Taking Care of Mom and Dad: Outliving Their Money Introduction

I never expected Mom to be around this long! Honestly, I expected her to go soon after Dad died. That's when she started having some health problems...and then she started going senile. Her doctor says it's non-Alzheimer's dementia. But now she'll be 88 next year and her health has gotten better. Her doctor says she could live another five years -- and I'll be pushing 70 by then. I hadn't been planning for her to live into her 90s. What if the money runs out? How will I take care of her? Dad did leave her some money...but I'm not sure how to make it last.

The main issue that older Americans face: Outliving their resources. Having enough resources to last through your life is everyone's ultimate financial challenge.

The issue can affect a person badly in either of two ways. First, an older person doesn't understand the risk of outliving resources and mismanages them -- spending too quickly when there may be decades left to live. Second, an older person becomes paranoid about the risk. The fear of living beyond his or her means becomes so strong that it warps an older person's ability to make good decisions about money.

You need to make sure that your parents have clear goals about what they need to live comfortably in their old age.

There are some basic ways to calculate your parents' needs and the resources they have, in order to estimate the time they have left and whether they are ahead of or behind the financial curve. These calculations rely on two kinds of information:

• standard longevity tables and some knowledge of your parents' health; and
• a rough understanding of the money-management tactics that apply to the needs of older people