We hear from so many members of the HerMoney community that your care-taking responsibilities — for both children and elderly parents — have simply become overwhelming these last few months. An incredible 39% of women are now considering reducing their hours at work or stepping out of the workforce entirely, and 24% of those say they would be doing that to support an aging parent or another adult family member, according to new data from our sponsor, Fidelity.
And oftentimes, when we need to support an elderly family member, finances are a big, big part of that. There’s the old saying that you should “look for dementia in the checkbook” because money management is often one of the first places people start to struggle. And as of last month we actually have data to back that up. A study from Johns Hopkins just discovered that patients with Alzheimer’s disease and related dementia were more likely to miss credit card payments for up to six years before they ever got a medical diagnosis.
So, what does this mean for you, as a potential caregiver? One of the most important things we can all do to get ahead of what’s coming is to start having these conversations with our parents sooner rather than later. Discussions around money, retirement assets, wills and death, are never easy, so it’s very appealing to put them off. But they are essential.
You’ve got to know:
- If your parents have enough saved.
- Whether or not they have long term care insurance — or some other plan for paying for their care.
- What they want — because you love them and want them to be happy.
- Where things stand with their will, financial power of attorney, medical power of attorney, trust (if applicable) and so much more.
To help us navigate these waters and formulate a game plan for discussion is Cameron Huddleston, author of “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.”
Listen in as Cameron shares her personal story with us — when she was 35, her mom (who was just 65) was diagnosed with Alzheimer’s disease and Cameron had to learn how to navigate the elder care process at an early age. She and Jean discuss why so many families never have a broader discussion about the roles that adult children are expected to play in their parents’ financial lives as they age, and why these conversations are so important. While these discussions are almost always uncomfortable, and are never “one size fits all,” the risks of never broaching these conversations are dire.
“I think you can start simply by asking what sort of planning they have done. “Mom and dad, have you ever calculated how much you need to live comfortably in retirement? Have you ever met with a financial planner? Have you ever looked into long term care, and figured out how much it might cost? If you need it, do you have a plan to pay for long term care?” This is keeping it in very general terms, initially. And then, depending on their answers, that’s when you’re going to start to need to dig a little deeper,” Cameron says.
Cameron walks us through how we can take those first steps into these conversations (Hint: talk to your siblings first) and offers some ways to kick off the dialogue naturally. She also gives us a list of the types of information we need to gather from our parents to make sure we’re prepared. She dishes on what she really thinks about long term care insurance, and whole life policies with a long term care benefit. We also dive into medicaid planning and the transfer of assets, reverse mortgages, and permanent life insurance policies wherein the cash value can be tapped.
And P.S. We can totally have these conversations over Zoom during the pandemic, even if it’s a little awkward. (But maybe it might actually be less awkward if you’re not in the same room??) If our parents get sick, we need to know if they have the proper documents in place, so Cameron advises not waiting to have these discussions.
In Mailbag, we tackle a question from an international listener who is debating selling her home in New York, and we hear from a woman who is looking for guidance on how best to support her parents in retirement while she’s trying to grow her own accounts. We also hear from a listener who is unsure how best to invest and allocate non-retirement funds. Lastly, in Thrive, Jean dives into some great advice for stopping the productivity slump so many of us encounter in winter.
Sponsored by Fidelity Investments. Join us for Moms & Money, a candid conversation with moms about this past year and beyond. We’ll talk about the unique financial realities moms face and how you can create a roadmap for your family’s financial future. Visit Fidelity.com/Women today.
Cameron Huddleston: (00:03)
I think you can start simply by asking what sort of planning they have done. Mom and dad, have you ever calculated how much you need to live comfortably in retirement? Have you ever met with a financial planner? Have you ever looked into long-term care and figured out how much it might cost? If you need it do you have a plan to pay for long-term care? This is keeping it in very general terms initially. And then, depending on their answers, that’s when you’re going to start to need to dig a little deeper.
Jean Chatzky: (00:39)
HerMoney is supported by Fidelity Investments. Whether you’re celebrating a milestone or adjusting to the unexpected, Fidelity’s there to help you navigate life’s important moments with confidence. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:58)
Hey everybody. I’m Jean Chatzky. Thank you so much for joining me today on HerMoney. Over the last few months, we have heard, Kathryn and I, from so many of our listeners that your caretaking responsibilities for both your kids and your older parents have just become overwhelming. And an incredible 39%, almost four out of 10 women, are now considering reducing their hours at work, or sometimes stepping out of the workforce entirely. 24% of them say they would be doing that to support an aging parent or another adult family member. And that’s according to some new research from the folks at Fidelity. Often when we need to support an elderly family member, finances are a big, big part of that. There’s that old saying that you should look for dementia in the checkbook, because money management is often one of the first places people start to struggle. And as of last month, we actually have real data to back that up. A study from Johns Hopkins discovered that patients with Alzheimer’s and related dementia were more likely to miss credit card payments up to six years before they ever got a diagnosis. That is so scary. And yet, what does it mean? What does it mean for you? What does it mean for you as a child of older parents? What does it mean for you as a potential caregiver? What does it mean for you as a woman? Because as I’ve said on this show before, even though I adore all my brothers, I know that the lion’s share of the responsibility with my mom is going to fall to me. So one of the most important things that we can all do is try to get ahead of what’s coming down the pike. And the way to do that is to start having conversations with our parents sooner rather than later, because discussions around money, around assets, around wills, around death, and all things related to that, they’re just not easy. And so it becomes very, very appealing to push them off, to just procrastinate. But they are essential. You have to know, do they have enough saved? Is long-term care insurance, part of the picture? What do they want? Because you love them and you want them to be happy. To help us navigate these waters and formulate a game plan, I want to introduce all of you to Cameron Huddleston. She is the author of a great book called “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.” Hey, Cameron.
