What to Do When Mom or Dad Is Retired and Broke

If your aging parent is in dire financial straits, here are some ways you can help.

Over 25 million Americans over the age of 60 are considered "economically insecure," defined as earning $31,225 per year or less for a single person. Making matters worse, one in three would-be retirees cannot save $5,000 toward their retirement goal.

If your parent has become one of the 49 million retirees in the U.S., you're likely aware of how precarious their personal finances can be. Financial emergencies, such as unexpected tax bills and protracted illnesses, can derail the best-laid financial plans.

Or, like my retired mother, a parent can have her life savings stolen. As devastating as that theft was, my mother's situation is not at all unusual. Criminals steal an estimated $37 billion from elderly Americans each year. It doesn't matter how Mom (or Dad) came to be without money, though. If you're the adult child of a parent who cannot pay their bills, all that matters is coming up with a plan to make their lives a little easier. 

It can be difficult for an aging adult to give up the financial reins. This person who has always taken care of you may be embarrassed, sad, or even angry at the thought of the roles being reversed.

A Care.com survey found that 54% of adult children would rather have the "sex talk" with their own kids than discuss money with their parents. If that's the case for you, it's natural. You can never be certain how a parent will react. The best thing you can do is to go in with a plan.

Here's where to start:

• Work through your own emotions before asking your parent to talk. My mother is the most intelligent person I know. She spent her career traveling the world with the C.I.A., and I was angry that she allowed someone to con her out of money. My anger, sadness, and fear for her future were my problems, issues I had to work through before sitting down with her.
• See the issue through your parent's eyes. This is a difficult, possibly embarrassing, conversation for your parent. She knows she's in trouble and wishes that weren't the case. Lecturing her is both cruel and a waste of time. What she needs is for you to listen to her situation without judgement. If she doesn't want to talk, that's fine. You might say something like, "I know this is hard, but I care about you. What would you think if I helped you with your finances?"
• Keep the conversation brief and give your parent time to think it over. You may be lucky, and your parent will hand their finances over to you. If they are resistant, ask if you can help come up with a new budget, something that will better fit their new reality. 

How you help will depend upon how much your parent is still able to do and how much they're willing to let you take over. For example, if your parent is dealing with memory loss, you may need to take over her budget. If she's still relatively sharp and wants to remain in control, your job may be that of a support player.

In either case, these three steps can help your parent get back on solid financial footing.

1. Stop the bleeding

Take charge of any credit cards or other revolving debt. If your parent is in debt, speak with her creditors about a low (or zero) percent interest repayment program. In the event your parent's debt is a result of fraud, work with the creditor's fraud department. If you prefer not to deal with creditors directly, many debt counseling companies offer services free to seniors. If your parent has no way to repay her debts, speak with an attorney about bankruptcy. Look online for an attorney who offers free legal help to seniors.

If your parent has decided to let you take over her finances, you will need a power of attorney to speak on her behalf. If your parent prefers to do it herself, make it easier by providing the contact numbers she needs. For example, DailyCaring offers seven sources of free legal services. 

2. Dig for hidden benefits

In many cities, seniors have access to tax relief, home weatherization, senior transport, utility aid, prescription drug discounts, and food programs. If one of your parents was in a fraternal order like the Masons or Shriners, find out about any assistance they offer members and/or their spouses. If your parent is receiving veteran benefits, make sure she's getting everything she is eligible for.

My mother had been receiving Social Security and my father's Marine Corps survivor benefit for five years. A little digging showed that she was also eligible for a widow's pension for injuries Dad suffered in battle. Before you pay for anything, assume there's a program that will help cover the cost. All it takes is a little online investigating and a phone call or two to get started. AARP offers an easy to use support service directory that will help you get started. 

3. Create a budget

Make a list of how much money is coming in each month through Social Security, pensions, military retirement, and other sources. Then make a list of how much is being spent. Work with your parent to trim the budget, cutting in a way that makes them feel as though they're not losing too much. For example:

• Switch from standard cable to a less expensive streaming service.
• Cancel club memberships she no longer uses.
• Make sure the Medicare coverage she chose last year is still the best deal.
• If interest rates are down, consider refinancing her auto or home loan.
• Merge home phone and cell service. My mother doesn't get out much, so she did not need a cellphone. What she needed was a traditional phone (with huge buttons) and an inexpensive service plan. We saved by installing a wireless home phone. Because it uses a nearby cell tower to make her calls, we pay around $30 per month for unlimited, nationwide service.
• Sell anything she no longer needs and bank the money for a rainy day. Those 10-speeds in the garage are only gathering dust.
• Consider moving your parent to a smaller home or even into an assisted living facility. According to Genworth's Cost of Care Survey 2018, in the right circumstances, assisted living costs are less than the costs of staying at home.

For example, the average price of assisted living nationwide is $4,000 per month. If your parent still has a mortgage on her home, add utility and monthly maintenance costs to decide which option is least expensive. The average cost nationwide of adult day health care is $1,560 and a home health aide costs $4,195 per month. If your parent uses either of these services, add that cost to her rent or mortgage payment to learn whether assisted living would save her money. 

The results will depend upon where your parent lives. Assisted living costs an average of $5,495 per month in Massachusetts, but only $2,844 in Missouri. 

If your parent is not ready for senior living, HUD offers low-cost housing options.  

These steps assume that your parent will allow you to help her get her financial house in order. It is possible that your parent will not let you near her finances or be open to your advice.  If that's the case, there is little you can do but appreciate the fact that your parent's debt is not your own. Creditors cannot come after you to pay them (unless you are a co-signer). Even when your parent dies, creditors will only come after her estate if there's enough money left to repay her debt.

It's terrible to watch a parent stress over bills, but it can also be a powerful incentive to save for our own retirement. The ultimate goal is to be as independent as possible for as long as possible, and planning is the way to make it happen.