Helping Elderly Parents with Debt

According to a report by the Stanford Center on Longevity, thirty percent of Baby Boomers have no retirement savings — at all. Further, of those who do have some money put away, few have enough to maintain their current lifestyle in retirement.

 

This means helping elderly parents with debt is going to be a fairly common situation for millennials. In other words, you may well be called upon to provide financial assistance for your parents in their “golden years.”

 

Nobody wants to see their parents suffer, nor does anyone want to rob them of their dignity. Thus, the challenge becomes how to accomplish all of this without going broke yourself.

 

Be Certain They’re Willing to Cooperate

Your parents are going to have to learn to budget, track their spending and consider the ramifications of their financial decisions will have going forward.

 

They may feel put-upon when asked to change the way they do things. This can lead to some rather uncomfortable conversations. You might even have to turn a blind eye if you can’t get them to work with you.

 

Ultimately, people have to be ready and willing to accept help.

 

Formulate a Plan of Attack

Begin by assessing their financial situation to see exactly where they are with their debts. Create a list of all of them, logging the name of the creditor, the balance owed, the minimum payment, the current interest rate and the due date. This will give you the information you need to prioritize repayment.

 

While the avalanche method (paying off the debt with the highest interest rate first) will generate the most significant cost savings, the snowball method (paying off the lowest balances first) will produce a more psychologically gratifying result because they’ll see bills go away sooner.

 

You might have to try to work out settlements to resolve some of the debt if their situation is such that they can’t meet the obligations. Bringing in a company like Freedom Debt Relief to negotiate with creditors on your parents’ behalf can be helpful if trying to settle debts on your own seems like too overwhelming a task.

 

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Begin by tracking their current cash flow for a month or so to get a baseline of their current spending. You might find they’ve been flying by the seat of their pants — so to speak — spending according to what has now become a habit. 

 

Gaining a clear view of where their money is going will help them identify opportunities to save. It’s important to get this down in writing, as it can be difficult to grasp when they’re just envisioning it mentally.

 

Ask them to keep all of their receipts for that month in a file so you can total them up at the end of the baseline period. You can compare this figure to their income and look for opportunities to redirect some of the money to help with their debt once you have this information. This will also show you what will be needed to subsidize their shortfall — if it exists.

 

Find Additional Cash

Your folks may want to work if they are still in good health. This is a good thing as it may help them feel better about having you help manage the situation. You’ll have to figure out another way to increase their income If they’re in poor health and can’t work.

 

A reverse mortgage is one option if they have sufficient equity in their home. However, you have to be very careful here, as fees and interest can consume a sizable amount of their equity. This also places their legacy in jeopardy as you’ll have to buy the house back when their need for it ends.

 

Your parents might also be eligible for a number of governmental benefits — especially if one of them is a veteran. The National Council on Aging’s BenefitsCheckUp.org site has a comprehensive listing of these.

 

And of course, once you’ve determined what they can do on their own, you’ll be better positioned to figure out what you need to do to help them remain comfortable.

 

Helping elderly parents with debt without going broke yourself is possible to do. These tips will get you started on that path with some good momentum.