We like to think that by the time we retire we will have built up enough savings and investments to cover our expenses for the rest of our lives. Unfortunately, this is the financial independence myth, and far too many people buy into it.
If your parents are in their 70’s or 80’s then they may already need assistance with day-to-day expenses, and even if they are currently financially independent there is no guarantee that this independence will last.
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Most concerning of all is that many parents who experience financial difficulty late in life are reluctant to reach out to their family for help, or even acknowledge that there is a problem. In fact, Fox Business reports that “6 out of 10 older adults don’t want to burden family by asking for help managing finances, yet 8 out of 10 adult children actually want to be involved.”
Investopedia notes that about 10,000 baby boomers retire every single day, but 54% don’t have sufficient savings to support their retirement, and 24% don’t have any savings at all.
Since older parents and relatives are often reluctant to ask for financial assistance you may have to step in at a certain point, but when?
Thanks to the marvels of modern medicine people are living longer than ever before, but with an increased lifespan comes a higher risk of dementia and Alzheimer’s. Making matters worse, Next Avenue reports that one of the first signs of mental decline is difficulty managing finances. Even for people who are perfectly healthy their ability to make good financial decisions peaks at the age of 53, Forbes reports, citing a study by the Center for Retirement Research at Boston College.
To complicate matters, older people are at significant risk of experiencing financial abuse, in fact about 20% of people know an elder who has experienced financial abuse, at an average loss of $36,000.
So when should you step in? Generally speaking you should try to get involved as early as possible, but particularly for parents or relatives who are:
Whether you are stepping in to help a relative in need, or are getting involved early to nip a potential problem in the bud, there are some basic steps that you can take. These steps include:
Unfortunately, financial independence is a myth for many Americans, but facing reality doesn’t have to signal disaster for you or your parents. Creating a plan is the first step towards building a happy, healthy, and viable financial future. Together, you and your parents can weather financial storms.
Have you and your family pulled together to ensure your aging parents can remain financially independent? We’d love to hear your story!
Farrell, Chris. Why Boomers Shouldn’t Despair About Retirement. Forbes. April 24, 2017. Available online: https://www.forbes.com/sites/nextavenue/2017/04/24/why-boomers-shouldnt-despair-about-retirement/#6e3df82742f2
Friedberg, Barbara A. Are We in a Baby Boomer Retirement Crisis?Investopedia. March 8, 2017. Available online: http://www.investopedia.com/articles/personal-finance/032216/are-we-baby-boomer-retirement-crisis.asp
Dowd, Casey. Don’t Let the Independent Myth Ruin Your Retirement. Fox Business. December 20, 2016. Available online: http://www.foxbusiness.com/features/2016/12/20/dont-let-independent-myth-ruin-your-retirement.html
Eisenberg, Richard. Are Your Parents Falling for the Financial Independence Myth?Next Avenue. December 21, 2016. Available online: http://www.nextavenue.org/parents-falling-financial-independence-myth/
Eisenberg, Richard. When Alzheimer’s Strikes: Losing Your Money Mind. Next Avenue. October 6, 2014. Available online: http://www.nextavenue.org/when-alzheimers-strikes-losing-your-money-mind/