This post comes as a warning to all my readers, friends, and family just based on recent experience with my own parents.
I have an Accounting background by education and profession, so I like to think that I'm fortunate enough to be a little more financially savvy than some people. It also helps that I read through and try to understand any and all money matters that I encounter. You should too! Don't just glaze over something. Make sure you understand what you're receiving or paying for.
I think a huge problem with Baby Boomers and Generation X is that they didn't have the resources to educate themselves on all the financial opportunities available to them. These generations didn't have as many reliable people to guide them to make good decisions. And a lot of information was relayed by word of mouth from others who were just as inexperienced or unfamiliar with the topics as the next person.
That being said, today was one of many days in trying to assist my parents with their situation, concerns, and planning. While having a discussion with my mom about her and my dad's future plans about retirement, money, and timing of it all, I could not help but be annoyed / frustrated and even in disbelief at some of the things we were talking about. So I compiled a few suggestions / thoughts for others who may be able to help their own parents, friends, and family.
- The older they are, the simpler it needs to be. Less is more. Close bank accounts. Forego using too many credit cards. In both of these situations, I like the number 2. Two bank accounts and two different credit cards are more than enough to get them through old age and retirement. My dad hates to "put all [his] eggs in one basket" so 2 of each breaks it up enough in my opinion.
- It's hard to remember all those passwords. Along the same lines, once you've reduced the number of accounts open, you'll have also cut down the number of Usernames and Passwords required to be committed to memory. Because let's face it, memory deteriorates with age. If there are any other accounts you can help them close, you're only helping yourself for the future.
- Take inventory. Since memory fails more often, you should probably help your folks keep track of their passwords, account numbers, PINs, etc. in a safe place, of course. Whether it be by pen and paper or an Excel spreadsheet, you've got to help them organize and keep track of what they have. And if they have to use the "forgot password" function, make sure to have them update their records.
- Money doesn't grow on trees! Believe it or not, it's possible that your parents don't know where all their money is coming from. It is also possible that they don't know who they are paying or why. So once you've taken inventory (or maybe in parallel with taking inventory), you should help organize the to/from of their income and expenses. If they're anything like my parents, they will have a recurring expense (or two, or three) that they'll have no idea the reason or the recipient. You may uncover a long forgotten 401(k) that was never rolled over from a previous employer. You may realize that they're paying for something that is a duplicate of something else. And they may surprise you with the amount they've got stashed away.
- Things to pay attention to:
- 401(k) / 403(b)
- Traditional & ROTH IRAs
- Investment Portfolios (especially if they have multiple brokerage accounts)
- Multiple Bank Accounts (some seldom used)
- Foreign Accounts (bank / investment)
- Automated / Recurring withdrawals on their checking / savings accounts. Make sure to check monthly, quarterly, and annual frequencies.
- AutoPay on their credit cards (monthly, quarterly, annual)
- CDs (certificate of deposit)
- Safety Deposit boxes
- Pension and any other Retirement accounts
- Life Insurance policies
- AD&D Insurance policies
- Disability Insurance policies
- Other Insurance policies
- Social Security or Supplemental Security Income
- Medicare / Medicaid
- Plan it out. Brush up on your Excel skills and draw up a budget for them. Show them what they will have in income and budget out their expenses. If you can find ways to cut down their expenses, make sure to follow through with the processing and not just suggest it. Don't forget to leave them some money to play with. After all, they've earned it!
In my opinion, the earlier you get started on these processes, the better off you are, not to mention your parents. I think at first they will be apprehensive and may even feel as if they're still capable. But the reality is that their abilities will degenerate faster than you think with every passing year. At the onset, you have to convince them that this is for their own good. They may thank you later, or they may just leave you some of what they've saved!
It's an arduous process, but good luck!