We are living longer and longer, decades past the traditional retirement age of 65. It may be good that our life expectancy is increasing, but it comes with challenges. When Social Security was created in the 1930s, life expectancy was 65. Now it is 78 and most retirees will live well past that. In fact, many studies suggest that for a married couple, it’s likely that one will live to age 95.
One blessing of living in the twenty-first century is that for many of us, as we approach retirement, one or both of our parents may still be living. This means that we have much more time with our families than previous generations had. It can also be a challenge because as we age and our own health starts to decline and our income decreases in retirement, our parents may actually need even greater levels of care and support from us.
Many retirees find that living on fixed incomes can be more difficult than they originally thought. They often rely on their children to make their budgets stretch. A Pew Research Report found that more than 20% of Americans age 40 to 59 are providing financial support to a parent. That number is increasing. In some cases that child is postponing or slowing their own retirement savings plan to help out their retired mom or dad.
Providing cash to a struggling parent is sometimes necessary; but that may not always be the best option. Investigate your parent’s eligibility for certain government programs that may help them out. If your parent served in the military during war-time (even if they did not actually go in combat) they may be eligible for ~$2000 a month (or $1000 a month for surviving spouses) for home care givers from the Aid and Attendance and Housebound Improved Pension benefits program administered by the U.S. Department of Veterans Affairs.
Many retirees also qualify for additional coverage through their state’s Medicaid program. The average retiree pays over $4,000 a year for Medical expenses not covered by Medicare. If some of that can be picked up by the Medicaid program, it could free up money to help make the budget stretch. Many retirees that do not qualify for full Medicaid can still qualify to have Medicaid pay their Medicare premiums.
Social Security will provide lower-income retirees with assistance with their Medicare Prescription Drug benefits. Retirees with low enough income to receive Medicaid, likely also qualify for the U.S. Department of Agriculture’s SNAP program that provides poor retirees with food assistance. Many communities also have meals on wheels programs or retiree centers where retirees can get a hot meal for free.
Any benefits that your parent is entitled too, means that their budget will stretch further and they will need less help, in both time and money from you.
If you still need to provide financial support, it usually is better to pay some of their bills rather than giving cash whenever they run short. Paying their power and water bills for example may be better for both you and them, particularly if they are starting to struggle with memory or money management issues.
If they are paying medical bills, consider paying those bills directly. Doing so may qualify your for tax deductions. Nursing home or assisted living bills can also be tax-deductible for example. If the parent is living with you and you provide more than 50% of the cost of their care, you may be able to take them as a dependent on your taxes.
If your parent needs an additional monthly income from you, consider doing it as a private reverse mortgage or loan. Have an attorney draw up the papers so that it is legal. A reverse mortgage, if done right, will give you a growing interest in their real estate while they get the funds that they need. In some cases a child will provide income for an aging parent for years; but when the parent dies their property is split among all the living heirs or even left to a distant child. If you are the heir providing the support, giving that support through a private reverse mortgage allows you to strengthen your claim on the future estate. You might also want to consider supplying them with support through a loan or a line of credit. Creditor’s claims come ahead of the heir’s claims during Probate.
Don’t neglect your own retirement savings. Take a long, careful look at your children. Are they financially capable (and willing) of providing you with supplemental income during retirement? Just because you are capable of helping your relatives, doesn’t necessarily translate into them being able (and willing) to help you if the need should ever arise.
Plan your own retirement years and even decades in advance so that you control your retirement and don’t need to be rescued by your family’s next generation.
Discuss your retirement plan as well as your investing goals with your adviser and make sure that you are setting enough money aside so that when you retire you have sufficient funds to control your own retirement needs.
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