at which ones are currently hiring.
While you may also be able to find some jobs in newspapers, in the modern day and age, many more jobs are advertised online. As it turns out, a number of organizations have established online job banks exclusively for seniors. The State Department has compiled these databases here.
Helping your parents work with job seeking sites and creating a digital resume may be a challenge, but it is worth the effort.
PICK UP THE SIGNS THAT YOUR PARENTS MAY BE LIVING BEYOND THEIR MEANS
The signs that a parent may be living beyond their means are not always apparent. The following are a few indicators that your folks may be mishandling their finances and signal an impending ruin that may require that you or other step in to intervene:
– A refrigerator and cabinets that are often empty
– Borrowing money from others
– Often behind on payments
– Looking for second and third jobs to make ends meet
– Attempting to repeatedly refinance their home to squeeze out the last bit of equity
– No emergency funds
– Inability to afford car payments, including basic maintenance
– Paying overdraft fees (late fees)
– Asking for gas money
Perhaps one of your parents underwent a recent medical procedure that surpassed what they were expecting, or have simply made a few bad choices. We all have. At this point, however, you’re entitled to ask ‘What happened?’
If you’re among the people that your parents are coming to with a request for money, then you’re entitled to question a request for money, especially if you see these signs.
Even governments scrutinize seniors’ assets, before dolling out entitlements such as food stamps, free transportation vouchers, Medicaid, and more. Seniors are often required to spend down their own savings and assets before qualifying for Medicaid, for example. This ensures that Medicaid and other social programs are used for the truly poor and needy, and are not handed to someone driving a luxury vehicle and with a lavish shoe collection.
If your parents require much more assistance than balancing their checkbook, you may wish to invest in a financial consultant or encourage your parents to invest in one. If you take this approach, you need to look for someone that you and your parent can trust. Helpful advice can also be found online, although anything found online needs to be carefully evaluated, as there is a lot of inaccurate information online.
You may be struggling with the decision to intervene. You may think that it’s none of your business. The decision to intervene will have a lot to do with your existing relationship with your parents and how your good intentions will be perceived.
In many cases, elderly parents may avoid talking about financial problems because they don’t want to worry their children or because they feel embarrassed.
Whatever the case, finances are a delicate subject and something that should always be handled tactfully.
In particular, you want to make sure that your parents know that you aren’t trying to control their lives, but that you want to help make sure that they have everything they need. Gently remind them of this and then wait for them to come back to you.
Always focus on making your parent feel like they have control – this can go a long way in helping you gain their trust.
A key component of working with your parents on any issue is to make sure that you have a positive relationship that is built on trust. This may involve taking the time to work out where there are issues in your relationship and also to look for areas where issues can be resolved.
This is an important area to examine with any parent and child relationship, especially when you are helping your parent – as there can often be unresolved issues that are not immediately evident to either party.
Even then, the process may take time, especially for. So, be persistent.
To learn a few strategies for managing stubborn parents that can be applied to this situation, have a look at our article, which highlights many of the challenges of stubborn parents as well as some potential solutions.
If you are repeatedly being asked to bail out your parents, finance their medical and household expenses, or take on extraneous duties around their home to accommodate them at the risk of your own financial health and sanity, then it is perfectly fine to draw some boundaries. Here is where many adult children face an ethical dilemma, and may feel they are abandoning their role as a dutiful son or daughter.
We want you to know that you are entitled to say ‘NO’.
‘No, mom, if you want to continue living in this home, you will have to either let the weeds grow outside, but I cannot continue to drive 3 hours each way every weekend and spend 5 hours of backbreaking work to keep up your garden. It leaves me very run down and with no time to run my own errands or spend time with my kids. Perhaps we can pay the neighbor’s son to help you water such a few of your favorite plants.”
Or “No, mom and dad, I cannot lend you $10,000 to expand the patio, or pay the 3 months of late mortgage payments. We need that money for Mary’s braces or to repair the leaking roof.”
When you stand firm on these decisions, and stop enabling poor spending choices, lifestyles, and budgeting, it will force them to revisit other options.
PROTECT PARENTS FROM FRAUD
Everyone is vulnerable to fraud in some degree of another. However, seniors are especially vulnerable to fraud. Seniors can be hit hard financially by ruthless scammers, and immoral caregivers.
In 2012, 26% of all complaints concerning fraud were made by people 60 or above. That’s more than any other age group.
Estimates suggest that at some point, one in five Americans who are 65 years of age or above will be abused financially, and that number doesn’t count the seniors who were targeted by fraud but did not fall for the scam.
Some of this comes from their vulnerability in general. For example, seniors often heavily rely on family members, meaning that family members are in a position to take advantage of and manipulate them. Sadly, family caregivers as well as paid caregivers are often the biggest perpetrators of elder abuse, financial and otherwise.
Your parents may also be vulnerable to fraud from outside the home.
For example, many different scams directly target seniors, because scammers are aware that seniors have a steady income. Many seniors do not know how to watch out for scams, and may trust people too easily, especially ruthless people who know how to portray someone in a position of authority.
Social isolation can also serve to make seniors even more vulnerable to fraud. It can also subject them to financial manipulation from family members.
When seniors have very little contact with one (or more) of their children, they may be more inclined to do anything for that child who they may view as more loyal and caring for sticking by them. If that child calls up to ask for money, that senior may be more willing to go out of their way to find that money, simply because they do not want to lose contact with the child again.
Because it is a family member asking, many seniors may not recognize that there is anything wrong, and may not even feel that they are being manipulated. However, such situations often end up being the start of a pattern, where a family member may consistently turn to the senior as a source of easy money.
When the scammer calls up, they often do it in the morning or late at night when the senior may not be thinking clearly. When seniors are isolated in this way, they may be willing to spend the time talking to a scammer that calls or may even be more likely to fall for the charm or flattery of that scammer. At the same time, socially isolated seniors have few people to talk to about anything they are concerned about. This is also reflected in a scam known as the ‘grandparent scam’, which largely targets seniors.
This scam has been around since about 2008, but the scam artists are growing in their abilities to carry it out. Essentially, the scam involves someone calling up and pretending to be the grandchild of the senior, or their friend. They will often claim that they are trapped in a foreign country, and need money wired to bail them out. When the scammer calls up, they often do it in the morning or late at night when the senior may not be thinking clearly.
There are literally thousands of different types of scams and fraud out there. Many of these are targeted at seniors, and even those that aren’t can often catch seniors. Scams will often try to tap into an emotion in the senior and try to get them to react emotionally rather than rationally.
Protecting your parents from fraud may seem challenging, but one of the first steps is simply to educate them in what to look out for.
If they trust you, you can also get them to ask you about anything that looks suspicious. However, as always, it is important to approach this topic delicately, as no one likes to be told that.
AT THE END OF THE DAY
For most of us, finances are challenging in some way or another – and that’s simply when we are focused on our own needs.
Caring for or supporting an elderly parent adds a whole different dimension to this challenge and there are no easy answers for exactly what you should and should not do.
Instead, the answers will ultimately come from your own needs and the needs of your parent, as well as history and the precedence you’ve set.
Perhaps the key thing to remember is that no matter what, working to build a relationship of trust is critical if you want to try and help your parent with their finances in any way.
After all, if your parent doesn’t trust you, they certainly won’t be willing to talk to you about a subject as touchy as finances.