There are a lot of people out there with parents well into their 80’s and 90’s. In fact, in the aging community, seniors in their 80’s are the fastest-growing segment of senior life. But with technology allowing humans to live longer paired with the prices of everything rising daily, our aging parents’ finances can fall short and they end up running out of money. This is a very common problem today since the boomers are reaching retirement and their parents are well into their 70’s, 80’s and 90’s. Running out of money at their age may not necessarily be blamed on poor planning, but could be attributed to: living longer than expected or financially planned for; retirement funds have dwindled, medical costs have increased, prescription costs have increased, living expenses have increased…the list goes on and on. There are a lot of other reasons your parents may be falling short in finances and we want to touch on a few of those topics in this blog.

For most folks with aging parents, it’s common to have concerns about their financial future. It can be extremely difficult and stressful to figure out how to move forward when your parents have run out of money. The earlier you can determine their current financial status the better.  This can help you avoid worst-case scenarios and ensure that your loved ones are cared for in the future.

Budgeting

When it comes to putting your parents on a budget, I want to warn you from personal experience, you will more than likely be met with resistance. It’s their money, and they won’t like being told how to spend it. First, you need to determine how much money they have coming in every month and their required expenses (power bill, gas bill, insurance, water bill, groceries, etc.). If they are not drawing enough to cover necessities then another aid is required. If they do draw enough money to cover these expenses then you have to dig deeper to determine why they are running out of money. Make sure there are no unnecessary charges to their account each month and that someone has not scammed them.  

I know that this may seem far-fetched but I have known more than a couple of seniors that were addicted to shopping. This has occurred more often since the pandemic. Seniors usually watch a lot of television and that shopping network is just too good to be true. I can order right off my television and have it in a couple of days. Just make sure they are not going on a spending spree.

Is a reverse mortgage an option?

I am not a fan of this option but when it comes to caring for your parents and there are no other options left then you may need to look into a reverse mortgage if your parents own their home or have significant equity in their home.

Here are some of the Pros of a reverse mortgage:

-Allows the homeowner to stay in the home.

-Can pay off existing mortgages on the home.

-No monthly mortgage payments are required, however, the homeowner must live in the home as their primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to Federal Housing Administration requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.

-The homeowner receives payments on flexible terms:

• • Credit line for emergencies
  • Monthly payments
  • Lump-sum distribution (only on fixed-rate loans)
  • Any combination of the above

-A reverse mortgage can not get “upside down” so the heirs will never have to repay more than the value of the home.

-Heirs inherit the home and keep any remaining equity after the balance of the reverse mortgage is paid off.

-Loan proceeds are not taxed as income or otherwise (though you must continue to pay required property taxes).

-The interest rate may be lower than traditional mortgages and home equity loans.                                                      

Here are some of the Cons of a reverse mortgage: 

-The fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage because of the insurance cost. The largest costs are:

• • FHA mortgage insurance
  • Origination fee

-The loan balance gets larger over time and the value of the estate/inheritance may decrease over time.

-A reverse mortgage loan usually does not affect eligibility for entitlement programs, such as Medicare or Social Security benefits. However, some needs-based government benefits such as Medicaid and Supplemental Security Income (SSI) may be affected by a reverse mortgage loan. You should consult a qualified professional to determine if there would be any impact on your government benefits.

-The program is not well understood by most individuals. However, the availability of independent reverse mortgage counseling helps.

This is by no means an exhaustive list and you should do your own research and consult a financial advisor before making this decision.

What to do with your aging parents when they have no money...

It is tough to figure out what to do when your elderly parents run out of money.  A good starting point would be to find out all of your options. To start with, research any government programs that might be able to help. A great place to start with is Medicare and Medicaid. This may be able to cover most of their medical costs. These programs are designed to help people with low incomes.

But, Medicaid and Medicare are only the beginning. You can find state and county programs that are aimed to assist the elderly. These programs can include everything from housing assistance to supplemental income. The Area Agency on Aging is a great resource to find information that could be available on home care, food delivery, transportation, check-ins, and many more services. They can also direct you to Meals On Wheels sign-up and food stamp options.

I know It takes a lot of time to investigate these resources and can seem overwhelming at times, but it will be well worth the effort. You need to exhaust these resources before you make any personal or family contributions directly to your parents, this will ensure that your financial assistance won’t interfere with their eligibility.

Other Options

If you have already exhausted your options on the county, state, and federal programs, then turning to your family is the next option. Sometimes the best way to deal with aging parents with no money is also the most common and that is through direct family assistance.

Begin with a conversation with both your parents and other family members. See if there is an alternative that could work by combining resources. Sharing the load reduces the stress on one and could help provide care for them long-term.

This option is not ideal for everyone and may mean that returning to work is the only option left.  People over the age of 55 make the most successful gig economy workers. They make up about one-third of this workforce. For those with certain skills, the internet can be another lucrative option for income. 

What happens to my parents if I have exhausted all the above options?

Most states have Medicaid that will pay for nursing home stays, some for shorter periods than others. The grim reality is that most of this generation has helped build this country and now they are left with few options. If an elerly person has been living in an assisted living facility and runs out of money then they are evicted just like renting an apartment or home. This is much more common than you think and is very traumatic for the senior.

When an elderly person has no money and no family to assist them,  they may become a ward of the state. When this happens a guardian will be assigned to them to make decisions on their behalf. This situation is far from desirable and should be looked at as a last resort.

Caring for Aging Parents with No Money

I wish I could say there was a silver lining and a quick fix to this issue but there is not. Handling financial issues with your parents, especially if they occur with little or no warning, it is stressful and can become a tremendous burden on you and your family. That is why it is a good idea to have these conversations with your parents early on to help plan their long-term care.