Cameron Huddleston: (03:47)
Hi Jean. How are you?
Jean Chatzky: (03:49)
I’m terrific. I should tell everybody that you are joining us from your home in Kentucky. I don’t know that we’ve ever had a guest from Kentucky before, so that’s exciting. We should just put pins in the map.
Cameron Huddleston: (04:01)
Sounds like a good idea.
Jean Chatzky: (04:03)
Tell me a little bit about this book and why you decided to write about this topic.
Cameron Huddleston: (04:09)
I wrote this book because I made the mistake of not having conversations with my mom about her finances before she started having memory problems. And so when I could tell that she was starting to forget things, I had to scramble. I had to encourage her to meet quickly with an attorney so we could draft those essential legal documents to name me and my sister, her power of attorney and her healthcare power of attorney, to update her will. And then, as she was forgetting more and more, I had to play detective to get information about her finances, to figure out what sort of assets she had, because she was forgetting things. And like I said, I had not talked to her about her finances. So I didn’t know where things stood. I didn’t know what she had. And I just didn’t want people to make the same mistake that I made. I wanted to give people a resource to help them have these conversations, to figure out what sort of questions to ask and to walk them through the process, to give them hope that these conversations don’t have to be difficult, to help them talk to their siblings and to help them get through to those parents who are reluctant to talk. So that’s what inspired me. My mom.
Jean Chatzky: (05:23)
Tell me a little bit more about that experience. I mean, I was struck by the fact that this happened to you when your mom was just 65 and you were just 35, which I think is a lot earlier than many of our listeners think they have to have these conversations.
Cameron Huddleston: (05:39)
Yes, I was young. And I get this question all the time. Like, how old should you be? How old should your parents be when you have this conversation? If you’re in your twenties, it’s not too early to start having this conversation with your parents because they’re still going to be in good health. They probably haven’t even retired. And that’s when you should be having these conversations. I was young. My mother was relatively young for that diagnosis. And I was shocked. Like I never expected having to step into that role, especially when I still had young kids. I thought my mom was going to be there to help me with my kids. And it turned out I was the one having to help my own mother and start taking care of her at that young age for me, at that relatively young age for her. And so it really was a big surprise for me. And I didn’t have any friends in a similar situation. I didn’t have anyone to turn to for help.
Jean Chatzky: (06:31)
I have to say those numbers made me feel, I mean, really a lot of sympathy for you and everything you went through. But I often spouted this 40/70 rule that I was taught decades ago, which is basically if you hit 40 or your older parents hit 70 and you haven’t had this conversation with them yet, then it’s time. And you can just rely on the 40/70 rule as a reason to do it. But what your experience says to me is that that may be too late. Like that may actually need to be revised.
Cameron Huddleston: (07:03)
Definitely needs to be revised. You know, something else I’ll add. My father actually passed away at the age of 61 without a will. He was in a second marriage. I feel like if I had had a conversation with him asking him if he had a will, maybe he would have taken the steps to write one so that we didn’t end up in a awkward situation with him dying without a will. And a second marriage, two children of his own, a stepchild. So, no, it’s never too early to have these conversations.
Jean Chatzky: (07:35)
Why do we do this? Why do we get to age 60 without a will? I mean, I know that there are a lot of parents with young children listening, who don’t have wills because statistically, we just know that that number is huge, but how is it possible that we go through four, five, six decades of our lives and we just don’t do this?
Cameron Huddleston: (07:56)
I think two reasons. A lot of us are afraid to face our own mortality, and writing the will forces us to think about the fact that we are going to die someday. I think a lot of us also don’t realize that you have to have something in writing, because if you don’t have a will, the state has one for you. And the state law is going to determine who gets what. And your things, your assets, your property, might be going to people you don’t want to receive your property because that’s just the way state law divides things up. And so it’s so important to put something in writing.
Jean Chatzky: (08:31)
It’s not just your stuff, it’s your kids, right? I think people do not understand that the will is the only document that allows you to have a choice in who will be the guardians for your minor children if something were to happen to you. And, you know, God forbid something happens to you. We never want to see that. But I also know it happens every single day. And so, I mean, I did get a will before my first child was born. My husband, at the time, and I actually got our will made the day before we got on an airplane for the first time without our child, which I think is a very, very common scenario. You just have to do it. It’s unconscionable not to do it.
Cameron Huddleston: (09:14)
It is. And it’s not that hard either. And I know that naming the guardian is often what hangs people up. It’s what prevents them from writing the will because they’re like, I don’t know who to name.
Jean Chatzky: (09:25)
Or I don’t want to tell my brother that I picked my sister.
Cameron Huddleston: (09:28)
Right. You know, and maybe you don’t tell him right away at least.
Jean Chatzky: (09:32)
Or don’t tell him at all, right? Just think about this. You play this out. If this is going to come into play, you are going to be dead. Right? So if you can’t get yourself to cop to the fact that you did it, at least just do it.
