Helping an Elderly Family Member Manage Their Finances
When you think of your parents, managing their finances may not be the first thing that comes to mind. But as time passes, people may find that the roles have reversed and they are now providing care to the ones that raised them.
According to The State of Caregiving 2018 report , an average of 10,000 people are turning 65 daily in the United States and, for the first time in our country’s history, there are more than 50 million senior adults.
As the Baby Boomer generation continues to age, the report shares, high costs of senior living will drive increasing numbers of people to become caregivers for others in their family. And this trend is expected to continue for at least the next several decades. Caregiving is expected to become the “new normal” for many Americans.
If you’re in this situation, or anticipate becoming a caregiver to an elderly family member in the future, one aspect that should be considered is financial management. This post will walk you through some common issues you may need to think about when older family members become ill, or when they can no longer manage their own finances for other reasons.
What should you do? That is a challenging question because everyone’s situation is different, but you may need to think about things like protecting assets, streamlining portfolios, preventing identity theft, and more. Here are some tips and ideas to help get you started.
It can be tough to talk to your parents about their money. Having said that, it’s important to have these conversations if you’re going to be dealing with aging parents’ finances—so here are a few tips to consider. As part of your conversation, you might want to discuss the following issues:
• Long-term care insurance can cover the costs of in-home care, although premium costs may be high if your parent is already over the age of 60 and/or in poor health. The average annual premium for a couple can range between $2,466 to $3,381.
• A reverse mortgage, if your parents are over the age of 62 and meet other eligibility requirements, could allow them to tap into their home’s equity without selling it. So, instead of making mortgage payments, they could take out a lump sum of money or a line or credit to draw on as needed, or receive monthly income payments. When the qualifying person sells or moves, then the loan is repaid, however, this can significantly erode the value of your parents’ assets.
• Permanent life insurance: This kind of policy does not expire and has a cash value that can be used to pay for elder care costs, either through a direct loan, using the policy as loan collateral, or surrendering part of the policy for cash.
Depending on the types of assets your parents have, you may need to consider looking into additional options.
When dealing with elderly parents’ finances, you may decide it’s time to streamline so you can focus on providing additional types of care for them while still managing your own life and finances.
What makes sense, investment-wise, can vary by generation. Keep in mind that what makes sense for your parents will vary based upon their ages and financial situation, among other factors:
• Maintain a liquid emergency fund, whether that’s set aside for their health-related costs or something else entirely.
• Consider actively investing until retirement.
• Continue to diversify investments based on financial goals.
Here’s something else to consider. Perhaps one or both of your parents have enjoyed actively participating in their portfolio selections, investment trading, and more, but now you’re wanting to help them manage their portfolios in a less time-consuming way. In that case, consider introducing them to the idea of automated investing.
It may also make sense to look at what savings accounts, checking accounts, certificates of deposits and so forth that your parents have. How many can be combined into one account for ease of management?
Helping to Prevent Identity Theft
Although identity theft can occur in numerous ways, incidents may start with a security breach on computers or mobile phones. So, to help your parents protect their identities, make sure that they’re using strong passwords, and that they don’t repeat the same one from site to site. Help them to select ones that will be easy for them (or for you) to remember, but don’t make it easy for hackers to find any password hints. Remind your parents to change these passwords at least once a year.
Depending upon how cyber-savvy your parents are, you may need to offer them additional tips, such as to avoid entering a password on a mobile device when someone is looking over his or her shoulder, known as “shoulder surfing.”
It is recommended that you encourage them to shut down devices when they’re not using them. Your parents may need help with anti-virus software, firewalls, privacy settings, and so forth. Also make it easy for your parents to shred documents with sensitive information.
If you suspect your parents have been a victim of identity theft, next steps can include:
• Contacting your local police department
• Filing a complaint at 877-IDTHEFT
• Contacting the senior fraud helpline: 800-243-5377
• Changing all of your parents’ passwords and codes
Because the biggest factor in determining FICO scores is payment history, to protect your parents’ credit scores, help to ensure that all your parents’ bills are paid on time.
If you believe your parents have already been a victim of identity theft, it is recommended that you review their credit report with them to identify and mitigate any damage that’s taken place. Your parent can order a free annual credit report that pulls information from all three major credit bureaus. This free report does not state credit scores but will show all other credit activity.
If there has been a security breach, it is highly recommended to place a fraud alert or a freeze on your parents’ credit. If you choose to place a freeze, you’re preventing any of their personal data from being reported to creditors without their express authorization. If someone steals your parents’ information and then tries to use one of their Social Security numbers to open a new credit card, the application would be rejected because the credit score could not be verified.
You’d need to contact each credit bureau individually to perform the freeze, with your parents going through identity-validating processes at each one. Your parents would then each be assigned a PIN code that they could use to freeze and unfreeze their credit reports. There is not a cost associated with this process in any part of the United States.
Credit freezes don’t protect people from all forms of fraud, though; and, if your parents later need to apply for credit, freezes can cause delays in the process. So consider both pros and cons of this move, and continue to stay vigilant, even if you do implement a freeze.
Fending Off Predators
As you provide financial support for elderly parents and otherwise help to protect them, watch out for the scammers. According to the National Council on Aging , these are the three most common scams targeted towards seniors in 2019:
Social Security Fakes
With this scam, someone falsely claims to be from the Social Security Administration (SSA) and he or she threatens potential victims that they face legal action, including arrest, if they don’t provide certain pieces of information. Or, they might claim that a Social Security number is suspended and needs reactivated.
Even worse, some scammers have figured out how to have the official SSA number (1-800-772-1213) appear when they call. Tell your parents that, if they receive this kind of call, hang up.
The SSA rarely contacts people by phone unless there is an ongoing situation and they never call to threaten legal action. If this happens, call the Inspector General at 1-800-269-0271 or report the call online .
An Old Scam is Resurfacing
Here, a claim is made that a grandchild is in trouble and needs money immediately. The Federal Trade Commission (FTC) recommends that older adults end that call to try to contact grandchildren on their regular phone numbers.
You can file a complaint about this scam at the FTC. If you discover your parents have already mailed cash, you can report the transaction to the U.S. Postal Service (or other shipping company used). If your parents have a tracking number, it’s possible that, by acting quickly, the delivery can be stopped.
Fake Charity Calls
Scammers may call to make pleas for donations to help victims after, say, a natural disaster. They may be after the cash or to mine financial information for another type of scam.
Ask your parents to hang up and, if interested in donating, to independently research the status of a charity; you can find information at the IRS , or at Charity Navigator or at this National Council on Aging resource .
As you spend time researching ways to help your parents with their financial management, you may decide that you’d like to take a look at your own investments. If so, consider checking out SoFi Invest®.
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