Have Your Parents Made Their Financial Plans?

As an adult, you're fortunate if you still have your parents. However, as they get older, you may well have to assist them in some key areas of their life.
Specifically, they may need you to get involved in some of their financial issues. If you do, you may need to focus on two areas: leaving a legacy and managing finances during retirement.

While initiating these conversations may not be easy for you, it is important, and you may find your parents more willing to discuss these issues than you had thought. In any case, if your parents haven't already done so, encourage them to work with an estate-planning professional to develop the necessary legal documents, which may include wills, trusts and financial durable powers of attorney. These documents and services can be invaluable in helping individuals find efficient ways to pass assets from one generation to the next. An estate-planning attorney can identify which arrangements are the most appropriate for you and your family.

In your discussions on leaving a legacy, you may also want to bring up the topic of the beneficiary designations that may appear on your parents' life insurance contracts and qualified plans, such as 401(k)s and IRAs. If the family picture has changed in recent years, and your parents had intended to change these designations, they should take action sooner rather than later.

While your parents need to deal with the legacy issue, they still may have plenty of years of living ahead of them and they might need help managing their money during these years. For starters, you may want to have a discussion about their savings, investments, insurance and so on as well as where these assets are held.
Are they kept in banks or investment companies? Do your parents have safe-deposit boxes? This knowledge could be valuable if you ever become involved in managing or distributing your parents' resources.

Also, you might want to talk to your parents about the income sources they may be drawing from during their retirement. For example, how much are they taking out each year from their 401(k)s and IRAs? They don't want to withdraw so much that they deplete their accounts too soon, but at the same time they would no doubt like to maintain their standard of living in retirement. You may want to suggest to your parents that they evaluate their investment portfolio for both growth and income potential because they will need both elements during a long retirement.

If your parents aren't already working with a financial advisor, you may want to encourage them to do so. Managing an investment portfolio during retirement is no easier than doing so during one's working years and there's less time to overcome mistakes. A qualified financial advisor can help your parents choose the right mix of investments that can help meet their needs.

During the course of your lifetime, your parents have done a lot for you. You can help pay them back by doing whatever you can to assist them in managing their financial strategy.