It had been a festive family reunion. Len and Gloria Benton reclined on the veranda of their upscale retirement community condominium and happily rehashed every detail.
“We're so lucky,” sighed Gloria. “Thanks to your good planning, we've been able to retire early, buy this great place and really enjoy getting the whole family together — our kids, grandchildren and our parents!”
Len grunted happily in agreement. Due to hard work and careful planning, he and Gloria had been able to retire in their mid-50s and could look forward to a comfortable and secure retirement. Or so they thought.
Fast-forward five years. The Benton's are now in their early 60s and their parents, all four, have survived into their 80s. Suddenly the Benton's hard-won comfort and peace of mind are collapsing under the weight of a series of unplanned, but hardly unusual, disasters. Len's mother had a stroke, which resulted in her needing at-home nursing care; Len's father was mentally fuzzy and suddenly needed full-time care himself. Len's siblings didn't want to help, so Len suddenly found himself spending enormous amounts of time dealing with medical and home-care personnel, attorneys and realtors. Finally, he was able to sell their house, consolidate their assets and get his parents settled in a decent assisted-living facility. With luck, he figured, there was enough to pay for their expensive care for at least two years.
And then the other shoe dropped. As soon as he had gotten his own parents settled, Gloria's mother called in hysterics. Gloria's parents couldn't make payments on their second mortgage because of huge credit-card bills, and the bank was threatening to take possession of their house. Gloria's mother and father had really been living it up and were facing bankruptcy and dependence on government entitlements unless Len and Gloria agreed to support them.
Plan Ahead
Here's how to help your clients avoid Len and Gloria's fate:
1.
Push Them to Have that Conversation with
Aging Parents
Most baby boomers wouldn't think twice
about plopping their platinum credit
card number on Amazon, but our parents'
generation is more secretive about its
financial affairs. One of my
grandfathers went bust in retirement,
but no one knew anything about it until
he was forced to sell his retirement
dream home and move to a cheaper state.
Don't assume your clients have spoken to
their parents about specific money
issues. Have you?
2.
Prepare for the Inevitable: Investigate
Care Options in Advance
Start with the basics. What kinds of
medical risks do the parents face? What
are the home health care options? Are
their continuous-care retirement
facilities (CCRF) nearby? Can they
qualify? What are the costs? Are there
other family members who will help with
care, or will your clients have to carry
the ball alone?
3.
Prefund Expenses
Is there a fund for unexpected health
care and living needs? Can liquidity
sources be tapped by establishing lines
of credit today, such as reverse
mortgages? Should a share be purchased
now in a CCRF? What about longevity
risk? Are there annuities in place? Is
it too late for long-term care? A note
of caution: Credit-card debt is rising
fast among the elderly — watch out.
4.
Establish a Retirement Budget, Well in
Advance
This is tricky stuff. Start with the
simplest significant expense to help
your clients make the point with their
folks. Calculate a budget for a
retirement home with all maintenance,
taxes, utilities — and then add an
inflation assumption. You don't need to
go much further than the Rule of 72 to
realize that inflation can make a modest
retirement home seem like a McMansion
when it comes to payments.
5.
Don't Go it Alone: Build a Team
Get help now. Build an Eldercare SWAT
Team. You'll need a flexible estate
attorney with knowledge of advance
directives and eldercare issues. Make
sure you know an accountant who has
worked with older clients, as well as a
life insurance professional who can not
only sell, but also liquidate policies
efficiently. Get specialists in your
orbit for reverse mortgages, disability
insurance and long-term care. Check out
local retirement-living facilities, and
make contact with each facility that has
a relationship with one of your client
households.
Having parents who are ill prepared for
retirement can easily derail even the
most bulletproof retirement plan. Make
sure your clients don't delay planning
for parental emergencies until it's too
late.
