Finances for Your Aging Parents: What to Expect and How to Prepare
It's not always easy to think about your parents getting older and more dependent on you. When it comes to their finances, what do you need to know? What are the most important things for aging parents to consider when it comes to their finances?
This article will cover what you need to know about planning for your elderly parent's financial needs in retirement so that they can maintain some level of independence.
Planning for Long-Term Care Costs
The biggest responsibility comes in the form of long-term care costs. Long-term care can cover anything from nursing homes and assisted living facilities to home health aides and adult day care centers. If your parent is planning to age in place and remains at home, then you'll need a plan for how care will be paid.
According to the Department of Health & Human Services, 65% of seniors needing long-term care services use them at home as opposed to in an assisted living facility or nursing home.
Long-term care costs are usually paid for by the individual until their assets are depleted. According to the 2016 Genworth Financial Cost of Care Survey, "the national median annual rate for a private room is $92,378."
Common Long-Term Care Costs
There are different types of plans for paying long-term care expenses, including Medicaid and Medicare (only if you have low income and assets), long-term care insurance, or a self-funded plan.
Medicaid and Medicare
The first step is to determine whether you qualify for Medicare or Medicaid. If so, then the next step would be determining if your parent qualifies based on their income level and assets. Typically, they are eligible once they have depleted all of their savings and family assistance isn't available.
Long-Term Care Insurance
Long-term care insurance is a great option for people who may not qualify for Medicaid but want to protect their savings from being depleted by long-term care expenses. According to the American Association for Long-Term Care Insurance, the average annual cost of an individual policy is $40 per month.
Self-funding is the same idea as long-term care insurance, but it is typically an option that allows you to set up a plan in which your parents pay out of pocket until they reach their asset limit (which can be determined by state law) and then switches over to Medicaid provided they qualify.
Retirement savings is another way to cover long-term care costs for aging parents. This will allow you to keep your parents at home as long as possible and provide them with a living environment that is more comfortable than an assisted living facility or nursing home. You can also protect their savings from being used up by long-term care expenses.
Planning for the future of your aging parent is something that everyone should have on their "to-do" list. However, you don't have to do it alone. Working with a financial professional, especially one who is a member of the National Association of Insurance and Financial Advisors (NAIFA), will help youcreate an individualized plan that considers your parent's needs.
Find a local NAIFA member using our easy online tool.