How can I balance aging parent care and retirement?

Carissa Lucreziano, Vice-President of Financial Planning and Advice with CIBC, says that Sophia and Carmen’s situation is a common one. CIBC’s research shows that 63% of Canadians over the age of 30 are already covering or expect to cover some of their parents’ or in-laws’ expenses in the future. Nearly half of caregivers say they’re spending $5,000 per year out of pocket to support their aging parents.

“The financial impact is significant, not only today, but you have to think about it in future dollars,” Lucreziano says, since costs will rise with inflation. “This is something that’s becoming really important in core planning considerations and needs to be built into your overarching financial plan.”

That plan needs to include both the time and financial consideration of caring for aging parents, how siblings and others may be able to help and an awareness of the financial assets your parents can access.

“Early planning is so important because when this hits, you often don’t have the capacity to deal with all of this stuff at once ― physically and mentally,” she says. “You’re trying to build your future and your goals but also respond to the immediate needs of your older parents.”

Planning for the care of aging loved ones can be particularly challenging because you can’t predict what illnesses or health issues parents might face in future, Lucreziano says. These struggles can be compounded by the current economic environment, as rising inflation hits expenses from groceries to health care and market volatility makes people feel less financially secure, she adds. “This combination can create the feeling of being squeezed from all angles.”

Working with a financial planner will help you understand the returns you need to achieve through your investment portfolio to meet the income requirements for your own goals while supporting aging parents, Lucreziano says.

An advisor is also a valuable guide and steady hand amid an “emotionally charged” situation, she notes. They can also help bring the entire family into the discussion. According to CIBC data, only 40% of Canadians are having these family-wide discussions about finances and care as parents age.

“Your financial plan is a roadmap, and you need that professional assistance to help you keep it organized and help you feel confident that this plan is working,” she says. “Those trusted relationships will help you through that journey.”

Tyler Proctor, a Financial Planning Consultant with CIBC, says adult children should have conversations to map out care scenarios while their parents are still healthy because health situations can change quickly with a fall, illness or cognitive decline.

It’s important to understand the assets parents have, such as savings, insurance and government benefits, and any gaps in their coverage.

“These are uncomfortable discussions potentially, but it’s important, so it needs to be prioritized,” he says. “The earlier you plan for it, the more options and flexibility you’re going to have and the less stressful these life moments will be.”

Once the full financial picture is known, a financial planner can look at various scenarios and evaluate potential plans, Proctor says. CIBC’s GoalPlanner tool allows advisors to look at returns, retirement dates, care options and costs and model multiple goals and options simultaneously.

“This is where financial planning tools can be helpful, because you can model a base scenario and then look at different scenarios and stress-test it and see where the cracks are,” he says.

A financial planner can help build a plan “that prioritizes essentials for both generations,” he says. “You have to acknowledge that you can’t sacrifice your own retirement security. So, this is where it’s about finding a middle ground where everyone’s core needs are met.”

Proctor recommends creating a dedicated caregiving budget that will outline costs and all sources of income such as investments, home equity and government benefits, as well as creating a caregiving reserve, like an emergency fund, to cover unexpected costs.

“The goal is to make parental care part of your overall financial plan, rather than letting it be an unexpected drain down the road,” he says. That pre-planning can help ensure there’s room for retirement goals like travel and hobbies.

Once you get a plan in place, you can revisit it regularly and modify it if required, he adds.

Working through these issues with an experienced financial planner who’s an unbiased third party will help reduce stress and anxiety through the process and boost your confidence that you’ll be able to handle the financial demands of the future, Proctor notes.

“Knowing you have a road map and working with a professional you can speak with as things change down the road makes a huge difference in confidence and peace of mind.”

Want to learn more about how you can support your aging parents while still funding your own retirement? Book a meeting with a CIBC advisor to create a personalized plan.