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The most bitter pill to swallow is discovering that your parents have depleted their retirement savings. But as the primary caregiver, you must figure out how to help without risking your financial situation. What should you do?
When elderly parents run out of money, you should empathetically have an open conversation with them to have a clear understanding of their financial situation. Next, you should explore options to support their living, including a part-time job.
If you need more options for providing a decent livelihood for your parents when they are out of money in their retirement, this article have you covered. It discusses what happens when the elderly run out of money and what actions to take as the primary caregiver.
What Happens When the Elderly Run Out of Money?
No one plans to outlive their retirement savings, but retirement is expensive, and most people underestimate their retirement expenses.
They also fail to consider the steadily growing inflation that diminishes the value of money, and as a result, 83% of retirees in the lowest income bracket and 13% in the highest income bracket run out of money.
Some seniors will likely be in nursing homes, assisted living, or retirement communities. What happens to them?
Running Out Of Money In Assisted Living Or Retirement Communities
Assisted living and retirement community facilities are for-profit organizations and require residents to pay privately for the room, bed, food, and personal care services. When a resident defaults on payment, it’s a red flag that can lead the facility into a financial crisis.
These communities usually evict residents who run out of money because Medicaid and Medicare don’t cover such expenses. But, they have to give a 30 days notice to the resident or the primary caretaker.
Alternatively, the facility may pass the payment burden to the adult children of the senior. Seniors with no one to step in are moved into the Social Services department program.
Going Broke In a Nursing Home
Nursing homes are more costly than assisted living and retirement communities because, in addition to basic amenities, they provide daily access to professional nurses.
When a resident runs out of money in a nursing home, there are three payment options:
- Medicare: Medicare only covers a specific number of days, usually 100. After that, the resident takes over and pays out of pocket.
- Medicaid: It’s the best solution for seniors who run out of money because it covers long-term nursing care. However, to be eligible, you must meet the state asset and income requirements.
- Veterans’ Affairs (VA) benefits: These benefits are available for seniors with service-connected disabilities or with no assets or income. If seniors qualify, the nursing home or assisted living facility transfers them to a VA nursing home.
Beware: Some nursing homes or retirement homes don’t accept Medicaid and Medicare payments. When seniors run out of money in their facility, they transfer them to another nursing home that accepts this payment method.
If the senior is in a facility that accepts Medicaid or Medicare, they’re moved from a private room to a Medicaid or Medicare bed. If the seniors don’t qualify for any program, they are discharged to live with the primary caretaker.
I’ve explored this in my article on retirement homes kicking out patrons. You can check that out for other potential reasons, and what to do if such a scenario happens. Could Someone Be Kicked Out of a Retirement Home?
11 Things To Do When Your Parent Run Out Of Money
Your parent may run out of money while in in-home care, and when this happens, it will be upon you to take the burden and ensure their golden days are bearable. Below are some actions to take.
1. Understand the Severity Of Their Financial Situation
Before taking action to help your parent, you first must understand the financial situation you’re dealing with, which calls for having a genuine and open conversation with them. Remember, this is a difficult situation, and they might feel ashamed and anxious about their future, so you should approach the situation empathetically by putting yourself in your parents’ shoes.
Your goal should be to:
- Have a look at their financial records, such as bank statements.
- Know whether they have credit card debts, mortgages, or pending utility bills.
- Understand the status of their retirement benefits.
- Know if they have insurance coverage and if they have been paying monthly premiums.
Tips for Discussing Finances With Your Senior Parents
If you feel unequipped to initiate this dialogue, here are some tips to guide you:
- Choose the right time: The best time to have a financial discussion is when your parents are relaxed and emotionally stable.
- Be direct: Go straight to the point and explain what you need to know about their finances and why. The focus should not be on how they spend their money but on finding a solution for their situation.
- Be brief: Keep the conversation centered around the main issues to gather the information you need in the least time possible.
- Control your feelings: Though the situation may stir up your emotions, be kind and gentle. Don’t blame your parents but try to be supportive.
2. Involve Your Family Members
Supporting your parents should be teamwork, and if you have siblings, you should bring them on board.
In the initial conversation, inform them about your parent’s financial situation to assess their perception and to know if they are willing to offer support. When everyone is on the same page, you can have a family meeting and discuss the way forward.
3. Get an Affordable Financial Advisor
Making wrong choices during a financial crisis jeopardizes your chances of recovering, so to avoid this, look for an expert’s view of the situation.
A financial advisor has the experience and expertise to recommend the best short-term and long-term options. They can also help you assess the situation in terms of numbers, such as how much your parent spends, their income, assets, and debts, and how much you need to sustain their lifestyle.
If you’re in a budget squeeze, you can have a one-time consultation with the financial advisor. Ensure you have all the questions ready to get the most out of their services.
4. Encourage Your Parent To Boost Their Income With a Part-Time Job
Instead of entirely quitting work in retirement, you can encourage your parents to work part-time. Having streaming income, however small, makes it possible to stretch their retirement income and benefits for a more extended period.
