Dwindling retirement incomes and longer lifespans are sending some seniors to live in their adult children’s homes. Moving mom or dad in may feel like the right thing to do in your heart, but adding another adult into the household mix means you both have to prepare for how this will impact your finances. You want to feel comfortable you can afford the increased expenses, and your parent probably wants to feel like an independent adult and a contributor to the household. Figuring out what to plan and budget for can help get you started.
Making space and paying for it
Depending on space available in your home, you may need to add a bedroom on another level or reconfigure another space to accommodate your parent. Home renovations such as upgrading a bathroom with a walk-in tub, adding a chair lift and other safety features may be needed. Price out the cost of remodeling and consider a Home Equity Line of Credit to cover this cost if cash isn’t immediately available.
Budgeting for everyday expenses
Discuss expectations up front and decide how much each of you can and will contribute to living expenses. Anticipate higher expenses such as buying more food and increased utility costs. Is your parent bringing a pet? Don’t forget to factor the costs of pet care into the new budget. If you’re going to chauffeur dad or mom to the doctor or around town regularly, you’ll need to include more gas money in your budget to cover extra trips.
Will you need in-home professional medical help or have to pay for your parent’s copays and prescriptions? Jot down a list of monthly, quarterly and annual expenses, then create a newly merged household budget.
Where will the money come from?
If your parent does not have much cash to contribute to household expenses, have them consider selling assets they are not using, like real property or an automobile. Proceeds can be placed into a money market share account to assist in covering budget costs.
Most parents don’t want to feel like a financial burden for their adult children. Your parent may agree to do minor home repair or take care of your children afterschool if they don’t have cash to contribute to their living expenses. Place the money you’re saving on childcare or home repair in an emergency fund or use it to cover your increased monthly expenses.
Keep in mind by moving your parent into your home it may reduce the amount of government aid they can receive. However, you may also become eligible for tax breaks or government monies. Consult a tax advisor for details.
Combining households with an older parent can be a joyous time, but also complicated by financial concerns. Be prepared. Contact LGFCU to review your financial plan so that your transition to a combined household can go smoothly.