A growing number of Americans in their prime earning years are finding themselves faced with a financial obligation they may not have thought they would be responsible for: supporting their aging parents in retirement.
Almost one-third of all Americans with a parent older than 65 told the Pew Research Center they have given a parent financial support in the past 12 months and 72 percent of those said the money went to ongoing expenses.
It’s a consequence of the “silver tsunami” of 10,000 retirees a day and it represents an opportunity for life insurance agents and financial advisors who can help these clients find ways to support their parents.
For agents and advisors who have based their practices on marketing and selling products to clients in their 40s and 50s, this can be another opportunity to explore their needs and a way to connect with them as a resource they might not know they have.
The sobering fact of retirement is that as many as 70 percent of those older than 65 will need some kind of long-term care during their lives. In many cities, Genworth estimates the expense for a private room in a nursing home approaches $100,000 a year, an expense that can quickly eat through retirement savings. When parents reach this stage of their lives, adult children can find themselves in a frenzied hunt for assets to pay for quality care. You can play an important role in finding and understanding assets the parents hold as well as products the children can use to generate assets they can use to pay for these costs.
Because of the new tax law, life insurance policies are in need of a review across the board. Many were purchased to pay for estate taxes that no longer apply and the IRS has reduced the taxable amount of a life insurance policy that is surrendered to the issuing life insurance company or sold on the secondary market.
Talking to clients about their parents’ needs is a way to deepen your relationship with with them at a time when they may feel like they have no one to turn to who understands the issue they are facing. With the rising number of retirees and the skyrocketing cost of retirement, you can assure them they are far from alone.
Here are some steps you can take to connect with clients who may have to support their aging parents:
- Client review sheet: Add a line about parents’ needs to your client review sheet. It may be a subject they have never brought up on their own before or it could be a new expense that just came up because of a change in their parents’ health or living circumstances. It doesn’t hurt to ask if they are facing this issue; at worst, it can deepen your relationship and plant the seed about help if it happens in coming years.
- Start a discussion about the issue: Even if they haven’t had to take on financial responsibility for their parents, they should be made aware of the costs they might face. Many may be in denial about the need, but a discussion about the costs and their parents’ preparation for them is likely to bring the issue home to them.
- Gather information: If they are imminently facing this issue or want to prepare for the future, find out as much information as you can about the assets they and their parents hold and the needs they are likely to face. In some cases, the parents may hold assets they didn’t know they can access. That includes life insurance policy they did not know had value on the secondary market.