Having too much debt can be a huge burden, but what happens when it’s your aging parents who are drowning in debt? Learn the steps you need to take to handle this stressful situation.
There is an entire generation of people who are dealing with financial issues at both ends. On one hand, they are working hard to support their family and to provide a solid future for themselves and their children. On the other hand, they are becoming more and more financially responsible for their aging parents because of the size of their parent’s debt.
This has resulted in stress and uncertainty in the minds of both the aging parents as well as their adult children.
1Your Parent's Debt
The problem is that today’s world is different that yesterday’s world. In the past, as people reached retirement age, they had very little debt. Their house was paid for and they had no other debt.
Times have changed.
With the tougher economic times, more people have refinanced their home multiple times, which means you have to make payments on it well into your retirement years. It is also much more common for people to have high credit card balances and other debt as they get closer to retirement age.
2Expenses At Retirement
Upon retirement, your income drops but your expenses will remain the same. Sometimes you even have more expenses when you retire. Planning to continue paying off debt into the retirement years becomes very, very difficult.
It is also likely that at some point, your parent’s medical bills will be substantially higher. They may even need to have in home care, etc. At some point, additional medical care may also be required. If your parent’s aren’t in good shape heading into retirement, you may be come responsible for these additional costs. This makes it very important that you understand your parent’s finances as they near the retirement age.
3Personal Financial Responsibility
If you are concerned about your parent’s debt and the repercussions as they age, the first thing you must do is look in the mirror. If you are still accepting any financial help from them, it’s time to stop. Although they still want to help pay for vacations or assist you in buying a home, etc. you should stand on your own two feet and let them focus on being better prepared financially for their retirement.
4Start Communicating With Them
It’s a well known fact that one of the things that families fight about the most is money. Unfortunately, this is what causes many people to avoid the topic of their parent’s debt until it’s much too late to help them with it. Another thing that may make this a difficult conversation is that your parents may become defensive or secretive about the state of their finances.
5Prepare For the Conversation
Before you speak with your aging parents about their debt and finances, make a plan for what you want to say.
You will need to remain calm during this conversation and you will need to help your parents stay calm also.
One way to open the conversation is to talk about the fears you both may have about the future.
It will be very helpful if you come into this discussion about your parent’s debt with several different suggestions on how the whole family can work together to handle any problems your parents have with debt.
Another topic you should think about is how big a role you want to play in providing financial help regarding your parent’s debt.
6Know How Much Responsibility You Want To Take On
You need to be aware of just how much responsibility you are willing (and able) to take on as your parents age. If your parents are in good financial shape, it won’t matter if they need to go to a nursing home or if someone needs to be hired to help care for them.
However, if money is an issue for them, you need to decide how you will handle these situations. Can you pay for a nursing home or someone to care for them? Can they live with you or one of your siblings? Can you help them continue to pay off any debt they may have?
All of these things should be discussed with your spouse and your siblings to help you create the financial goals needed to manage your parent’s debt.
7Making Financial Goals With Your Parents
After starting these discussions with your parents and deciding how much of a role you will play, you need to start setting up some financial goals.
Here are a few options you may want to consider when setting goals for your parent’s debt:
- Create a plan that will allow your parents to be debt free upon retirement
- Setting up your own savings plan to help with their expenses in the future
- Buying a larger house that will allow them to live with you at some point
The types of goals you set will depend heavily on how much responsibility you and your siblings have decided to take on for your aging parents.
8Research Other Options For Your Managing Your Parent’s Debt
There are more and more resources available to help elderly people manage their debt. The sooner you research to find out the specific options that are available, the better off you will all be. There are even some programs available for adult children who are paying for the care of their parents.
9The Importance of Understanding Your Parent’s Debt
Since their medical expenses will rise dramatically in the future, it is important that your parents enter into retirement as debt free as possible. If they have too much debt, you may be put into a position of providing help that will then snowball and will impact your own financial future.
Start communicating with them early, think about your role, help them with a financial plan and research other options that are available.
This will lead to a financially stable future for your parents as well as yourself.
What Do You Think?
Are you part of the “sandwich generation” who is now responsible for both your children and your parents? Do you have any other tips for how to handle the situation of having parents in debt?
