Seniors In Recession: Practical Advice For Helping Your Parents Now
During this challenging downturn in the U.S. economy, not a day goes by in which we are not asked the question “What are we to do in the face of this recession?” The adult children of our residents and future residents are as concerned as they have ever been about the impact of this economy upon their aging parents.
Unfortunately, the senior housing industry does not have any type of “magic wand” to effectively overcome the realities of an environment such as this. Throughout each cyclical correction during the past 30 years, seniors have been disproportionately affected. The vulnerability of relying principally upon fixed rate income investments, along with the very real impediments to lifestyle mobility, has exacerbated the challenges faced by most of them.
In the current market correction (potentially a recession), these two traditional issues have been further complicated by the worst housing market in generations. It would appear that a perfect storm of discouraging economic factors has materialized just when your Mom or Dad was psychologically and financially prepared to begin enjoying their “Golden Years.” The result is that many seniors have adopted the age-old attitude of “I’ll simply do nothing until things turn around.” For many, this may be the logical alternative. For others, however, it could be a critical mistake.
At the top of the scale of vulnerability are those seniors who have a real and present need for either healthcare or personal assistance. The easy answer for many such people in today’s world is to delay a move into either assisted living or skilled nursing by relying upon family, friends, or home healthcare providers. While these alternatives may be expedient, they are seldom the right solution.
Next in line are those seniors who are perfectly capable of living independently, but who would be much happier and healthier if living in an active congregate setting. These people may be recently widowed, lacking social interaction, in need of giving up their car keys, or simply tired of taking care of their home or condominium. They can maintain their current lifestyle without a major challenge, and will often mask everyday difficulties which they may be having.
The third group of seniors are those who are simply reconfiguring their plans for the future. Most in this segment are fully independent, able to live comfortably in his/her current environment, and do not realistically need to make a lifestyle change in the near future. The trauma for these individuals, many of whom have been relying upon the equity in their home for a meaningful part of their future funding, is the perception that a significant portion of their asset base has deteriorated.
How, then, can a concerned “Baby Boomer” assist aging parents in the face of the current recession? The answer to that question will vary from circumstance to circumstance, depending upon conditions and family dynamics. In every situation, however, there is a real need for the adult child to become involved. The following is our suggestion for each category.
I. The first group of seniors are those who are reaching the point in their lives where some form of assistance is required. Many of these people and their families were well-prepared before the economic downturn. Reversals in home equity, investments, and earning power have diminished their ability to make a much needed lifestyle change.
Regardless of how far they may have come in life, many of these individuals are still willing to sacrifice their own quality of life in exchange for their goal of preserving “the kids’ money.” Most of the seniors in this category believe that they can “get by” with temporary help, home healthcare providers, or a little more help from the children or grandchildren. Although they may be right, they are seldom willing to consider the more intangible aspects of “getting by.”
What most Boomers want for their aging parents is that they are able to enjoy their remaining lives to the utmost. To accomplish that goal, personal care or assistance is only a part of the formula. Even more meaningful is your ability to preserve Mom’s dignity and convince her that social interaction is the very best medicine.
The following are a few suggestions for those of you who have a loved one in this category:
- Determine whether or not preservation of the estate is truly a priority for your family. If it is, plan accordingly. If it is not, orchestrate a conservative financial plan which may include some monthly “spend down” of the available funds. In developing this plan, make an ultra-conservative assumption (say three years) regardless of what the mortality expectations might be. Do whatever is necessary to convince your parents that their well-being is the only thing that is important to you. If you don’t say it, they will not know it.
- Recognize the fact that your loved ones may not acknowledge many of the factors that are really weighing heavily upon them. Even with the best home healthcare, the psychological pressures of managing a home may be adversely affecting their quality of life.
- Determine what your loved one can realistically afford to spend on a monthly basis. Combine that with any supplemental funding that might be available from the family. Research all of the available communities within your area and decide which one might offer the best alternative for your needs and your resources. It is critically important that you make the logical decision – then convince Mom that her only responsibility is to select the clothes and furnishings that she wishes to bring to her new home. Every decision that you leave to your parent provides another opportunity for delay.
- If your family’s decision is to opt for a home healthcare provider, carefully check references, insurance, drug screening, fidelity bonds, and training standards. Know the individual to whom you are entrusting your Mom’s wellbeing. Also remember that social interaction is every bit as important as grooming, feeding, and medication management. Commit your family to maximizing the amount of time that each of you spends with your parent and arrange for frequent opportunities for her to visit with friends. Do not make the mistake of relying upon your home healthcare provider to be the primary social contact for your loved one.
- Should it be difficult for you and your family to provide the active socialization that your parents need, focus your decision on easily accessible assisted living communities. Most of such communities are professionally managed and offer a complement of services which is adaptable to individual needs. Each community will have certain advantages, but the most important determinant is the staff. In this decision, personnel and references should always outweigh the attractiveness of the physical plant.