Cameron Huddleston: (09:48)
Agreed. 100%. And we’ve actually gone through the process of writing wills twice. My husband and I have. You know, and it’s funny because people, I have estate planning attorneys tell me all the time that they have clients who fear that if they write that will, that’s it. I mean, the next day they’re going to die. No, my husband and I have gone through the process twice. We are still here and at least we have a plan. At least there is a plan in place. And the guardian knows who he is and there’s the power of attorney form and the healthcare power of attorney. Everything is in place. It didn’t kill us. It just means that we are prepared for that worst case scenario.
Jean Chatzky: (10:23)
And let’s just say, I mean, you mentioned that it’s easy and it is easy. And it’s not all that expensive. If you don’t want to go through the process of doing this with an attorney, legal zoom is fine. It is totally fine. And if you want to double cross your t’s and double dot your i’s, then either hire the attorney or take the legal zoom paperwork to an attorney and just have them look it over, which will be cheaper than having the attorney do it from the beginning to end.
Cameron Huddleston: (10:50)
You know, I would add though, that even if you meet with an attorney and have the attorney draft that will, the power of attorney, the living will, that spells out what sort of end of life medical treatment you do or do not want, that’s still cheaper than the alternative. It’s cheaper than your family going to court and fighting over who gets what. It’s cheaper than going to court to petition to become your parents’ conservator if they haven’t named you power of attorney. I interviewed a man for my book who had to go through that process. It took him nine months and $10,000 to go through the court process to be named his dad’s conservator, because his dad had Alzheimer’s. And he could not access his dad’s bank account to pay his bills. He also was spending his own money to pay for his dad’s nursing home care, in the meantime, until he was appointed conservator and could access his dad’s accounts. I mean, that’s a heck of a lot more than the thousand dollars you might spend to meet with an attorney to have all those documents drafted.
Jean Chatzky: (11:49)
No, I think that’s right. All right. Get a will. Get a power of attorney. Get a living will. We’ll get off this part of the soapbox at this point. Let’s talk about how to have these conversations. I mean, children, you point out in your book that we’re not often prepared to help our parents and to dive into these conversations with them about their finances. You know, it sometimes feels rude to ask your parents, or intimidating to ask your parents about their financial situation. So how do we do it?
Cameron Huddleston: (12:21)
There are a lot of ways you can do it so that it seems natural. If you are young, if you’re in your twenties, one of the best ways to do it is to ask your parents for advice. Then you’re avoiding that role reversal. You go to mom and dad and you say, hey, I just started a new job and I can contribute to a retirement account through work. Do you think I should do this? Like you might know already what you should be doing, but asking mom and dad is going to give you insight into what they’ve done. They might say, well, I never had to worry about that. I have a pension. You say, oh great. You have a pension. That means you have a guaranteed source of income in retirement. Is that right? And keep the conversation going from there. Or maybe you just got married and you asked mom and dad, should I get life insurance? Do I need a will now? Again, that’s going to give you insight into what they’ve done. Easy way to start the conversation. You could use current events. We are in the middle of a pandemic. So you simply say, mom and dad, you know, I’m really worried about everything that’s going on. And I want to know what would happen in case of an emergency. Have you named someone to make healthcare decisions for you? Or if you’re in the hospital, how would I make sure your bills got paid? It’s as simple as that. And they might not have ever even realized that they should be thinking about this and they might say, you know, I’m so glad you brought this up. Because if I do end up in the hospital, my bills are paid automatically. Or I write a check every month. And hey, we need to make sure that you can sign checks for me if something happens. It can be as simple as that. You can use a story about someone you know. You can talk about your own financial planning experience. I just wrote a will. I want you to know where it is. By the way, do you have a will? Where is it? You don’t have to ask about dollars and cents. You just want to know, do they have those estate planning documents? Do they have an emergency plan? Do they have any sort of plan for retirement?
Jean Chatzky: (14:14)
When do you start to have to ask about dollars and cents? I did a show for awhile, a television show on RLTV. And I had my mother come on as a frequent guest. And we would just answer questions. And her take on knowing when you had to start asking about how much money your parents had, was that you could tell a lot just by looking at how they’re living when you visit them. That if they’re struggling, you really need to have those conversations. And that your eyes will tell you an awful lot without even asking the questions. But I’m wondering, you know, how do you prevent those surprises from coming your way, knowing if you’re going to have to help provide their support if social security is not enough for them, if they don’t have a pension.
Cameron Huddleston: (15:03)
I think you can start simply by asking what sort of planning they have done. Mom and dad, have you ever calculated how much you need to live comfortably in retirement? Have you ever met with a financial planner? Have you ever looked into long-term care and figured out how much it might cost? If you need it, do you have a plan to pay for long-term care? This is keeping it in very general terms initially. And then, depending on their answers, that’s when you’re going to start to need to dig a little deeper. If they say, well, no, I’ve never thought about long-term care. Then you might say, well, did you know that Medicare does not pay for long-term care? And a room in an assisted living facility can cost you on average $4,000 a month. A long-term care insurance policy or a life insurance policy with a long-term care benefit could help pay for this. Maybe you ought to reach out to an insurance agent to see whether this is something that you should have. Or maybe you should meet with a financial planner to look at your assets and figure out whether you could pay for this out of pocket. So keep it general at first, asking about what sort of planning they’ve done. If they tell you they haven’t done any planning, or you can tell by the way they’re avoiding answering you directly, you might say, well, listen, would you like some help? Would you like me to help you find a retirement calculator online? Would you like me to help you find a financial planner who’s just going to charge by the hour and help you create a plan that’s going to give you some guidance. Would you like me to help you find a free or low-cost credit counselor? Offer help. The last thing you want to do is make your parents feel embarrassed. You don’t want to pass any sort of judgment. You don’t want to say, oh my gosh, I can’t believe you haven’t done anything. What are you expecting me to help you? You don’t want to do that because then they’re just going to shut down. Offer your help.
