Senior Money Management: Helping Your Parents Stay on Track Financially
By Carissa Hagen
“Mom can’t find her checkbook again, and Dad just bought another gadget from a late-night TV shopping channel he’ll never use.”
Sound familiar? For millions of Americans, the roles have reversed as they step in to help manage their parents' finances. This transition isn’t just about paying bills – it’s about protecting a lifetime of hard work while preserving your parents’ dignity and independence for as long as possible.
If you’ve recently noticed unpaid bills piling up, unusual purchases, or confusion about money matters, it may be time to have “the talk” with your aging parents.
Having “The Talk” about money
Talking about money can be difficult, especially with your parents. First, don't wait for a financial crisis to bring up the subject. Begin with genuine concern rather than criticism. Try saying, “I’ve been thinking about my retirement planning, and it made me wonder about your situation.”
During this first conversation, listen more than you talk. Ask open-ended questions like “How do you feel about your finances?” or “What are your biggest concerns about money?” This approach shows respect for their experience and wisdom.
Frame the discussion around their goals and independence. Instead of saying, “I need to take over your finances,” try, “How can I help you stay independent with your finances for as long as possible?” This perspective makes it a partnership rather than a takeover.
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Be prepared for resistance or even anger. Many seniors fear losing control or admitting they need help. If the conversation doesn’t go well, back off and try again in a few weeks. Sometimes, it takes several attempts before parents are ready to accept assistance.
Consider bringing in a neutral third party if discussions become too emotional. A financial advisor, family friend, or clergy member can sometimes bridge communication gaps. And professional advice often carries more weight than suggestions from adult children.
Start small with specific offers of help rather than asking to take over everything at once. Volunteer to help organize paperwork, set up automatic bill payments, or review insurance policies. These smaller tasks build trust and demonstrate how your involvement can make their lives easier.
Looking at your parent’s finances
Once your parents agree to let you be involved with their finances, it’s important to understand their current situation clearly. Begin by collecting information on all income sources, including Social Security benefits, pension payments, retirement accounts, and any other consistent income. This groundwork will help you grasp what is coming in each month.
Next, review their bank accounts, credit cards, and outstanding debts to see what bills need to be paid. It wouldn’t be unusual for you to discover your parents have accounts you don’t know about. So, a careful review helps ensure that nothing falls through the cracks.
Compile a list of monthly expenses to pinpoint areas where adjustments might help. Your parents may be paying for services they no longer need or use. Magazine subscriptions, unused gym memberships, and outdated insurance policies are common ways in which seniors inadvertently waste money.
Organization is key when managing someone else’s finances (and your own, too!). Consider using online banking and bill-pay services to simplify the process. If your parents prefer paper statements, set up a simple filing system with clearly labeled folders for each account and type of bill.
Handling your parents’ day-to-day money management
Setting up automatic payments for regular expenses is one of the simplest ways to ensure bills are paid on time. Mortgage or rent, utilities, insurance premiums, and loan payments can all be automated. This reduces stress for everyone involved and eliminates late fees.
For bills that can’t be automated, create a bill calendar with due dates and payment amounts. Check this calendar weekly to stay on top of what needs to be paid. Even missing one payment can damage your parents’ credit score or lead to service disconnections.
Financial scams targeting seniors have reached epidemic levels in recent years. Protect your parents by discussing common scams and setting clear rules about sharing financial information. Never give personal or banking details over the phone unless they initiated the call to a verified number.
Consider establishing account alerts to notify you of unusual transactions. Ask their bank or credit union if there are text or email alerts to alert you to large withdrawals or when account balances drop below a specific level. These early warning systems can also help you detect potential fraud before major damage occurs.
Managing debt and avoiding financial pitfalls
Unfortunately, many seniors struggle with debt in their later years.
When you first get involved with your parents’ finances, review their credit report to identify all outstanding debts and create a repayment plan. It’s wise to focus on high-interest debts, such as credit cards, while making minimum payments on other accounts. Be sure to check their credit report annually or, in the event of a breach, for free at annualcreditreport.com.
