1. Continuum of Care Financial Issues Josephine Turner, Ph.D.,CFP Professor, FYCS,UFL

2. Population Facts Over 22 million households in America provide care for an aging person 83% of caregivers are female The fastest growing segment of the population is people over 70 Traditionally people are not financially prepared to live past 70 Traditionally women have less experience in the financial areas than men

3. Population Facts Cont. 90% of respondents in a national poll believe they have a moral responsibility to take care of parents Money is a touchy subject: Both parents and children value their ability to handle their own affairs Each guard his/her privacy Each tries to avoid conflict

4. Method Knowledge brings competence Competence breeds confidence Confidence reduces emotional tension

5. When Should Children Become Involved in Parents’ Finances? When there is a Critical concerns a medical emergency and parent can not physically handle affairs heart attack stroke

6. When Should Children Become Involved in Parents’ Finances? When there is a Chronic concern Builds over time Not immediately life threatening A parent is chronically ill and financial affairs are becoming more difficult Income has dropped or money has run out Excessive medical bills Victim of fraud

7. Signals of Financial Problems Late fees Bounced checks Credit problems Missing bank statements Memory loss Illness Complaints about not having enough money Large withdrawals from accounts

8. Who Should Intervene? Family member who: Has the time to help Lives close to parent Financial expertise Willingness to assist

9. Parenting Your Parents Life has come full circle The continuum in life is not a straight line but a circle

10. Getting Involved Usually happens when crises is looming or already occurred Bills aren’t paid Utilities are about to be turned off

11. What to do First? Track Cash Flow Record income/expenses for past month Maybe difficult because parents: Often hide money from children May not remember Have not kept records Typically income exceeds expenses until age 70 then savings are needed to meet expenses

12. Verify Financial Information Check bills to determine if there are errors Review expenditures to see if they are accurate Request information on unclear transactions in accordance with the “Fair Credit Reporting Act” Report any suspected fraud or financial abuse to appropriate authorities

13. Net Worth Statement Preparing a net worth statement will help you determine how long the savings will last Ratios that will help you in planning parent’s finances: Debt to asset ratio (goal for each $1 of debt, $25 of assets) Debt to income (goal for retirees no more than 10% of income going to debt) Investment assets to net worth (70 to 90% of net worth in investment assets – lower for homeowner)

14. Taxes Review income tax situation of parents Have they filed taxes? Do they owe taxes? Review records to determine next step Professional help may be needed

15. Insurance Coverage Review insurance policies. Is coverage adequate? Too much? Too little? Property (auto, homeowners) Liability (auto, homeowners, umbrella) Health (medical care, long term care, nursing home care, Medicare drug card-D) Life

16. Investments Review investments for appropriateness and availability to meet financial needs Develop a schedule for IRA/pension withdrawals Position investments to meet needs of later life

17. How Long Will Money Last? Depends on amount, rate of return, and amount withdrawn to determine: Use financial calculators to answer the question. (IFAS publication “How to use a Financial Calculator”) Use attached chart

18. Estimating Withdrawal Rates From Savings and Investment Accounts* Rate of Return Years 5 Years 10 Years 15 Years 20 Years 25 3%0.017970.009660.006910.005550.00474 4%0.018420.010120.007400.006060.00527 5%0.018870.010610.007910.006600.00585 6%0.019330.011100.008440.007160.00644 7%0.019800.011610.008990.007750.00707 8%0.020280.012130.009560.008360.00772

19. Estimating Withdrawal Rates Choose a percent of return (ex: 5%) Choose number of years you want money to last (ex: 15) Determine amount of savings/investments (ex: $100,000) Next multiply $100,000 by 0.00791 (intersect of 5% for 15 year) You can withdraw $791 per month for 15 years before the money is depleted

20. Mandatory Withdrawals At age 70 ½ if you are retired, you must begin withdrawing funds from Traditional IRA’s 401 (k), 403(b) Roth IRAs have no mandatory withdrawals IRS provides tables to compute amount of required distributions Example table shows that a 73 year old must divide amount of IRA’s, 401(k) other tax deferred accounts by 24.7 to arrive at this year’s withdrawal Ex. $100,000/24.7 = $4,049

21. Preparing a Budget With input from parent(s) Set goals for spending Develop a record keeping system Set time to manage finances Record income Record expenses Balance, track, evaluate At this stage in life, savings is not a goal

22. Money Management Systems Use a calendar to list due dates of bills Set time to pay bills Record expenses Evaluate spending

23. Not Enough Money? If there is not enough income to balance spending: Decrease spending where possible Use savings/investments Sell possessions Use reverse mortgage Public assistance

24. Housing Options What are plans for housing? Continue to live independently Nursing home Assisted Living Live with a family member Downsizing

25. Distributing Assets Methods used: Will Titled property Other tools used to determine asset distribution Who gets non-titled property (“Who Gets Grandma’s Yellow Pie Plate?”) Power of attorney

26. Living Will “Five Wishes” Living will Health care power of attorney

27. Resources Burns, Sharon and Forgue, Raymond. How to Care for Your Parents’ Money While Caring for Your Parents. 2003. NY: McGraw Hill. Turner, Josephine. Planning Your Financial Future. 2005. UF IFAS.