It Takes a Family to Plan a Retirement

Financial Advisor Jason Mardinly co-wrote this report.

NEW YORK ( TheStreet) -- It is no secret that we have an aging population: Each day 10,000 baby boomers turn 65 and start collecting Social Security and Medicare benefits. This trend is expected to continue for the next 19 years.

However, what's less well known is that the vast majority of retirees are underfunded for retirement. The reasons for being underfunded are many: lack of savings, poor investment choices, excessive spending or unforeseen expenses.

No matter what the cause, it is becoming clear that neither they nor we can rely on the federal government to take ample care of our senior citizens.

In fact, it truly does take a family to care for their elders and we are seeing more and more situations where children are pitching in to help out parents with both care and financial support.

To facilitate this, having annual family financial meetings is a critical yet simple step that can help a family find the best available solutions for their finances. Every situation is slightly different, of course, but we see two specific areas that seem common to most situations where it pays to be proactive in getting all members of the family on board, before a crisis hits.

The key areas to discuss are long-term care and real estate because they are two areas that often cause the most significant pressure on the next generation of a family.

One of the biggest financial burdens of a retiree is long-term care, which can run around $100,000 a year with an average stay of three years. Who is going to foot the bill? Who is going to manage the parents' transition into a nursing home? With the right planning, the next generation can provide the care needed without a slew of sudden emergency expenses.

As a part of the family planning process, options for long-term care insurance should be investigated. Traditional long-term care insurance is a use-it or lose-it type of insurance policy with premiums that are inexpensive relative to the benefit amount. Another option is a life insurance policy with long-term care benefits, in which case you will use the long-term care insurance for elderly needs or a loved-one will receive a death benefit upon your passing.

Thinking about long-term care needs today can save you both dollars and heartbreak and/or financial discomfort in the long run.

Next is real estate: Who is going to be responsible for the care and disposition of the family home? What is the plan for the succession of the family vacation home? Who will take care of the maintenance, upkeep and taxes from year to year? Who will take the tax deductions and/or rental income, if any?

Real estate can be part of a family's financial solutions since it can be leveraged to help out the underfunded retiree. This could take several forms, but one is by having a working child move in and do a buyout of the home and another is a reverse mortgage.

Of course, these are idealized solutions. In real life there are usuallymore complications, especially when more children and grandchildren are involved.

Often the party that does not want his or her parent to give up the family home is not the party that is dealing with the day-to-day care issues. Similarly with vacation homes, it's usually the side that frames the issue in terms of memories, nostalgia and emotion that is the least able to step up and take on the responsibilities in terms of finances and time commitment.

All of these issues can be dealt with in advance of an emergency, which forces the issue and heightens the emotions.

When trying to set up an advance meeting, communicate that the goal is to get to a win-win solution for everyone: to provide financial relief and liquidity to the retiree and gives all adult children an opportunity to weigh the pros and cons of various solutions.

Too often we see people think only in terms of potential inheritance and forget about the potential expenses for their parents or conflict within the family that can arise. For all of these are reasons and more, it is important to sit down and develop a plan for your family before it is too late.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Steve Cordasco is a principal at Cordasco Financial Network and host of CBS Radio's The Big Money Show, a weekly radio program on 1210 AM WPHT.

Cordasco has been helping investors reach their financial goals for over 20 years. A graduate of Temple University¿s Fox School of Business, where he earned a Bachelor's degree in finance and real estate, he is a Registered Investment Advisor and Registered Representative. He holds the Series 7, 63, 65 licenses along with an insurance license.

Barron's, a national financial newspaper, continues to rank Cordasco in the top 10 for Pennsylvania on its annual list of America¿s top financial advisors. Cordasco maintains strong ties to Temple University, where he is an associate professor in Temple¿s School of Engineering. He is also involved with charitable organizations including, Cooper Hospital Foundation, Christ the King Regional School Parish Council and School Board, Temple University Fox School of Business Investment Association.

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