Retirement For Clients With Modest Portfolios—Making Money Last

Retirement For Clients With Modest Portfolios—Making Money Last

May 6, 2019 | aging, aging investor, elder investor, elderly, finances for elders, financial advisors, investor, resources for senior, resources for seniors, retirement planning, senior investor, seniors finances

Retirement For Clients With Modest Portfolios—Making Money Last

By Carolyn Rosenblatt, RN, Attorney, AgingParents.com

The U.S. Census Bureau projects that by 2060, nearly twenty-five percent of Americans will be age 65 and above.  At the same point, the number of people age 85 and older will triple. What will they all be doing in those long retirement years? If they live into their 90s, will they run out of money?

Many who have not saved enough ultimately find new jobs. Working in retirement is something to discuss with clients who are aging, have set a retirement date and have no answers to what happens if they outlive their savings. The advisor is not a miracle worker who can stretch their dollars beyond what is reasonable with prudent investments.

Maybe some clients will consider seeking a “not too big” job that is relatively easy, compared with what they did in a prior career. For the advisor with a client whose invested assets have a predictable length that does not match life expectancy, it is wise to help them plan how to keep their dignity as they live longer than they thought possible. That is through producing some earned income, even if modest.

If an older client is determined to retire from a stressful job, that’s fine. No one needs high pressure forever. But every job is not stress filled and some are more satisfying than others. The stereotypical image of a retired elder serving fast food is not for everyone, especially for educated clients who may have more interesting choices. For some retirees, long stretches without structure lead to isolation, boredom and even to depression. The routine of some kind of work relieves that risk and can bring enjoyment a person never had in the prior career.

Some may need the double benefit of bringing in money while finding ways to be with others. Elders certainly don’t need to go from one job to another at the point of retirement, but the holistic retirement plan for a person with modest investments should include some form of earning money through work. Your client may expect that family is willing and able to provide financial support if the client runs out of money. This prospect does not appeal to many younger families who are still supporting their own children and saving for their own retirement. They fear the idea of having to support aging parents and rightly so.

Imagine a client finding something to do in retirement that pays and something the client likes. Here’s an example.

My 30-something daughter is a regular Uber user who likes to converse with her drivers in San Francisco. She reports that three of her drivers in past two weeks were over age 65.  One was age 80. He told her that he had retired from a union job at age 65. His wife had passed away and he got withdrawn and bored, having no sense of purpose. He worked part-time as a warehouse floor worker and cashier. He liked the walking and being around people. He worked another few days a week driving which he enjoyed because it kept him sharp, using the app, navigating around the city, keeping track of the best ways to get places, and most importantly, he liked chatting with his passengers.

Longevity creates a pool of older workers available either part-time or full-time, not necessarily expecting a benefits package and having no lofty career aspirations. Employers in a broad variety of service fields can benefit, as can the potential workers. We have met elders at AgingParents.com who have gotten a teaching credential after retiring from a high pressure career and are happily teaching part-time. We have found others who are mentoring in businesses, working in nonprofits, doing childcare, working in retail and otherwise using their natural talents while earning a paycheck. These were all part-time positions and all were glad to be doing them.

Discussing the possibility of working with your older clients should include when in retirement the client should consider doing it. Physical and mental loss of ability can preclude work of any kind, even volunteering. They can’t necessarily count on being able to work in the later years of retirement when they may run low on cash. Someone might be fine at 70 and impaired at 85. The time for planning an appealing part time job is in the earlier stages of retirement when the client is feeling good and is not impaired by health problems.

If your client has a modest portfolio that with a conservative drawdown would only last 20 years and life expectancy is 30 years, you need to encourage working. Take the axiom “know your client” to a realistic individual plan for living long with sufficient means.

If you have trouble with these sometimes emotional, difficult conversations, contact us at AgingInvestor.com for a private one-on-one consultation so you can get the job done. Click HERE to find out more how we can help you.

Clients Without Family: Financial Planning With “Elder Orphans”

Clients Without Family: Financial Planning With “Elder Orphans”

Apr 25, 2019 | aging, aging investor, declining health, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, financial judgement, handling money for seniors, health, senior investor, seniors finances

Clients Without Family: Financial Planning With "Elder Orphans"

Every financial advisor will eventually come across an aging client who is essentially alone in the world. The elder may be single, widowed, or otherwise without a partner. Some are members of the LGBTQ community and never had children. Others were childless, or have lost children and significant others in their long lifetimes. The end result is that the usual support systems that exist for others are not available to these clients when they may need support the most.

Some refer to these elders who are alone with no family as "elder orphans".

Heidi is an example. She has a financial advisor who has worked with her over decades. He referred her for advice, which she wanted and I visited her at home. She is 90 and lives alone in her own house, which she owns outright. She has a modest portfolio and is comfortable. She was widowed 20 years ago and she has no children, nor any relatives in the U.S. She relies on her best friend and neighbor when she needs help. This need is increasing now that her vision is impaired. When I spoke with Heidi I asked her about her one best friend. She mentioned that this neighbor is 86, but is "doing pretty well". Heidi had recently fallen twice in her home, but fortunately escaped serious injury from those falls.