However, this option is only advisable for healthy and strong seniors. If your parents have a health condition, working can worsen their mental and physical health.
Best Jobs for Seniors Above 60
Below are some jobs that you should consider or your senior:
- Consultancy: Being in the corporate world for over 10 years exposes your senior to life and business lessons that qualify them to offer advice to younger professionals. This job is ideal because your parents can do it online without leaving the house.
- Tutoring: If your parent is eloquent and enjoys working with students, they can work as a teaching assistant. Alternatively, they can register with online teaching platforms such as Alison and teach from home.
- Event organizer: The work of an event organizer is preparing the venue for occasions such as birthdays or weddings and operating cash registers. The job is part-time and requires little training.
- Translating: Your parent can offer these services if they’re bilingual. Their roles include reading, writing, and speaking, which they can do online.
5. Sell Some Assets To Raise Funds
If you think about it, some assets are expensive to keep when you run out of money. For instance, if your parents own several cars, they’ll incur maintenance and insurance costs monthly.
If they have several assets like these, the bills can become overwhelming. Disposing of such assets can help you raise quick cash and reduce expenses.
The other option would be downsizing. If there is still a mortgage on your parent’s house, you can sell it and buy a smaller but comfortable home, reducing maintenance costs. But before implementing such a decision, you should consult with your parents and have their consent.
For example, I have an article talking about selling stairlifts to a third party or giving them back to the manufacturer. Just like that, if you have other costly items in your home that you don’t need anymore, you can sell them to make some money. Do Companies Buy Back Stair Lifts? The Facts Explained
6. Move In With Your Parents
Moving in with your parents is an overwhelming commitment. But if they have no money or need assistance with daily living activities, living alone is a death sentence.
However, this living arrangement comes with both highs and lows. You’ll have peace of mind knowing your elderly are safe and enjoy quality with them. But you’ll also have more responsibilities and expenses, which can be physically and emotionally draining to you.
To make the burden lighter, you should:
- Rent your parent’s space to supplement your income.
- Ask your siblings for assistance when you need it.
- Share household duties with your parents if they’re able to work.
- Avoid burnout by taking breaks and taking care of your physical and emotional health.
7. Consider a Life Settlement
A life settlement can be an instant source of a large cash payout for your senior parent. It involves selling an insurance policy to a third party for a lump sum, usually higher than the policy’s cash value.
Apart from receiving cash, the policyholder transfers all the rights to the buyer. That means the buyer takes responsibility for the premiums and assumes the death benefits.
You can sell the policy to a provider or a broker if your parent is above 65 and the policy is worth $100,000 or more. A financial advisor comes in handy because they’ll help you value the policy accurately.
8. Cut Out Excessive Spending
If you track your parent’s spending, you’ll find some unnecessary expenses you can cut out, such as subscriptions and vacations, which are luxuries when facing a financial crisis. Also, evaluate the necessary expenses and figure out how to trim them to stretch every dollar.
For instance, you can buy goods at discount stores or use solar energy to cut utility bills. This requires you to create a budget for the fixed and variable expenses to ensure each dollar of your parent’s spending goes into items and services they cannot live without.
It also sets a limit on monthly spending.
9. Consider a Reverse Mortgage
A reverse mortgage is another source of funds for your parent if they are over 62 and have paid off their home mortgage. With traditional loans, you borrow money with your house as collateral, but instead of paying the lender monthly installments, they pay the homeowner.
But when the homeowner moves out of the house, dies, or sells it, the amount received plus interest accrued has to be paid back. To keep receiving the loan installments, you must maintain the home and pay homeowner insurance and property taxes.
You might not want to use this option unless there are no other options available, as you might get stuck paying this back in the unfortunate event that your parents pass away.
10. Seek Assistance From Government or Non-Profit Programs
Apart from Medicare and Medicaid, which offer assistance to seniors in nursing homes, you can consider other government or non-profit programs to help your senior stay afloat.
Examples of such programs include the following:
- Volunteers of America: This is a non-profit organization that has been around for 127 years and provides food, affordable shelter, nursing care, and Medicaid enrollment assistance to low-income seniors.
- Supplemental Nutrition Assistance Program (SNAP): This government program helps needy families buy food.
- Benefits Check-Up: This is an online program that connects seniors to people and organizations that can help pay for their healthcare bills, utilities, food, and shelter.
11. Explore Your Parent’s Retirement Income Sources
If your parent qualifies for any retirement income, you want to ensure they receive it in the right amount and on time.
List all the potential sources of income and the amount they are likely to provide. Because lifetime income from sources such as Social Security or insurance annuity is predictable, it can pay essential fixed and variable expenses.
To know more, check out my article discussing how much of your elderly parents’ expenses will be covered by social security. Will Social Security Pay You to Take Care of a Parent?
Other income, such as dividends and interest, can pay for unexpected and discretionary expenses.
Final Thoughts
When your parents outlive their retirement savings, there’s not much you can do to give them financial freedom. However, exploring the above options can help you give them a decent livelihood. Collaborating with your family and involving a financial expert can help you find the options that suit your parent’s situation.
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