Projecting an Aging Parent’s Finances


In assisting my mother-in-law with her finances, one of the things I’ve done is to project how long her savings will last. I’m monitoring her income, spending and savings to ensure she is able to live comfortably now and still has enough to cover future potential living and care expenses. Since it may be of help to those of you who are either caring for or expect to assist an aging parent or are entering/in retirement, I’ll explain what I’m doing. (It can also work for those of you who want to create your own retirement budget.)chart

First, a brief background. One risk that most of us face is longevity. While we all desire to live for as many years as possible, longevity comes with the challenge of financing it. The longer we live, the more income we need. Longevity risk is therefore the chance of outliving one’s savings. It is a particular risk for those who lack enough in guaranteed income (Social Security, pensions, annuities, etc.) to cover their current and future expenses or who do not have enough wealth where longevity risk isn’t an issue.

Actuarial tables provide estimates of lifespan, but it is prudent to plan beyond those tables. While there is certainly an upper limit to how far beyond you should plan—Wikipedia lists fewer than 50 Americans who are currently 110 or older—an adequate margin of error should be factored in. Even living just five years longer than anticipated (e.g., 95 instead of 90) can put a strain on finances. At the current cutoff date on my projections, I allowed for enough of a cushion so that if we have to extend the forecasting out further, we can.

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AAII Sentiment Survey

Optimism among individual investors about the short-term direction of the stock market rebounded, rising above its historical average. More about this week’s results.

This week’s results:
  • Bullish: 43.1%, up 15.2 points
  • Neutral: 27.8%, down 5.1 points
  • Bearish: 29.2%, down 10.1 points
Historical averages:
  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

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The Week Ahead

Dow Jones industrial average components Travelers Companies Inc. (TRV) and Microsoft Corp. (MSFT) will report earnings on Thursday. Joining them next week will be 33 other members of the S&P 500 index. Most of the companies reporting earnings next week will be mega-cap companies.

The week’s first economic reports will be May business inventories, the July Empire State Manufacturing Survey and June retail sales, all of which will be released Monday. Tuesday will feature the July housing market index and June industrial production and capacity. June housing starts and the Federal Open Market Committee’s (FOMC) periodic Beige Book will be released Wednesday. Thursday will feature the July Philadelphia Federal Reserve business outlook survey.

Federal Reserve Chair Jerome Powell will give his semi-annual testimony on monetary policy to a Senate committee on Tuesday and a House committee on Wednesday.

The Treasury Department will auction $13 billion of 10-year inflation-protected securities on Thursday.

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