It Takes a Family to Plan Retirement

Let clients know financial planning is not a solo project for retirees—annual family meetings can ease the transition into senior status.

It is no secret that we have an aging population: Each day 10,000 baby boomers turn 65 and start collecting Social Security and Medicare benefits. This trend is expected to continue for the next 19 years.

Physician Retirement Planning

However, what’s less well known is that the vast majority of retirees are underfunded for retirement. The reasons for being underfunded are many: lack of savings, poor investment choices, excessive spending, or unforeseen expenses.

No matter what the cause, it is becoming clear that neither they nor we can rely on the federal government to take ample care of our senior citizens.

In fact, it truly does take a family to care for their elders, and we are seeing more and more situations where children are pitching in to help out parents with both care and financial support.

To facilitate this, having annual family financial meetings is a critical yet simple step that can help a family find the best available solutions for their finances. Every situation is slightly different, of course, but we see two specific areas that seem common to most situations where it pays to be proactive in getting all members of the family on board, before a crisis hits.

The key areas to discuss are long-term care and real estate, because they are two areas that often cause the most significant pressure on the next generation of a family.

One of the biggest financial burdens of a retiree is long-term care, which can run around $100,000 a year with an average stay of three years. Who is going to foot the bill? Who is going to manage the parents’ transition into a nursing home? With the right planning, the next generation can provide the care needed without a slew of sudden emergency expenses.

As a part of the family planning process, options for long-term care insurance should be investigated. Traditional long-term care insurance is a use-it-or-lose-it type of insurance policy with premiums that are inexpensive relative to the benefit amount. Another option is a life insurance policy with long-term care benefits, in which case you will use the long-term care insurance for elderly needs or a loved one will receive a death benefit upon your passing.

Thinking about long-term care needs today can save you both dollars and heartbreak and/or financial discomfort in the long run.

Next is real estate: Who is going to be responsible for the care and disposition of the family home? What is the plan for the succession of the family vacation home? Who will take care of the maintenance, upkeep, and taxes from year to year? Who will take the tax deductions and/or rental income, if any?

Real estate can be part of a family’s financial solutions since it can be leveraged to help out the underfunded retiree. This could take several forms, but one is by having a working child move in and do a buyout of the home, and another is a reverse mortgage.

Of course, these are idealized solutions. In real life, there are usually more complications, especially when more children and grandchildren are involved.

Often the party that does not want his or her parent to give up the family home is not the party that is dealing with the day-to-day care issues. Similarly with vacation homes, it’s sometimes the side that frames the issue in terms of memories, nostalgia, and emotion that is the least able to step up and take on the responsibilities in terms of finances and time commitment.

All of these issues can be dealt with in advance of an emergency, a time that forces the issue and heightens the emotions.

When trying to set up an advance meeting, communicate that the goal is to get to a win-win solution for everyone: to provide financial relief and liquidity to the retiree and give all adult children an opportunity to weigh the pros and cons of various solutions.

Too often we see people think only in terms of potential inheritance, forgetting about the potential expenses for their parents or conflict within the family that can arise. For all of these reasons and more, it is important for families to sit down and develop a plan while everyone can be at the table in a relatively calm and unstressed condition, before it is too late.

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