And Why is it Important to Have One?
When people talk about retirement and personal finance, they usually think of themselves and their children. Retirement is the time of life when you finally get to relax, focus on your hobbies, and think about leaving an inheritance to your children. However, most people forget to include their aging loved ones in their financial future. If you have parents or other loved ones who are older than you, they will likely need more care toward the end of their lives–and the costs could come out of your budget. That’s why it’s important to talk with a financial advisor about creating an aging plan.
What is an Aging Plan?
An aging plan is a plan to help care for your loved ones as they age. Aging is something that happens to everyone, but because it’s a slow process, most people don’t ever think they’ll have to be a caregiver until there’s an emergency. In fact, 57% of adult children find themselves thrust into the role of caregiver without any previous family discussion. This can lead to significant emotional turmoil, as well as financial stresses. More than half of family caregivers end up paying for their loved one’s care out of their own funds, and it frequently reduces their contributions to their own savings accounts and retirement funds. Being a caregiver is also a time-consuming role, sometimes causing caregivers to work fewer hours or give up career opportunities.
What Does an Aging Plan Include?
An aging plan can include all aspects of life, but one aspect that people typically underprepare for is the financial effects of caring for a loved one. As you think about aging plans, you can consider plans for both your elderly loved ones as well as for yourself in the future. Here are some thoughts to include as you prepare your plan:
- Where will you live as you age?
- Who will provide care when needed?
- How will care be paid?
- What are your parents’ expectations of you? Do they expect you to care for them?
- What is the plan if your family lives across the globe and a medical crisis occurs?
- Does your loved one have a Power of Attorney document, and who do they name as their designee?
How Do I Make an Aging Plan?
An aging plan can be tailored to your family’s individual needs. Depending on who you are planning for, your aging plan can be simple or extensive. Here are some things we recommend you do when you create your aging plan:
- Create a Power of Attorney document. If you are making this document for elderly loved ones, this document designates someone to take over and make big life decisions for them should they become incapacitated or pass away.
- Create an emergency binder. This binder can be used in case of sudden injury, illness, or death. In the event of an emergency, you’ll want to focus on the injured person, rather than logistics. You can prepare your emergency aging binder with items such as:
- Social security card
- Insurance information
- Advance directives and end-of-life wishes
- Talk with a financial advisor. Whether you’re planning to take care of an older loved one, or you want to make sure that your children have the means to take care of you when you’re older, you’ll need to prepare financially. A financial planner can help you design a retirement plan that gives you peace of mind.
For more information on aging plans, you can watch this webinar sponsored by Advice Chaser. It features Annalee Kruger from Care Right, Inc., as she explains in more detail how to create an aging plan. It also includes advice from Signet Financial Management on how to plan for aging from a financial security perspective. Watch the webinar here.