Financial Wellness @ Work

What You May Want to Discuss Around the Thanksgiving Table

Thanksgiving is right around the corner, and if you are like most traditional American families, you’ll probably eat too much, watch a game or two on the TV, and simply enjoy spending some quality time with each other. For some families, spending quality time together happens regularly, but for many, including my own, it usually only happens around the holidays.  If that is the case for your family, one thing you may want to do this holiday season is discuss long-term financial goals. It may not seem like the most enjoyable topic of conversation around the dinner table, but with more and more uncertainty about the future, it may be one of the more important conversations you will ever have in your life.

Yahoo! Finance contributor Farnoosh Torabi recently wrote a response to an inquiry on the topic of how children should approach their parents about discussing long-term financial plans. In it, she offers ideas on ways to breach the subject and reminds us that most parents simply want to stay in control of things, whether it is their assets or their health care.  No matter how you start the conversation, here are some very important topics to discuss:

Retirement planning (if not already retired)

Our research suggests that only one in five employees is confident they are on track to reach their retirement goals.  A majority of employees have not even gone as far as to run a retirement estimate.  With projected shortfalls in Social Security and Medicare, coupled with a higher chance of living longer, now more than ever we need to shore up our nest eggs.  If your parents have not run a retirement projection, suggest an online calculator such as the one found here.

Investment planning

As of the time I am writing this, the Dow Jones Industrial Average is up 19% year-to-date, and if your parents are like most investors, they don’t mind watching their stock holdings go up.  But as we’ve learned in the past, what goes up eventually comes down.  It is not unusual for an investment portfolio to gradually become more aggressive as the stock market goes up, but if investors are not careful, their portfolio may become too aggressive, which often leads to emotional selling when a market correction occurs. Remind your parents of the importance of rebalancing, and suggest that they take advantage of auto rebalancing if such a feature is available for their portfolio.

Tax planning

One thing we can all agree on is not giving the IRS more than we have to.  If your parents have built up their emergency fund to more than enough, you may want to make sure they are aware of tax rules that allow for Roth contributions, even if their income exceeds the annual income limitations (see How to Get Around Roth IRA Income Limits).  Not only will qualified distributions be tax free, but if your parents held the Roth IRA for at least five years, distributions are tax free when you inherit the account.

Estate planning

Last and perhaps most sensitive is a discussion about end-of-life care and the disposition of assets.  If your parents have not already done so, they should prepare a last will and testament, a financial power of attorney, and a healthcare directive.  If they have life insurance, it would be good for you to know where the policy is kept and make sure the beneficiaries are up to date. You should also find out if your parents are prepared for any long-term care related expenses.  If not, you may want to direct them to http://longtermcare.gov/ to learn more.

Not only will good long-term planning increase the chance that your parents reach their goals, but it provides peace of mind and may spare you from having to support them financially later in life. You may not cover everything in one sitting, but at least you are attempting to create open dialogue about important matters. Now could you please pass the gravy?

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