With Pat Regnier, Assistant Managing Editor at Money Magazine, Prolific Writer on Personal Finance issues
They were the ones who gave you your first allowance at 8 years old, so talking to your aging parents about their finances can be a sensitive issue.
Pat Regnier, Assistant Managing Editor for Money Magazine, has some advice on this uncomfortable turn in the parent-child relationship. It’s more than taking away their keys and independence, it’s also taking away their dignity, and if the parent is of reasonably sound mind, it’s even more of a challenge and so must be handled with care, compassion, and insight.
Fidelity Investments did a survey and found that 25% of adult children with parents think that their parents could use a hand, while 97% of the parents surveyed don’t think they need that help at all. “You need to understand that this is something you’re going to find some resistance on,” says Pat. “The first piece of advice is don’t go in with an attitude of ‘I know better’ and avoid ‘you should’.”
Pat lays out several approaches on how grown-up children can approach money conversations with their parents, directly and indirectly, through trusted channels such as family doctors, financial planners, or familiar estate planning attorneys. He offers sound advice on how you can guide your parents while protecting their assets and also strengthening your relationship with them. To initiate the conversation, Pat recommends perhaps referring to an article you’ve read or offering to help the parent lower a bill, for instance, a cable bill. With technology changing so rapidly, many seniors feel confused even when there’s no mental decline, simply because it’s out of their element. The goal is to make your parents feel comfortable with you, the son or daughter, as the overseer of their finances.
Protecting your elderly parent from scammers is vitally important. Ideally, your parent will have a trusted professional whom they’ve worked with for the long term to ward off the unscrupulous person out there trying to scam the elderly with new and better products, only to feed their own pockets with hefty fees and commissions.
This will happen to all of us. At some point in time, we’ll grow old and our kids will become young adults. Retirement is often also when seniors have a lot of accumulated wealth. But, chances are, the younger generation will be more in touch with the world than the older generation and may want to guide their parents on money management issues or on protecting them from online scams they may not be aware of. But to parents, children will always be children, and old habits and egos can sometimes be hard to overcome.
Pat strongly advises his clients to get their financial house in order between the ages of 55 and 65, in anticipation of the years ahead so you know that what you have will work for you for a lifetime.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Sometimes we have to have serious discussions with our loved ones, and sometimes those discussions can be troublesome and troubling, especially when trying to speak to your aging parents about money, and in light of some of the things that you may yourself have read about some of the challenges that seniors face. I wanted to discuss that today, and I’ve invited Pat Regnier, Assistant Managing Editor for Money Magazine, to discuss this issue. He has written on this issue himself, as well as edited others at the same time. Welcome to the show, Pat.
Pat Regnier: Hi. Good to be with you again.
Steve Pomeranz: What are the ground rules here? I mean, this is a very sensitive issue. We deal with this all the time in our own practice where you can see that, on one hand, from the parents’ point of view, they’ve been handling their money all of these years, they’ve pretty much done okay, children have come up, and now the children are such an age that, if they’re well educated or reading about these things, they’re finding, “Hey, you know, maybe my parents aren’t really doing everything right,” or they’re subject to scams and things like that. First of all, how should this whole situation be approached?
Pat Regnier: Well, first of all, you want to really drop the attitude is ground rule number one. You want to avoid an “I know better” approach. An interesting stat we found, Fidelity Investments did a survey and found that 25% of people who are adult children with parents think that their parents could use a hand. 97% of the parents surveyed don’t think they need that help. You need to understand that this is something you’re going to find some resistance on, and, if you go in there with a chip on your shoulder, that’s going to be difficult. Two words to avoid… the experts that we talk to say… just don’t say “You should.” I think that goes hand in hand with avoiding the attitude. We’ve also suggested often that it can be helpful to bring a 3rd party. It’s not just you, some kind of a trusted expert, who doesn’t have to be necessarily a financial advisor. I mean, there are all kinds of people you could talk to. Some of the experts we talk to, sometimes if you have a relationship with a doctor that can be helpful.
