I’ve been doing financial planning for the past four years, and one of the common concerns that Latinos have when they sit down with me is what they should do about their parent’s financial situation. This can be very stressful to deal with, but there are resources out there to help out.
Below are some essential questions to get answers from your parents about. They might be uncomfortable to ask or know, but they can prevent more significant obstacles down the road.
How Much Are You Expected To Support Your Parents?
For many of the Latinos that I work with, they have a strong urge to help out their parents. Their parents sacrificed so much to raise them, and now they want to pay it back. This could mean that a parent moves in with them, or it could mean financial support in some other way.
Now, most of my clients don’t know the full extent of their parent’s financial situation, and this could be a ticking time bomb. If the parents are reluctant to ask for support, this could cause them to accumulate more debt and create a bigger problem. Now, most parents are fine, but I would take some time and talk to your parents and see if they need any assistance.
For many Latinos born in the 70s, 80s, and 90s, they have the extra responsibility of having to take care of their parents and their children. Grandparents born in the 40s, 50s, and 60s are living longer than ever now due to medical advances, so having a retirement plan was never in really something they thought about. Plus, the financial services industry back then wasn’t tailored for Latinos, but the internet has reduced the difficulty tremendously for Latinos to start investing.
If you never ask, then there might come a day where you might be dealing with more than you expected. Understanding the numbers and expectations will reduce a lot of that stress in the future.
How Does Social Security Work?
For a lot of Latinos, they might only have social security to rely on, and there are a bunch of different rules for how it works. Some could be divorced but still be able to apply for social security based on their ex-spouse’s social security if they meet specific criteria. The same thing applies to widows. There is also a spousal benefit that one can receive if they never worked, but their spouse did.
In most cases, folks can start taking social security at age 62 but can delay their benefit until the age of 70 to get a more significant benefit. It all depends on someone’s financial situation and health for when they should elect their benefit. Latinos also need to realize that once they take their benefit, that is the payment they will receive for the rest of their lives in most cases. Social Security can play a significant role in someone’s retirement, and by maximizing its position, it can provide a lot of relief.
A great place to start is knowing how much they’re social security benefit is going to be, which can be found at ssa.gov, and a useful calculator is at Bankrate.
Do They Have a Will, Advance Medical Directive, and Power Of Attorney?
If your parents were to pass away or medically incapable of responding, would this cause financial issues? A Will, Advance Medical Directive, and Power of Attorney are all legal documents that are extremely helpful when something happens to our parents. A Will ensures that assets are passed to the right people without having to go through the courts to determine who gets what and saves people money and time.
Let’s say one of your parents is medically unconscious and needs someone to pay their rent on their behalf and all of their other bills, then a Power Of Attorney can help.
An Advance Medical Directive allows someone to make medical decisions on the person’s behalf. It can be stressful when you have to overcome legal issues while also dealing with a family member’s health.
There have been countless cases where these documents were not in place, and it just causes issues for the people who have to deal with it. To make life easier for everyone, make sure your parents have these documents in place. I’m not a lawyer who can draft up these documents, and most financial planners are not capable as well, so make sure you see a legal professional who can help you out.
If you feel comfortable doing it yourself, you can also check out an online legal firm like rocketlawyer.com or legalzoom.com.
What Is Their Long Term Care Plan?
When someone retires, there is going to be an 80% chance that they will need some long term care. There is private long term care, and then there is Medicaid, which is a state-run program. If you want more flexibility and control over where you stay, a private plan would be more suitable, but it is going to cost more.
To be eligible for Medicaid for long term care, it largely depends on what the state is offering. Some states are better than others, and some states provide different services than others. These services might not be enough for your parents, and it is something that needs to be discussed with your parents on what options they have.
A lot of long-term care is provided for free by friends and family and can cause stress since it is unpaid care that the friend or family member is providing. To make sure that long-term care is causing the least amount of friction in everyone’s life, have a plan.
To get more information about Medicaid, you can visit here.
If you want more information on a private plan, you need to see a long term care broker. Now there are different types of financial products that can pay for long-term care, and they all come with their pros and cons.
(Grow With Joe, LLC does not participate in the selling of financial products)
What Is Their Survivorship Plan?
Is the surviving parent going to continue to live in their current home? If the deceased parent has a higher social security benefit than the surviving parent, did they go to the social security office to increase their benefit? Is the surviving parent’s income in jeopardy?
To handle these concerns, it might require the parents in the meantime to get some more life insurance or to increase their savings rate if possible. Or it might mean that the surviving parent needs to downsize their home because they won’t be able to take care of it anymore.
Dealing with a deceased parent can be one of the toughest things that we have to deal with in life, so we don’t want to make it any more complicated than it needs to be.
By Failing To Prepare, You Are Preparing To Fail
These questions and more are things we should know about our parents because if we do the work now, it will be a lot less stressful in the future. With the right preparation, you can turn a year-long problem into a five-minute problem, and this is what financial planning is about. The financial planning needs that we have today are way more advanced than it was 10, 20, 30, and 40 years ago. So let’s be better prepared for our parent’s future by making sure they have a plan and a strategy for the future.
Even though these are questions that we should ask our parents, these are questions that we have answered for ourselves as well. Financial planning takes time and effort. If we wait until the last minute to do something, the number of options that we have gets smaller. With the right plan and execution, a lot of stress can be relieved and give people more peace of mind when things happen.
If you do financial planning early in life, it also tends to be cheaper in the long run. It can be scary to talk about death, taxes, and financial projections, but a good financial planner will take the stress out of the situation and help coach you towards success.
Financial planning has become a lot more complicated since we are living longer and have more responsibilities today. If we knew better, we would do better is something that I like to live by, and I hope you’re able to utilize this information to help your family out and live better.
For More Information
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