Money is a sensitive topic and trying to talk about finances with your retirement-age parents can be tricky to navigate, but financial adviser Phillip Mitchell, CPA, CFA, CTP and president of Kroon & Mitchell, said things can become even trickier if you wait to start those conversations.
“A lot of what drives this to begin with is some sort of life-altering event,” Mitchell said, noting a medical condition or changes in mental acuity are common catalysts for these conversations becoming a priority.
“But it could also be an event like right now. You have COVID-19, something like that is now giving a reason … if someone got this virus, they may not be able to have an in-person conversation with any of their family members before the end of life. There is no time to say, ‘by the way, I have this stock certificate somewhere, or I have this account you need to know of, or I need to line up the beneficiaries.’”
Mitchell said initial conversations can be as simple as asking your parents to create a document listing all of their accounts and contact people for those accounts and then telling you where that document is kept for the future.
It also can include conversations about beneficiaries and making sure your parents have created basic documents such as wills and other directives that will help make decision-making easier if something happens to them. Mitchell said having these conversations with your family and making sure everything is taken care of can mean saving thousands of dollars later by avoiding the court system.
Next up, sit in on their next meeting with their financial adviser and start learning about how your parents have accumulated wealth, where that money is being kept and how your parents intend to use those resources in the future.
On the opposite side of the conversation, it’s important for retirement-age parents of adult kids to start letting their kids know what their retirement expectations are and how they intend to fund those later years. Oftentimes leaving your kids in the dark about your financial situation can create undue stress on your kids as they worry about how they’ll help take care of you down the road.
In cases where parents intend to leave assets to their kids, Mitchell said it can help for parents to share their hopes for how their kids will use those assets, perhaps to fund their own retirement accounts or for a home purchase, etc. After working hard to accumulate a comfortable life it can be hard to hand over financial assets if you are unsure how your kids will manage them when you’re gone.
Mitchell said even if you are younger and in good health, it is never too early to bring your adult kids into the conversation because often they can garner helpful advice they can start using now, like the best ways to save, lessons from your own mistakes or successes and more.
It also helps them begin to build relationships with financial advisers they will likely be working with in the future. Mitchell said it’s important for everyone to understand legal changes that might impact generational wealth transfers and the strategies necessary for optimizing those transfers.