Jean Chatzky: (16:57)
I want to get a little deeper into this conversation of parents who don’t want to have this conversation. But before I do, let me just remind everybody that important conversations like this one are proudly sponsored by Fidelity Investments. Because although some of life’s important moments are planned for way in advance, there are others, like dementia or a diagnosis that we don’t see coming. And as always, Fidelity is here to help you. To help you navigate the joyous, but also the unexpected, with confidence. Their resources, their guides, their tools can help guide you through important financial decisions when you need it most. And you can visit Fidelity.com/HerMoney to learn more. I’m talking with Cameron Huddleston. She is the author of “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.” So parents are used to being the parent. And there’s a lot of emotion that comes with being the parent. There’s a lot of pride, I think, that comes with being the parent. There’s sometimes a feeling that you’re not supposed to show weakness, that you’re not supposed to show that you don’t know things or understand things, particularly for an older generation. And so sometimes parents have to be dragged into these conversations, kicking and screaming. How do you do that in a nice way?
Cameron Huddleston: (18:24)
This is so true. And this is where you can run into problems if your parents aren’t willing to talk. I do think most parents are going to be willing to open up. As long as you let them know, look, I need this information because I might have to help you someday. And I won’t be able to help you unless I have this information. So letting them know you are looking out for their best interests, but like you said, there are going to be some parents who are going to balk. And there are a variety of ways you can try to approach it instead. A good way, reach out to a third party. That might mean calling, if they’re already working with an attorney or a financial planner and saying, hey, could you please encourage mom and dad to share some information with me because it’s going to be important for me to know these things as they get older. And they might be more willing to listen to that unbiased professional. You might want to reach out to a clergy member, maybe a family friend, who has had these conversations with their kids and can say, look, you know, this has really helped our family. It’s brought us closer. I really encourage you to have these conversations with your kids. Another thing you could do is ask them to write down the information. And just tell them, look, you don’t have to tell me these things, but if you could at least make a list of your financial accounts, tell me where your estate planning documents are, and tell me under what conditions I can access this information and tell me how to access it. So that we are prepared in case there is an emergency. That lets them maintain control. They don’t have to divulge any information. They don’t have to feel like there’s a roll over. So they don’t have to give up that control because you’re letting them hang on to that information and tell you when the appropriate time would be to access it.
Jean Chatzky: (20:10)
Do you have a feeling one way or another on family meetings? So my father died way too young. My dad died at 71. My mother was in her early sixties at the time. Fortunately, she was actually really good at the finances. She handled the finances. And I did step in and help her find a financial advisor because she felt like she lost her sounding board. But as a result, we’ve had a lot of conversations about my money and her money and all of the above. And we did have a conversation at one point about family meetings. Like should we have a family meeting about this. And she hates family meetings. She just thinks family meetings would make her feel so ganged up upon. Did you guys ever have family meetings?
Cameron Huddleston: (20:58)
No. We did not. And I think this depends on your family dynamics. I do think it’s important if you have siblings to talk to them before you talk to your parents, just so all of you can get on the same page. So you can say, hey, we need to have this conversation. Let’s figure out who’s going to have it. Is it going to be one of us? Is it going to be all of us? You know, are we the type of family that has family meetings? Should we all be there? Because if you know your parents are gonna feel ganged up on, then no. It should probably not be all of you sitting down with mom and dad, because then they’re going to get defensive. So meet with your siblings first. Figure out when and how you’re going to have the conversation. And then based on that conversation, based on what you guys decide is best, then you can figure out how you’re going to approach it with mom and dad. And the key thing here is that this doesn’t have to be just one conversation. It should be a series of conversations. The last thing you want to do is set your parents down and say, tell me everything. That’s overwhelming. It’s overwhelming for you. It’s overwhelming for them. You know, just let them know, hey, we, we need to talk. I need to get some information. I don’t need to all at once. But let’s kind of think about the things that we should be discussing and planning for and just keep the conversation going. I didn’t have these conversations. So I had to figure everything out as I went along with managing my mom’s money. And that was just so difficult. I mean, there were accounts that I didn’t even know existed.
Jean Chatzky: (22:22)
Yeah. And you’re good at this. You do this for a living, you know. You write about this stuff. So I think we should all definitely take a lesson from that. What is your feeling about long-term care insurance at this point? And from the perspective that a lot of older parents really can’t afford it. And is it worth the adult children stepping in to help pay for these policies?