You can also help your parents create a budget. For tips, check out our blog, “Feel Financially Confident: 6 Tips for Budgeting Success.” However, if your parents have considerable debt, consider reaching out to a financial advisor. You can come away with strategies to manage or consolidate debt to safeguard retirement income.
My colleagues and I at Allegiant Wealth Strategies would be glad to help you with this. Please call (269) 218-2100 for a free consultation.
Also, watch for signs that your parents are struggling with financial decisions due to cognitive changes. Confusion about simple transactions, forgetting to pay bills, or making unusually large donations could signal a need for more oversight.
Managing investments and retirement savings
As your parents age, their investment strategy should shift. Most often, the focus should shift from growth to generating income and preserving their investments. It’s important to review their investment accounts with this in mind. Consider talking with a financial advisor to determine if their portfolio is properly balanced for their current life stage.
If your parents have multiple retirement accounts, consider combining them into a single IRA. This simplifies management and makes tracking Required Minimum Distributions (RMDs) easier. If you’re not familiar with them, RMDs apply when retirees reach age 73, when the IRS requires withdrawals from most retirement accounts. Not making these withdrawals can result in hefty penalties.
Explore whether your parents might benefit from additional income sources. Options like reverse mortgages, annuities, or part-time work can supplement Social Security and pension income. Each option has pros and cons, so research carefully and seek professional guidance before making changes.
Legal and estate planning essentials
Legal documents form the backbone of sound financial management for seniors. A durable power of attorney allows you or another trusted person to handle financial matters if your parent becomes unable to do so. Without this document, you might need court approval to help manage even basic financial tasks.
Healthcare directives and living wills ensure that medical decisions you may have to make for your parents align with their wishes. These documents help prevent confusion during health crises and provide clear guidance to you and healthcare providers. Many families avoid discussing these topics, but having directives and living wills in place offers peace of mind to everyone.
It’s also a good idea to review your parents’ will or trust to make sure it reflects their current desires. Family situations change over time, and outdated estate documents can lead to confusion and conflict. Also, check beneficiary designations on life insurance, retirement accounts, and bank accounts, as these override instructions in a will.
Budgeting for long-term care needs
According to Retire Guide, long-term care represents one of the biggest financial threats for senior citizens. The average nursing home now costs more than $108,000 a year, and Medicare covers very little of this expense. This makes it vital to have a plan for potential care needs.
If your parents have long-term care insurance, review the policy to fully understand what it covers. Many policies include waiting periods, coverage limits, or specific requirements for claiming benefits. You can plan more effectively when you know these details.
If your parents don't have long-term care insurance, looking into alternative funding options is a good idea. Medicaid might cover nursing home expenses, but only after nearly all your parents’ assets are spent. Depending on your parents’ specific circumstances, veterans’ benefits, community programs, and state-funded services may also help.
Supporting your own financial well-being as a caregiver
Helping manage your parents’ finances shouldn’t come at the expense of your own financial health. Set clear boundaries about what financial support you can reasonably provide. Many adult children contribute thousands of dollars annually to their parents’ care without realizing the impact on their own retirement savings.
If caregiving responsibilities impact your work, explore whether your employer provides benefits like flexible scheduling or family leave. Some companies now offer elder care referral services or caregiver support programs. Taking advantage of these resources can reduce stress and financial strain.
If you’re regularly giving money to your parents, consider working with a financial advisor to create a plan that balances your financial goals with helping them.
Would you like assistance? We’re here to help you and talk about your options. Contact us here or call (269) 218-2100.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Allegiant Wealth Strategies offers securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Allegiant Wealth Strategies has offices in Battle Creek and Portage, Michigan, from which we serve Calhoun County, Kalamazoo County, and Kent County (Grand Rapids). The Allegiant Wealth Strategies team offers no-obligation financial planning consultations; call 269-218-2100 or contact us here.