Steve Pomeranz: I see.
Pat Regnier: Or, an attorney.
Steve Pomeranz: All right. Let’s get to the point where, let’s say, you are sitting there face to face and give us some phrases to use in order to open up a discussion so, as you say, people don’t become defensive and they don’t sense an attitude, an “I’m telling you what to do” kind of attitude. What are some of the first things that you can say?
Pat Regnier: Well, I mean, sometimes it’s really just about saying, for example, going to something other than “I just came in here with an opinion about something you’re doing wrong.” You could say, for example, if you are reading a magazine and there are some suggestions, you could say, “Hey, I just read this article. It has some really great tips or suggestions,” and that gets the ball rolling in one way. Also, to talk about if you’re worried about scams, you don’t have to say, “Oh, my gosh. Watch out for this scam.” Your parents have friends and they may be seeing some of their friends getting into trouble and that can be a natural time to bring up, “Boy, I heard about this scam. I hope none of your friends are involved in something like that.”
More broadly, I think one way to get the conversation going is to ask them for advice about your finances. My parents are still quite young. My father only just retired so a lot of the stuff is years away for us, but one thing that I have found is I talk to my father for financial advice all the time, and it’s built a relationship about talking about money that I think will hold us in good stead in the future. As I ask for advice, he often tells me a bit about his, and so I do have a sense of a financial picture. Also, by the way, I get great advice from him.
Steve Pomeranz: Well, you know, I mean in a sense, you’re in the business, too. He knows that you write about money and you probably have access to information that he doesn’t. When it comes to scams, especially via email, I mean, some of the more ridiculous ones can open up a conversation about some minister in Nigeria who needs a million dollars, but he just needs you to send whatever, a check for $10, to get him started, or whatever it is. I think you can open it up with some humor with some things that are obviously ridiculous.
Pat Regnier: Yeah, that’s right. I mean, I think part of it is, you’re keeping it a little bit off the sensitive parts. I think the thing that we’re often talking about things that other people are doing is often a way to get these conversations started.
Steve Pomeranz: Should you dangle a carrot? Should you say, “You know, I think I can save you some money on your cable bill, Dad. How about we take a look?”
Pat Regnier: Yeah. I think that can be helpful and one of the things about that is you’ve also talked about technology issue, which I think is interesting. A lot of people would be quite willing to say, “I’m sharp as a tack, but I don’t know about all the latest new things out there,” and cable stuff is changing all the time, online bill paying. Helping your parents out with technology stuff, which they may not feel as sensitive about as financial stuff, often that overlaps with money. For example, helping your parents set up online bill paying. For one thing, it’s just helpful to them if they aren’t already there, but also you do start to get a glimpse of what’s going on, which can hold you in good stead later.
Again, it’s not directly about, “You’re in trouble with your money.” It’s about, “There’s good stuff here that I’m telling you about that’s helpful and can make your life better, and it’s not necessarily about your failures in financial management.”
Steve Pomeranz: My guest is Pat Regnier. He is Assistant Managing Editor for Money Magazine, and we’re talking about how to begin the dialog when talking to your parents about money, whether it’s your own money, or whether you want to talk to them about theirs and help them as well. Pat, what are the reasons for talking to your parents about money? What are some of the issues that they’re really facing?
Pat Regnier: Well, you know, one of the things that I think it’s really important to say here is, it’s not just about if you have a parent who’s experiencing some kind of cognitive decline. That’s a part of life, but, as we all know, lots of people stay sharp well into their 90s and beyond, but often your parents are just going to be dealing with new and different issues. If your parents have a household anything like my household, spouses split financial duties, when one spouse dies, often that means that now you have a parent who’s dealing with financial issues that are completely new to them, and they might be feeling overwhelmed.