Heidi has a will and a trust, power of attorney and healthcare directive. The appointed person on those documents is her cousin who lives in another country. If an emergency occurs, it is not at all clear who would be available to assist her.

This situation is a disaster waiting to happen. The risk of another fall, vision problems that will likely prevent her from driving, and the age-related risks to her friend the 86 year old who could also become disabled or unavailable are all looming. I ask if her financial advisor has discussed the future with her, possible other living arrangements, a local person for a healthcare agent and what to do when she can no longer drive. "No" she replies, "we've never gotten into that".

I urged Heidi to contact her financial advisor right away so plans could be made and her safety assured. She also needed to speak with her estate planning attorney to update her documents, ensuring that an appointed local person had authority to assist in any crisis or if Heidi loses independence. She is close to needing help now.

Think about your book of business and whether you have any "elder orphans" in it. If so, there are things any responsible advisor should address with such clients. Here are three essentials for every advisor's discussion.

  1. First, the legal documents. The advisor can get permission from the client to contact the estate planning attorney and find out what plans exist for an appointed person to step in and take over the reins when or if the client becomes impaired. a local appointee is critical. Someone has to be able to make financial decisions if the client loses the ability to make them independently.
  2. Next, alternative living arrangements. A 90 year old with impaired vision who has fallen at home may need to consider options of where to live with help available onsite. The financial advisor knows what assets are available to pay for a choice such as assisted living. The advisor should bring this up and ask the client about what he or she wants.
  3. The need for a local appointed person to be not only the advisor's trusted contact, but your client's person to reach in the event of an emergency. An appointee in another country is not going to be of immediate help. Explore other choices.

The advisor needs to expand the limits of the usual role of simply managing the money with elder clients who do not have any family. To keep you on track and aware of the special planning these aging investors need, get your free checklist of points to address at AgingInvestor.com. With it, you can be sure of what you need to cover in your planning conversations with you "elder orphan" clients. Download Your Advisor's Seven Point Checklist— Best Planning For Aging Clients With No Family now so you can excel in appropriate future planning.

Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

Advising Your Longest-Lived Clients

Advising Your Longest-Lived Clients

Feb 21, 2019 | aging, aging investor, cost of aging, cost of long term care, declining health, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors, health, long term care insurance, resources for senior, resources for seniors, retirement planning, senior citizen investor, senior investor, seniors finances

It used to be that we could think of retirement in a kind of predictable way. People lived into their 70s perhaps, and we measured retirement by that. We used tables, algorithms and other tools to tell us how much we should save and how much we could spend in retirement. And it was all based on assumptions that may no longer apply.

Life expectancy for a woman in the U.S. in 2018 was 84 years. For a man, the figure is 80 years. Those averages do not take into account the fact that well educated and financially secure people live longer than average. This is presumably based on the notion that people who know what a healthy lifestyle is and who can afford the best medical care will outlive those who do not have those advantages. In my own county, for example, which has a high proportion of elders compared to other counties in California, one wealthy city shows a life expectancy for men of 93 years.

Suppose that your aging client lives to be 93, having retired at age 65. That's 28 years of retirement. What the algorithms don't clarify is what you, the advisor needs to plan for with your client during the last decade of life, from 83-93.  No formula is going to help you with the individual discriminations you need to make concerning your client's risks for care and how to assess and plan for them. They can be a substantial cost, out of pocket, not covered by Medicare, and absolutely necessary.

The way we age is determined by two main factors: hereditary tendency and lifestyle. Our genetic makeup directs only about 30% of the equation. The other 70% is driven by the way we choose to live our lives.  There are plenty of folks who think that a healthy lifestyle is just too much bother. They avoid exercise, eat whatever they feel like eating, never learn to manage stress and say they'd rather die a few years sooner than give up their habits, which their doctor advises against.

Here's the problem with that belief. Leading an unhealthy lifestyle does not just cause you to "die sooner". Rather, it may likely cause you to live with impairments, disabilities and a need for expensive long term care for chronic health conditions. These can go on for decades.

Take obesity, for example. Over two-thirds of Americans are overweight or obese. Obviously excess weight increases our risks for all manner of health issues, including diabetes, heart disease, high blood pressure, and strokes. When a doctor makes a diagnosis of one of these, the person doesn't typically just die on the spot and save a lot of expense later on. No. The medical providers will keep the person going with medications, surgery in some cases, lots of diagnostic monitoring and trips to the doctors. These chronic conditions usually lead to disability late in life, particularly when more than one of them exists in the same person.

If you have aging clients, you definitely need to understand health risks in a basic way, so that you can help your clients set aside funds for the care they are likely to need in the last years of their retirement lives.  All of the chronic conditions I mentioned are manageable with an effort toward a healthy lifestyle but for those who do not wish to do the work involved, you can bet on a likely need for long term care. While you can't predict the future, you can plan for risk. It's what you do.

