How to Avoid Being a Financial Burden on Your Children

Planning, delaying retirement, and using your home as an asset are some possible solutions.

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It ranks right up there with sex, religion, and politics. Money can be a tough conversation across generations. That talk can be even more delicate as longer lifespans and market volatility strain retirement and extended-care planning.

Senior citizens and the baby boomers who need more money to fund retirement than past generations are worried about being financial burdens on their families. A 2010 survey of 2,151 adults conducted by consultant Age Wave and Genworth Financial found that, on average, respondents would ideally like to live to age 92, believe maintaining good health is twice as important as any other factor that comes with a long life, and are more than five times more worried about being a burden on their family than dying.

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Crucial family money talks don't have to be an agitated debate, just a fact-finding discovery between adult kids and their parents. Ideally, the discussion takes place as both parties are fully engaged in their respective savings and investing pursuits—and long before any financial or medical crisis pushes everyone into emergency action. Revealing expectations about which generation will cover the other and in what circumstance (if at all) is the primary goal. Clearly, no one expects either generation to leave the other out on the street.

"Baby boomers are getting better about it, but for the World War II and Korean Conflict generation, they were almost pathological with regard to avoiding talking about money. Families have had to change that," says Linda Leitz, certified financial planner and co-principal of Pinnacle Financial Concepts in Colorado Springs, Colo.

"We all have great pride when it comes to independent living," adds Leitz. "But the reality is that most of today's seniors will live long enough to reach a point where they can't live independently, and thus there is planning involved."

According to U.S. Department of Health and Human Services data, roughly 70 percent of adults aged 65 and older will need some type of long-term care during their lifetime. The average 65-year-old couple may spend $200,000 on healthcare in retirement. If one of them heads to a nursing home, that bill could top $500,000.

Costs are currently greatly outstripping incomes, putting added pressure on savings and investing. Genworth's 2011 Cost of Care Survey reveals that the median cost of care in a private nursing home room rose 3.4 percent over the past year to $77,745 nationally, well above the $49,777 in real median annual household income for Americans. The comparable annual cost for an assisted living facility is $39,135, up 2.4 percent.

Are there steps you can take now to ensure you'll remain financially (if not physically) independent well into your golden years?

[See How to Help Family Members Without Hurting Your Own Finances.]

Hard-working portfolio. One of the first myths financial planners like to debunk is the notion that you have to go super-conservative with your portfolio nearing and in retirement. More conservative than earlier? Yes. Ultra conservative? No. These days, most planners advise clients to remain in diverse assets that offer a fighting chance against inflation.

To better take on a lengthy retirement funding challenge, separate your portfolio into the "lifestyle" category (the necessities) and invest this portion in tax-advantaged and lower-risk options, such as 401(k)s, bonds, annuities, and non-traded real estate investments, says Erin Botsford, CEO of financial planning firm Botsford Group, and author of The Big Retirement Risk: Running Out of Money Before You Run Out of Time.

Then dedicate a portion of your portfolio to "hybrid" investing—budgeting for what you plan to spend each year on leisure, perhaps travel. This is the money you can afford to keep in slightly riskier and potentially better-performing assets, which might include master limited partnerships (MLPs), dividend-paying stocks, bonds, and a variety of alternative investments. Consider keeping a sliver of your holdings in daring growth assets, such as commodity ETFs, and keep emergency funds in cash (such as checking or savings accounts), Botsford writes.