Cameron Huddleston: (22:44)
I do have slightly mixed feelings about long-term care insurance. I do think that the long-term care insurance industry is in a much better place than it was say 10 years ago. There used to be a lot of long-term care insurance providers. And the problem was that they got so many claims that they couldn’t keep up with them. And so a lot of companies pulled out of the long-term care insurance business. People who had policies suddenly found their rates rising dramatically. I think they have a pretty good handle on the situation now. And so, you know, when you get that quote, most likely that’s going to be what you’re going to be paying for the life of that policy. Just to give you an example, if you are in your fifties and you are healthy, don’t have any serious health conditions, you and your spouse or partner can probably get a shared policy that’s going to provide you with coverage, like a pool of coverage for about eight years or so. And you’re going to be probably paying around $300 a month. That’s not cheap, but like I said, you’re going to be paying $4,000, $5,000 a month for assisted living or a home health aid. There is a type of insurance that’s really popular now. It’s a life insurance policy, a whole life policy, permanent policy, that has a long-term care benefit. And so a lot of people are reluctant to have to pay for insurance they might never use. With that life insurance policy, you either use a long-term care benefit or your beneficiaries get a payout when you die. And so I think that makes it easier for some people to kind of swallow the pill of paying a large amount each month for insurance coverage, because you know someone’s going to get money. There are other options. I mean, if your parents have very little money, there’s Medicaid. Medicaid will pay for long-term care at home and in a nursing home. In some places it might pay for assisted living. That’s an option you can even meet with an attorney, an elder law attorney, and do what is called Medicaid planning, where you’re transferring assets well before there’s a need. But again, you’ve got to meet with an attorney do that. Reverse mortgages. That’s an option. Kind of an option of last resort. If you have a permanent life insurance policy, your parents could always tap the cash value to pay for their long-term care. Or there’s such a thing called a life settlement. So you can sell your life insurance policy typically for more than the cash value. This is something that you would probably want to do in the very later years. And again, that’s another way to pay for long-term care. So there are options. Of course, if you can afford to meet with a financial planner, that person is going to help you go through all of your options and figure out what you can afford to do and what you can’t afford to do.
Jean Chatzky: (25:29)
Absolutely. Last question, Cameron. So as you mentioned before, we are in the middle of a pandemic. Can we have these conversations over zoom? Or is that just way too awkward?
Cameron Huddleston: (25:40)
I think you should do it. I do. Because if your parents get sick, they need to have those estate planning documents in place already. They need to have named a healthcare power of attorney. They need to have named a financial power of attorney. At the least, you need to find out whether they’ve done this.
Jean Chatzky: (26:00)
So it’s almost more important than it’s ever been before, even if you have to do it from far away.
Cameron Huddleston: (26:06)
Yes. Don’t wait to have these conversations.
Jean Chatzky: (26:09)
Cameron Huddleston, the book is called “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.” Thank you so much for this conversation. Really, really helpful.
Cameron Huddleston: (26:18)
Thank you so much for letting me come on your show and share some information about it.
Jean Chatzky: (26:23)
Of course. Where can we find more about you and about the book?
Cameron Huddleston: (26:27)
You can find more about me at cameronhuddleston.com. There are links to buy the book. I’ve got some free resources that you can download and links to my social media accounts are there too.
Jean Chatzky: (26:39)
Thank you so much. Best wishes for a better 2021.
Cameron Huddleston: (26:43)
No kidding. Same to you.
Jean Chatzky: (26:45)
Thanks. And we’ll be back in just a moment with Kathryn and your mailbag.
Jean Chatzky: (26:53)
And HerMoney’s Kathryn Tuggle has joined me. Kathryn, nice to see you.
Kathryn Tuggle: (26:58)
Hey, Jean. Good to see you as well as always.
Jean Chatzky: (27:01)
Have you been through this with your parents?
Kathryn Tuggle: (27:04)
It’s a great question. I have gotten little snippets from my parents over the years, but I think that we are due for a bigger conversation. They told me years ago kind of who to contact if something happens to us and I know what their assets are. So I know that they have enough to retire on and that they won’t need any financial assistance from me. But in terms of hands-on, on the ground helping, it is a question that I have living in New York with them in Alabama. You know, what all will be involved in the day-to-day of helping them balance a checkbook or keeping up with medical bills and that kind of thing. So it is time to have another conversation on my end.
Jean Chatzky: (27:46)
Yeah. And I think a big important part of this is what do they want? We had a death in the family a couple of weeks ago and she had moved into assisted living about six months ago, reluctantly, reluctantly, reluctantly. She did not want to go but once she got there, she really, really loved it. And, we were talking about her and my mother said yet again, and she has said this many times before, she is not going. She has said it so many times that I just know that it is on me and my brothers to do whatever we have to do for her not to go. And, you know, I pointed out, there was such a nice social life there. She is not going. And I think we need to understand those things and, as much as we can, respect them.
Kathryn Tuggle: (28:37)
Absolutely. And then, you know, dementia can change that picture drastically, right?
Jean Chatzky: (28:42)
Kathryn Tuggle: (28:43)
Because what we want now can be completely different when we no longer know what day it is. Or if we can’t recognize our family members then home is the only option for us. But, you know, I think that’s the tricky thing about all of this is that it all has to be reevaluated every year, or every time there’s a medical change, or if your mom dies and leaves your father behind, then you have to continue having the conversation over and over and over again to get updates on where everybody stands.
Jean Chatzky: (29:14)
Yeah. Memory is the real game changer. Isn’t it?
Kathryn Tuggle: (29:16)
Jean Chatzky: (29:17)
I don’t know what’s the ethics of, I mean, I think it would be very, very difficult for me, even if my mom did have memory issues, to look into some sort of a facility because she’s been so adamant for so long. You know, I would feel terrible about that, but I understand it also may be the only way to get her the safety and you know, God forbid this happens. And I hope it never does. But you also, you have to think of the safety of the individual. You have to think of so many different factors. It’s so hard.
