How to Support Aging Parents Financially

1. Have an Honest Conversation About Finances

The first step is having an open conversation with your parents about the state of their finances. Here are some tips to help make that easier:

• Connect with siblings and close family members. Use this time to share specific concerns and the level of support each of you may be willing to provide. You can also decide together how you want to frame the conversation with your parents.
• Have the conversation sooner rather than later. It may feel uncomfortable, but the sooner you open the lines of communication, the better. Your insights could help them get on stronger financial ground and prevent further strain.
• Approach it from a loving place. Opening up about their finances may be difficult for your parents. Set the stage for a judgment-free conversation that centers their well-being.
• Clarify the details. Ask your parents about their income, expenses, assets, debts and whether or not they have life insurance. You can also clarify any estate planning measures they've taken, such as writing a will or choosing medical or financial powers of attorney. These details can guide the way you move forward together.

2. Review and Optimize Their Budget

If your parents are living on a fixed income, now is the time to review their monthly budget. There are two key pieces to consider:

• Income: This includes earned income, Social Security benefits, pensions, withdrawals from retirement accounts, annuities and other sources of income.
• Expenses: This includes regular monthly bills, like their housing and car payments, as well as non-monthly expenses like insurance payments. You'll also want to factor in discretionary spending such as entertainment and travel.
• Savings: Do your parents have a healthy emergency fund? The general rule of thumb is to set aside three to six months' worth of expenses, but retirees are often advised to aim higher. Your folks can set a smaller target if they have limited income.

Once you have a good understanding of your parents' finances, they can continue using the budgeting method they're used to if it's working. Alternatively, they could explore another approach, such as the 50/30/20 rule or zero-based budgeting. In some cases, you might choose to manage their budget for them. Either way, look for opportunities to cut costs and reduce their expenses.

Learn more: How to Make a Budget

3. Explore Government Assistance Programs

Financially supporting your parents doesn't have to fall squarely on your shoulders. These government programs can help lighten the load and prevent your parents from running out of money in the future.

4. Plan for Long-Term Care

Long-term care is designed for people who need assistance with activities of daily living. That can include medication management, cooking, bathing and dressing. As your parents advance in age, it's worth discussing who will care for them when the time comes.

Additional caretakers might include:

• Family members who step in to fulfill various caregiving roles
• An assisted-living facility that provides support while allowing your parents to maintain some level of independence
• A nursing home that provides 24/7 care

The drawback is that these options can be expensive. According to the Federal Long Term Care Insurance Program, the average cost of an assisted living facility is $159 a day—or $276 for a nursing home. Long-term care insurance can help pay for medical and non-medical expenses during this phase of their life.

5. Consult Financial and Legal Professionals

It's never too late for your parents to get their estate plan in order. Working with a financial advisor or estate planning attorney can ensure that things are done properly—and that your parents have all the necessary documents in order. Estate planning often involves:

• Creating a last will and testament
• Deciding on end-of-life medical directives
• Choosing medical and financial powers of attorney

Failing to plan ahead could create stress and confusion if your parents become unable to advocate for themselves. And if they pass away without a will, their assets may not be distributed as they intended.

Learn more: Things to Know About Estate Planning

Frequently Asked Questions

The Bottom Line

Having to financially support an aging parent can be stressful, but bringing in other family members and exploring government programs could help ease the burden. In some cases, they might just need help updating their budget or estate plan. If you do decide to offer financial assistance, contribute in a way that doesn't jeopardize your own financial health and emotional well-being.