II. The second group of seniors, those who are able to live independently but who could benefit greatly from a lifestyle change, are perhaps the most challenging group from the perspective of “Boomer” children. Like their slightly younger peers, they are often shell-shocked by the direct impact of this economy upon their lives. They are already in those “Golden Years’ and many of them believe that they have missed the boat. Never would they have dreamed that their conservative mutual funds and their homes or condos would actually lose value. Never would they have guessed that, within a period of only five years, yields on their CD’s and other investments would return to post 9/11 levels. Never did they dream that once again they would be confronted with the very real need to “spend down” to be able to afford the lifestyle that they want.
These parents are likely to be the most negatively impacted by the current recession. They don’t have to do anything, so they rationalize maintaining the status quo even though they may be lonely, overburdened with the realities of home ownership, lacking any meaningful opportunity for exercise, or deficient in such basics as nourishment and social interaction. From their perspective, periods of hardship are just a fact of life. No need to lose sleep over issues that are beyond their control.
Even though many of these seniors will confess to us that their current home is like an anchor around their neck, what they are most likely to do is nothing. Oftentimes, their biggest concern is that they may outlive their money. The challenge for their adult children is that they know that their Mom or Dad may be squandering what could be the last enjoyable years of their lives. What, then, is the Boomer to do in the face of this situation?
As is often the recommendation, we believe that the adult child of this category of seniors must intercede. The following are a few suggestions:
- Have a candid discussion with your parents about what they would like to accomplish with the remainder of their lives. Help them to understand that, within reason, they can still have fun, meet new friends, become more active, and truly have a rewarding life. The choice is theirs.
- Start with what must be a frank reassessment of their assets, investments, and fixed obligations. You may well find that the real picture is not nearly as bleak as your parents may be imagining.
- Consult with a financial advisor to establish new investment objectives that are realistic in today’s world. If tax consequences permit and they can afford it, offer to take their home today. Ultimately, it will be a part of the estate. Why not relieve them of the burden while they can still enjoy the benefits?
- Map out a pragmatic program and be prepared to help them set well-defined goals. If these goals include relocation, giving up the car keys, selling a home, managing an imminent health challenge, or any major life change, your parents can really use your help. Delay is always their greatest enemy.
- Don’t be timid about addressing the harsh realities. Whether they are the type of individual who will readily discuss life expectancy, estate planning, etc., the type who simply wants to avoid all such discussions, or something in between, they are having to deal with issues that are common to millions of their peers. Only the Boomer children can effectively impress upon them the many benefits of proactive planning and the benefits of change.
- Most importantly, investigate alternatives and determine in your own mind what is the best course of action for your parents. Once you are clear in your own mind, you will be able to direct the process in a way that is best for your family.
III. Although it would appear that parents in the third group are those who can most readily deal with the pressures of the current economic cycle, such is not often the case. Boomers must recognize the fact that these otherwise vital and fiercely independent people are now in a situation in which they feel somewhat helpless. All of their years of saving and planning may appear to have been a waste of time, and their current visualization of the future may well be much bleaker than what will actually materialize.
An adult child must first and foremost be sensitive to the psychological impact of today’s economic world. Find optimism wherever you can and assure your parents that, “This, too, shall pass.” You will almost certainly be right. Although we at Parc Communities are not yet seeing any consensus among economists, institutions, lenders, and other resources upon which we rely, the pervasive sense is that this economy will form a bottom by the first half of 2009.
Whether or not that “bottom” will quickly translate to improved real estate values and residential sales velocity is another question. In many markets, including Atlanta, it is likely that overall growth, along with generationally low interest rates, will begin to correct the housing downturn by the beginning of 2009. That does not, unfortunately, mean that residential values will quickly return to 2006 levels. Our best advice to the children of parents in this category is as follows:
- Acknowledge that residential values may not return to 2006/2007 levels for another 4-6 years. Readjust their expectation of the real value of their home or condo.
- Encourage your parents to begin re-planning their later years only when there is abundant evidence that the current trends have turned positive. Until then, maintain a conservative posture as it relates to lifestyle and investments.
- Do not attempt to encourage any dramatic changes until the headlines change. The last six months have provided all of the drama that most seniors need.
- Jointly with your parents, begin to explore alternative investment vehicles. Remember, your parents are among millions who are confronted with the same set of challenges. The free market will likely result in conservative, but innovative solutions.
- At the end of the day, most seniors in this category will be able to achieve their original goals for those “Golden Years.” This recession may delay the dream by a few years, but overall improvements in healthcare, wellness, and life expectancy should make up for the delay.
For an adult child, arriving at a solution for Mom’s “Golden Years” has always been a challenge. When financial implications further complicate the matter, the process is even more difficult. Our advice is simple – don’t allow today’s recession to delay decisions that need to be made. Given time, we know that the economy will return to normal. Unfortunately, when it comes to decisions regarding our aging parents, time is not on our side.