Another issue is right now lots of people are being pushed into making more complex financial decisions in this low-yield environment. People are hungry for some kind of yield, more return. That means that more new exotic kinds of things are being sold to them, pushed on them, and they may be seeking them out.
Steve Pomeranz: Well, the products get more sophisticated because they have to do more financial engineering to create seemingly high-income products in a low-income environment.
Pat Regnier: Exactly and, obviously, the marketers are aware that there’s a hunger out there for it, too.
Steve Pomeranz: Exactly.
Pat Regnier: It’s extreme, and there’s just also some scams on the rise, as well, that are new kinds of pitches that people aren’t necessarily ready for and know how to defend against.
Steve Pomeranz: My guest is Pat Regnier. He’s Assistant Managing Editor for Money Magazine, and we’re talking about communication with those you love. I think it’s ironic that when you’re accumulating money during your lifetime, you really start off with a small amount and, let’s say, you’re doing it mostly in a 401k and a 401k has a plan sponsor, and they may offer you some literature and some advice, maybe there’s actually an advisor there who’s meeting with employees once a year, something of that nature, but you don’t really have that much money. You accumulate over many, many years, and now that you have the most money you’ll ever have in your life, you decide, “I’m going to roll this money out of the plan into an IRA,” which, of course, is still sheltered from tax, and now you have no help and you’re completely on your own. What do you do about that?
Pat Regnier: Yeah. I mean, I think that’s really tricky then. David [Laibson 00:07:37], an economist at Harvard, talked about this as an upside down system, that people now they have the most money, and they have the least amount of protection when they have the most money, and, at the extreme end as they age, they may be getting into some cognitive issues and I think so that’s one of the reasons why kids need to be alert to what kinds of help their parents might need. One thing you do is—this is what Laibson has suggested—is when you are 55-65, that’s when you want to start getting your financial house in order. You want to set things up so while you’re still outside of that pressure zone, so that you know that you have something that’s going to work for you for a lifetime, so you’re not having to do new complicated things at 85 and 90 with your money. It’s a matter of getting your act together early, I think is very helpful.
Steve Pomeranz: We’re talking about other family members trying to help, maybe one very good idea is to ask whether you can come along to the meeting with a financial advisor because you want to learn about what they’re offering for your own reasons and, plus, it doesn’t hurt to have another set of ears.
Pat Regnier: That’s right. It’s helpful, first of all, because, obviously, while there are a lot of great financial advisors out there, and we talked about having a 3rd party can be very helpful in helping your parents, you also want to check this guy or gal out. You want to hear what they’re being pitched, and if you’re along with your parents, you can direct your concerns and your questions to that person instead of to them. It’s always much harder to …You’re not going to get such a great response if you’re interrogating your parents after they’ve had the meeting with somebody with a great idea. They’re going to feel like you’re asking critical questions of them. I think it’s probably more helpful to ask critical questions of the person on the other side of the desk.
Steve Pomeranz: I think the point, the final point here, is to remember that this idea is probably going to be a new idea to all, this idea of you now, as a younger person, trying to help, trying to get involved, and there is going to be resistance because, after all, you’re the kid.
Pat Regnier: That’s right.
Steve Pomeranz: No matter how old you are, you’re still the kid.
Pat Regnier: That’s right. One thing that we’re told, and this is I think another kind of side benefit of talking to your parents about money and getting advice, is if they are comfortable that you, the kid, are okay, and they know that you’re okay and they can stop worrying about you, or that you’re not asking them about their money because you need their money, being open about your own finances, assuming they’re in reasonable shape, I think can often save some of that.
Steve Pomeranz: Well, Pat, I think the only thing that’s incorrect about what you just said is I don’t think your parents will ever stop worrying about you.
Pat Regnier: I think that’s true. It’s been true in my life.
Steve Pomeranz: My guest, Pat Regnier, Assistant Managing Editor for Money Magazine. Thank you so much for joining us.
Pat Regnier: Thank you.