Kathryn Tuggle: (29:50)
Right. Exactly. And at a certain point, it’s almost out of your hands. My grandmother, my father’s mother, had Alzheimer’s. And the turning point for putting her in a home was she ran out of the house and ran out into the middle of the road and flagged down an 18-wheeler.
Jean Chatzky: (30:09)
Oh my God.
Kathryn Tuggle: (30:09)
We had to say, she has to be somewhere where she has that round the clock care, where the doors lock.
Jean Chatzky: (30:15)
Kathryn Tuggle: (30:15)
So it’s never easy though, no matter what you’re facing.
Jean Chatzky: (30:18)
No, no it isn’t. And I know that there’s so many people with COVID who are facing it now. So our hearts go out to every single one of you.
Kathryn Tuggle: (30:28)
Jean Chatzky: (30:29)
But again, Cameron, thank you so much. That was a really, really necessary conversation to have.
Kathryn Tuggle: (30:34)
Yeah. And so important for the new year. You know, if you haven’t had those conversations, 2021 is a good time to kind of make that to-do list and make it happen
Jean Chatzky: (30:43)
For sure. For sure. Okay. Let’s switch gears here and let’s answer some questions from our mailbag.
Kathryn Tuggle: (30:50)
Absolutely. Well, we had a bit of fan mail pop into the mail bag this week from a listener named Melody. She writes, hope you are all well. What a journey 2020 has been. I wrote back in may with a question about investment portfolio planning and I soaked up your advice. I really listened to the episode with Nicole Connolly, did additional impact investing research, reallocated my investments into funds with clear ESG commitment parameters, and I couldn’t be happier. Though the markets have gone up and down, I have a quiet confidence in the long-term strategy, as well as the values alignment. Thank you so much for your guidance and insight.
Jean Chatzky: (31:26)
I love that. Thank you so much for letting us know Melody. I’m really, really glad that we were able to help you chart a course that you’re happy with.
Kathryn Tuggle: (31:34)
A hundred percent. Yeah. Market’s going up and down plus confidence is not something you hear a lot. So that’s great. Our first question today comes to us from Sarah. She writes dear Jean and Kathryn. I love your show. I had discovered it about six months ago through my Fidelity app and I have listened regularly ever since. I’m a 47 year old American living in the Hague, the Netherlands, I came here with my twin children, I’m a single mom by choice, about three years ago for my job. I’m wondering what to do about my house in New York and I’m hoping you can give me some advice. I bought a house in Westchester in 2015. We lived in it for two years before being relocated with my job. The house has been rented since we moved by the same family who really loved living there, but will likely want to buy their own house next spring or summer. They wanted to last year, but decided to wait due to COVID. I would normally continue to rent it since we love the house, but there are a couple of issues. One is that I’m not sure we’ll ever move back there. My parents live in California, which is where I grew up, and they’re almost 80. So when we do move to the US again, I’ll need to live closer to them. The other issue is the school district where I bought my house in New York isn’t great for secondary school. So I wouldn’t want my kids to go to the public school and, at this stage, I couldn’t afford private school. The other factor is that I just bought a house in the Netherlands. I never wanted to own two houses, but they cover a hundred percent of the mortgage here and the interest rate was 1.65%. My monthly payment is the same as what I was paying for rent, around 2,800 Euro. I make a good salary around $200,000 a year, but I don’t currently have the savings to cover any issues with either house, which makes me nervous. If I wasn’t able to rent the house in New York right away, it would be difficult to cover the payment for more than a month or so. If I do sell the New York house, I would likely get back a large sum of money. And since I wouldn’t be buying again in the States, would I risk having to pay a lot of taxes? I paid $775,000 for it in 2015 and owe around $540,000. It does need some work, given I’ve had renters there for several years. I suppose the answer seems obvious, that I should sell it. But it feels emotional to let go of it and I could get really lucky with new renters and then just delay the decision to buy for a couple more years until I’m clear. Thank you.
Jean Chatzky: (33:49)
I am so excited about this question because this is a house in my neighborhood. It’s a house in my County, Sarah, and I feel highly qualified to give you this advice. Sell the damn house and sell it now because prices in Westchester, because so many people want to escape the city because of COVID, are just soaring. I mean, I’ve lived in my neighborhood in Westchester for 15, actually I’ve lived in this house in Westchester for 15 years. I’ve lived in my town in Westchester for 25 years. I have never seen houses sell as fast as they are selling today and at such premiums. So I think that you are going to do incredibly well. I would look perhaps to sell the house to the people who live in it if they love it as much as you do. And maybe that’ll be an easy way to get through the transaction and to save on the cost of hiring a broker and all of that kind of stuff. But I wouldn’t worry tremendously about taxes. Even if the price of this house is up 20-25% since you bought it in 2015, you are allowed a capital gains exclusion on the sale of a house as a single person of $250,000. Also, you can write off any improvements that you’ve made, so that could give you an additional buffer there. I mean, maybe it will sell for more than that. But if it looks like it, then you might want to just take some money and put it into the house in order to get it ready for sale and that money will go toward the improvements. Just keep really good receipts and keep receipts going all the way back to the time that you bought the house. I think the easiest thing to do is to call a broker, and call a realtor or two. We actually are thinking about putting our house on the market in the next couple of months, and we had three different brokers come through and give us an estimate of what needed to happen in this house in order to get it ready for sale and what we should price it at. So I’d go through that process now, before you put it on the market which you would likely want to do in the spring when sales start to heat up again. And just to get your ducks in a row, understand what you’re looking at in terms of numbers. But gosh, I mean, I think particularly since you believe you will not be coming back to Westchester County, owning a house where the roof could go, the air conditioning could go, the heating system could go, and you would have to put in a considerable sum of money to take care of any or all of that, especially from so far away, is a really, really big obligation.
