When You Want to Retire but a Parent Needs Assisted Living
It’s no secret; retirement is expensive. While many plan well for their golden and retirement years, some seniors unfortunately run out of money and can become a financial burden to their families.
You don’t want to sacrifice your own finances to pay for your parents’ assisted living. You need to think about your own future. There are options; you just have to do your research. Learn more about what to do when you want to retire but a parent needs assisted living.
Typical Sources of Retirement Income
Most seniors receive income from a variety of places, according to a recent Gallup survey of more than 2,000 U.S. adults, including 636 retirees. Retirement these days is expensive, so families need to pull together many different sources to live comfortably.
Here are the first resources to explore to pay for parents’ senior care. Ideally, these discussions should happen while Mom and Dad are sound of mind enough to communicate this information:
1. Social Security
Social Security is the most common way Americans pay for retirement, and 61% of retirees say it is a major source of their annual income, says U.S. News and World Report. Find out if your parents’ get social security and how much can help contribute to their senior living care.
2. Savings or Retirement Accounts
Many people have a 401(k), IRA, savings account, CDs, or similar type of retirement account to help fund their golden years. Check with your parents or their financial advisor to find out whether there’s any money remaining in these accounts.
More than a third of retirees enjoy a steady stream of pension payments in retirement. Do your research to find out whether Mom or Dad had a pension.
4. Home Equity
Use your parents’ home to help pay for their care, if needed. If it’s a bad time to sell the home, a second mortgage or reverse mortgage may also be an option.
5. Long-Term Care Insurance
Some Americans qualify for long-term care insurance for elderly care, and some don’t. You’ll have to research whether your parents are eligible.
Find out whether your parents had individual stocks or stock mutual funds to help pay for their retirement.
Have you Exhausted Your Parents’ Resources?
Medicaid is the foremost government assistance program paying for long term care for people who can’t afford it on their own. It is administered cooperatively by the federal government and states. While the majority of its funding comes from the federal government, each state has some discretion in its individual rules, regulations and eligibility requirements.
Eligibility for Medicaid
There are a number of qualifiers to be eligible for Medicaid:
- A senior has to put almost all of his or her existing assets towards care
- Low income seniors need to have have medical or care expenses that are higher than income
- If a married couple wants to qualify for Medicaid, the couple does not need to have exhausted all financial resources
- The healthy spouse can usually keep the home he or she lives in, but may still have to make significant sacrifices
Medicaid: The Social Safety Net for Low-Income Americans
Medicaid is the safety net for Americans who need care that they cannot afford privately. Like Medicare, Medicaid acts as health insurance. But unlike Medicare, Medicaid can be used to pay for long term nursing home care in all states.
Many states also allow their residents to use Medicaid to pay for assisted living communities or other alternatives to nursing homes such as in-home care.
Some states even offer a program through Medicaid called PACE (Program of All Inclusive Care for the Elderly), which covers all of the senior’s care and medical needs through one contracting agency, with the goal of allowing people who have traditionally gone to nursing homes to stay in the community (at home) with support.
Plan Ahead: Approaching the Topic of Paying for Senior Care Early
Andy Smith, Senior VP of Financial Planning at Financial Engines, host of call-in radio program, Investing Sense,
and A Place for Mom Advisory Board member, provides financial planning to families on a daily basis and was kind enough to offer his expert guidance on ways to plan for parents’ senior care early.
Here are the steps Andy advises taking to discuss senior care finances with elderly parents:
1. Talk about senior care finances early and openly: You think you’re going to offend someone by saying the wrong thing, but not saying anything is more problematic than making someone feel bad short-term, and having to deal with financial problems later.
2. Get sign-off from your parents early in the process: If they want you to help them, but they don’t give you the authority to do certain things (especially with powers of attorney and financial decision-making, in some situations), you’re always going to be playing “Mother, May I?” and you’ll never accomplish anything
3. Catalog and organize as much as you can: This will mean budgets, debts, accounts, bills, mortgages, healthcare accounts and bills, etc.
4. Find out their advisors, attorneys, accountants, etc.: Call each of them, introduce yourself, and ask for a meeting; let them know what is happening, what your initial plans are, and ask for their help in terms of creating their sets of plans and instructions for what they believe your parents, and you, need to do to plan for the future.
- Make sure you (and your parents) are working with fiduciaries: someone who is legally-obligated to do what is in YOUR best interests — not theirs
- If you don’t understand what their advisors are telling you, or if you get the sense that they’re taking you (and your parents) for a ride, fire them and hire someone you can trust
5. If your parents are in a place where they can still understand what you’re doing for them with these financial matters, have regular conversations with them: Let them know what you’ve done; what you’re doing; and what you plan on doing in each of their major financial areas: income, outflows, investments, expenses
6. Set short-term, intermediate-term, and long-term goals for yourself with managing your parents’ finances: If you, personally, can’t see regular wins and movement down the line, you’re going to become frustrated and you’ll lose steam (and, eventually, quit)
7. Regularly revisit the plans and determine what (if anything) needs to be changed, taking into consideration any of the following:
- Changing health
- Changing markets
- Changing finances (good or bad)
- Changing family situations (you having to deal with engaging or disengaging siblings, family, etc.)
8. Remember that a lot of other Americans are going through the same thing: You’re not alone in this, so reach out for help and talk with people about what you’re feeling, what you’re trying to do, and how to deal with the situation.
Have you had to be creative to pay for your parents’ senior care? Share your stories with us in the comments below.
We Can Help! Our local advisors can help your family make a confident decision about senior living.