Money conversations between parents and adult children can be difficult at best. Issues such as your parents' investments, retirement planning, estate planning wishes and elder care issues are never easy. A recent survey by Fidelity, which involved 1,058 parents of at least 55 years of age and 159 children (of 30 years of age or more), highlighted some of the key issues involved.
Suggestions for a successful family discussion. The Fidelity survey offers these suggestions:
- Initiate family discussions early.
- Don't be shy about bringing up detailed questions.
- Let your parents have the final say about their care and their finances.
- Have follow-up conversations.
Are your parents' investments properly structured for this phase of their life? Their investment portfolio will likely be a key funding source for their retirement and perhaps their long-term care needs. The right investment mix will vary from situation to situation. There needs to be a mix that provides for growth (to stay ahead of inflation) as well as liquidity (to meet any withdrawal needs).
What sources of cash flow do your parents have to fund their retirement? These sources might include:
- Social Security
- A pension
- Retirement accounts, such as a 401(k), individual retirement accounts, etc.
- Other investments
Do you have an inventory of your parents' assets and liabilities? What do they own and what do they owe? Among the assets and liabilities to inventory could be:
- Real estate (residence, vacation home)
- Retirement accounts
- Insurance companies
- Interest in a business
- Checking and savings accounts
- Art and collectibles
- Credit card debt
- Other loans outstanding
These conversations can be difficult because there is a lot at stake.
- How will your parents provide for their retirement?
- Where will the money come from in the event of a long-term care situation?
- Who will take over your parents' financial affairs in the event they become unable to do so?
- What are your parents' wishes, including disposition of their assets upon their death, burial, staying in their home, etc.?
What is really at stake is the opportunity for parents to communicate their financial wishes to their adult children, and for children to help their parents make those wishes come true.
There is nothing easy about discussing these issues and having these financial conversations as a family. But any difficulties that may exist will be dwarfed by the potential guilt and regret felt by both parents and children if this dialogue is pushed back. You should talk about money now, before resolving these issues becomes increasingly difficult.
Roger Wohlner, certified financial planner, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Illinois, where he provides financial planning and investment advice to individual clients, 401(k) plan sponsors and participants, foundations and endowments. Roger is active on both Twitter and LinkedIn. Check out Roger's popular blog The Chicago Financial Planner where he writes about issues concerning financial planning, investments and retirement plans.