Kathryn Tuggle: (36:42)
Yeah, absolutely. And it sounds like it’s just a source of stress, which, God knows, nobody needs right now.
Jean Chatzky: (36:48)
I understand what it’s like to have a home that you love and that you’re emotionally attached to. I’m very attached to the house that I live in right now. I’m going to have a very, very difficult time letting go of it. I feel, in many ways, it just saved my life.
Kathryn Tuggle: (37:05)
I love your house too. Maybe I’ll buy it.
Jean Chatzky: (37:07)
Okay, there you go. That’ll be easy. Then I can come visit my house. Although then you’ll change it. And although you have wonderful, wonderful taste, I’ll like wander through and I’ll be like, well, why did she paint that room a different color? So anyway, that’s just my 2 cents. But I think your timing could not be better.
Kathryn Tuggle: (37:24)
Yeah. I agree. Well, I’ve been hearing you talk about how crazy the prices are in your neighborhood right now. And just anecdotally, I know how many people have left the city for Westchester. So it’s been a mass exodus to people who want a backyard right now.
Jean Chatzky: (37:37)
Yeah. Having a backyard’s really nice.
Kathryn Tuggle: (37:40)
Jean Chatzky: (37:40)
Being in the Netherlands where they pay your mortgage sounds like it’s even nicer.
Kathryn Tuggle: (37:44)
Ah. Yeah, right. That mortgage rate. Crazy.
Jean Chatzky: (37:46)
Kathryn Tuggle: (37:49)
Our next question comes from Lauren. She writes, I’d really appreciate any guidance Jean could provide on how to best support parents that are in a difficult financial situation. I have a question that I’ve been grappling with for quite some time. I’m 33, married, and I have a two year old. My husband and I both have successful careers and I feel like we’re finally on a better path for saving in retirement. We have an emergency fund. We’re each maxing out our 401ks. We contribute to a 529 plan for our son and put some additional money away in a high-yield savings account each month. We know we need to be saving more and I’d like to have a more sizeable emergency fund by the end of the year. We’re also considering opening up a non-deductible IRA as we were over the income limits for the other options. One of the reasons I’ve been so focused on setting a better path for retirement is that my parents have not done this. They’re both in their sixties and struggle to pay for large medical bills, home repairs, let alone even think about retirement. My mother was working part time, but is no longer because it’s too risky with her health and COVID. This has put even more pressure on their financial situation and there’s a good chance my father will get laid off. They recently refinanced their house to get a lower rate and my father decided to take out more money on the loan to pay off some of their other debt and to have cash on hand for the mortgage if he gets laid off. All that to say, their financial situation continues to get worse and I’m really at a loss for how to help them. I know there are resources out there, Medicare, Medicaid and things like long-term care, but it’s a bit dizzying and hard to know where to start. I appreciate any guidance you can provide on how best to navigate this kind of situation. I’m particularly interested in whether investing in something like long-term care insurance is recommended. Thank you again for all that you do. And for brightening my Wednesday morning commute.
Jean Chatzky: (39:33)
Kathryn, this is why you’re such a good producer. Because you do things like pulling this letter and putting it into this show. So thank you for that. Lauren, there are a lot of questions buried in here, but there are more questions that I think need to be asked. I’m wondering how dire your parents’ financial situation really is, what they’re looking like in terms of numbers, what they’ve got in equity in their home, what the decision has been in terms of when they will likely take social security, where they are in their sixties, if they’re in their early sixties or if they’re in their later sixties. There’s a lot going on here. And so I am thinking a couple of things. Let’s sort of back into these answers. First, you ask about whether something like long-term care insurance is recommended. My guess, based on the scenario that you laid out, is going to be no. And the reason that I’m thinking that way is that it seems like, in this scenario, they will spend their assets fairly quickly and qualified for Medicaid, which will pay for long-term care if they need it. It won’t give them a huge array of choices if they need an assisted living facility or a nursing home, but it will pay the bills for that. And it will pay the bills for long-term care at home. As far as their income asset ratio. When we think about a house for people at this point in their life, often, that’s the biggest asset that they have in terms of their net worth. And so I know that they just refinanced, but if they have a considerable amount of equity and if the home is more space than they actually need, now may be a good time for them to think about moving, to think about selling that place and buying something that is smaller, cheaper, and perhaps more manageable with fewer home repair bills. This is the logical time to tee up a question like that. And especially with interest rates so low and with your father’s still employed that may be something that you continue to look at. The other big, big question is when are they going to take social security. Waiting as long as possible, particularly for the higher earner in the family, can be tremendously beneficial. But they need to balance that with the need to put food on the table. And so I would follow Cameron Huddleston’s lead and I would really try to get very clear with your parents on their numbers. You may want to bring a financial advisor into this conversation. Not somebody to manage their assets, but a fee only financial advisor, perhaps somebody who works by the hour, who can help you get the lay of the land and just make a plan going forward. Helping your parents by doing that, I think, is probably the very, very best way to go. It’s also going to give you an indication of surprises that are coming down the road in terms of whether or not your parents are going to need you to provide financial support in the way of money, and how much you’re going to be able to contribute. And if you do have siblings, now’s the time to tee up this conversation with them as well.
Kathryn Tuggle: (43:07)
Yeah. That’s a great point. Maybe some siblings would have some good advice or cousins even.
Jean Chatzky: (43:12)
Yeah. And the ability to contribute if that’s what’s necessary.
Kathryn Tuggle: (43:15)
Yeah. Our last question is from Rachel. She writes, hi Jean. I’m in my third year of nursing school and work part-time as a waitress and do other jobs like babysitting, landscaping, painting and more. I live at home. College is covered and I have about $10,000 in cash after paying off my used car. I expect to earn about $8,000 this year and next. My parents helped me set up a Roth account and a mutual fund brokerage account. I currently have $5,000 in each of those accounts with the Roth and a Vanguard target fund, but I don’t know how I’m supposed to invest and allocate for non-retirement funds. I’d appreciate advice on this and anything else you could suggest that I should do to get a good financial start? Thank you.
Jean Chatzky: (43:55)
Well, thanks Rachel. This is fantastic that you are getting such an early start on this. You’re going to be really, really happy down the road that you did that. The answer to your question depends entirely on what the money in the brokerage account is for and when you are going to want to use it. So the sooner you are going to want to put that money to use, the more necessary it is to keep the amount of risk that you’re taking with that money lower, which means keeping more of it in safe places. And more of it likely in cash. The markets have been running up and up and up. They’ve been hitting new highs. And what we’ve also been seeing is a considerable amount of volatility. And what you don’t want to see happen is if, for example, this money is money that you have decided you are going to use to buy yourself an apartment or put a down payment on an apartment. If this is for that, and you are expecting to do that in a couple of years, or even if you’re expecting to use this money for a security deposit when you move out on your own, then you’re not going to want to put that money at risk. You’re not going to want to put it into stocks and see it tumble by 10 or 20% right before you have to put that down payment down, because that would be really, really demoralizing. So if your goals are within a couple of years, two to three years, I’d keep the money really safe. I’d keep it in cash. If you’re looking out further, if you’re looking out five years, 10 years, then you can invest it in a way very similar to the assets in your target date fund. At your age, you can put most of them in stocks, which is how your target date fund is invested right now. And as you get older or get closer to your goals, you can start taking a little bit of risk off the table bit by bit. The last thing that I should mention is that you can make that Roth IRA contribution every year. And one of the nice things about a Roth is that it’s so flexible that if you need to get at that money in order to make a down payment on a home, you can get at that money. It’s set up for that. So don’t let a home in the future, dissuade you from putting more money into that Roth.
Kathryn Tuggle: (46:33)
That’s great advice Jean. Thank you so much.
Jean Chatzky: (46:36)
Oh, thank you, Kathryn. And thanks to everybody for writing. If you all are enjoying these shows, both Kathryn and I would really love it if you could think of one friend that you think would enjoy them as well and just send it along, recommend it. That’s how we grow the HerMoney community that we love having all of you as a part of.
Kathryn Tuggle: (46:57)
Jean Chatzky: (46:58)
And in today’s thrive, how to stop winter’s productivity slump. With winter officially knocking at the door, thoughts of evenings snuggled up under the covers, movie marathons, warm drinks and comforting eats come to mind. Less motivating though, is the prospect of having to remain productive at work even as the days get shorter and the temperatures drop. The good news is that cooler weather does not have to mean lower levels of productivity. In fact, with the right approach, it’s actually possible to increase our output. At Hermoney.com, we’ve got a run down of some of the best ways to boost your productivity this winter. I just thought I’d let you in on a couple. First, take a day off when you need it. The days your company gave you for Christmas and New Years do not count because my guess is, you still had plenty on your to-do list to keep your family and friends and loved ones happy. Take a day that’s just for you. And instead of considering time away from work as the enemy, accept that downtime is really necessary recharge time, which makes you a better worker at the end of the day. Second, take care of yourself. Start by drinking enough water. Actually Bobby Brown, the beauty guru told me that. I once said to her, how come your skin is so great? And she said, I drink a ton of water. She is right. Studies have shown that when we’re fully hydrated, we have significantly improved mood, concentration and energy levels. Also be sure you’re getting enough vitamin D, which to be honest, you probably aren’t. An estimated 70% of the American population is vitamin D deficient. So get out, take some walks in the sunshine and snag some supplements if your doctor recommends it. And finally, embrace your to-do list. I know, depending on the day, these lists can just seem daunting. Ticking as much as possible off your list early in the day will help you face the rest of the day with some of those endorphins that you can only get from kicking butt and taking names. However, leaving all your little bulleted tasks until the last minute will have the opposite effect. So try to set aside your early hours for crossing off as many items as you can.
Jean Chatzky: (49:25)
Thank you so much for joining me today on HerMoney. Thanks to Cameron Huddleston for giving us some much needed pointers. I hope you found her information as interesting and helpful as I did. If you’re due to have one of those conversations, you can now go into it with a confidence boost. And if you like what you hear, I hope that you’re a subscriber. If you’re not, please subscribe to our show at Apple Podcasts. Leave us a review as well. We’d love to hear what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thank you so much for joining us and we’ll talk soon.