My own mother in law had high blood pressure and chronic kidney disease for decades. She worked vigorously at diet, exercise, social activities and other components of a healthy lifestyle. Heredity was not on her side. She lived to be 96. During the last 3 years of her life, she needed help. She moved to a seniors' community where help was available and eventually, she paid for private caregivers. Her cost of living at the last part of her life was $120,000 a year. If this were your client, would he or she have at the ready $360,000 to pay for care? How about if there was no pursuit of a great lifestyle? The care expense could easily be 10 years.

The takeaway here is that advising for longevity needs to include the skill of assessing fundamental health risks that create a need for out of pocket, long term care. You don't need to be a doctor and you can't predict everything, but you can do what is reasonable to help your client plan. Ask the right questions. Keep track of your client's general health picture.

To learn more about what to look for and what to ask, get Hidden Truths About Retirement & Long Term Care, available at AgingInvestor.com and on Amazon.

By Carolyn L. Rosenblatt, RN, Elder law attorney, AgingInvestor.com

Are Financial Advisors Ageists?

Are Financial Advisors Ageists?

Feb 13, 2019 | ageist, aging investor, elder investor, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors, investor, retirement planning, senior citizen investor, senior investor, seniors finances

In a conversation with a prominent retired financial advisor from a large institution, I heard the following:

“Financial advisors are not interested in retired people. They’re taking money out. The advisors are interested in investors who are putting money in, not the other way around.”

Just hearing this generalization, whether true or not, gave me a kind of sick feeling in the pit of my stomach. Millions of Boomers fall into this category of retired. If their advisors lose interest in them when they are no longer increasing their investments, where does that leave the retired person in need of advice? The generalization sounded like age discrimination.

As a professional devoted to the well-being, financial safety and quality of life of older adults, I can only hope the statements I heard about lack of interest are untrue. I have met plenty of financial advisors who are indeed interested in maintaining their relationships with their oldest clients, not just based on whether the portfolio is increasing. They actually do care about the clients. For them, it’s not just an empty advertising slogan. I hope this is the majority!

Millions of clients served by advisors will retire soon enough or these clients are already in that phase of their lives. Competent financial advisors who have the ethics they hold themselves out as having will increase their skills in planning for lifespans for some of their clients who will live into their 90s and beyond. No logarithm nor mathematical table will do a complete job of this.

Here are some of the areas involved in longevity planning that the best advisors will fully understand by their increased training and preparation:

  1. Social Security, and how to maximize the benefit.

Particularly with married couples, this requires specialized knowledge in order to give appropriate advice. When I asked my own long time B-D at our financial institution about it, he was very vague and couldn’t even refer me to anyone who could answer questions my husband and I raised. We fired him. We found an independent advisor who was very knowledgeable about Social Security. We referred three other people to this new advisor in the meantime and all became his clients. Take heed. Word spreads.

  1. Long term care planning.

Telling a client who is reluctant to purchase long term care insurance that self-insuring is a choice is fine, but the longevity advisor understands how to address the risk of needing long term care and has actual figures at hand to spell this out for the client. If this is not your area of expertise, you can get a clear understanding of the costs of all types of long term care in my book, Hidden Truths About Retirement & Long Term Care. About 70% of people will need some long term care at some point. Know what it costs.

  1. The nexus between financial planning and estate planning.

It never fails to surprise me about the disconnect between the financial advisor and the client’s estate planning attorney. Both should be working together to ensure that the client’s later years are financially safe. Successor trustees should be known by both the advisor and the lawyer, so that if a client begins to show cognitive decline, they can coordinate efforts to have the named successor take over decision making at the appropriate time. If you are worried about confidentiality of protected information, get the client’s permission in advance of any impairments, to communicate with the attorney involved. In other words, do this at the time of retirement.

  1. Targeting relationship building with the next generation.
  2. A loss of interest in a retired client deprives the advisor of a huge opportunity.                                    That is, to establish a connection to and trust with your retired client’s heirs. Have you even spoken with any of them at the point of the aging investor’s retirement? If not, you have an explanation for the reason why about 80% of the heirs move their inherited assets to someone else after the patriarch or matriarch dies. The heirs can get to know you well in advance if you invite them, with your client’s permission of course, into the planning conversations. Don’t lose that chance.

In a nutshell, the older client needs the skill the financial advisor has and retirement should not change the advisor’s interest level. Keeping clients for life takes an understanding of longevity. Make it your business to do just that.

Carolyn L. Rosenblatt, RN, Elder law attorney, AgingInvestor.com

Planning for Longevity: It’s Not About “Housing”–It’s About Care

Planning for Longevity: It’s Not About “Housing”–It’s About Care

Feb 5, 2019 | aging, cost of aging, cost of long term care, custodial care, declining health, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors, health, long term care, nursing home, resources for senior, resources for seniors, retirement planning, seniors finances

The financial services industry often refers to retirement planning for the future with aging clients in terms of "housing choices". This reflects some degree of misperception about what happens as we age. For healthy people of retirement age, there is little interest in planning for the need for care and planning for loss of independence. People usually resist talking about it. We don't choose to lose our independence. It happens. It is up to the advisor to raise it if you want to advise for longevity. The subject is emotional and can be difficult.

Where we need to get help when we can't be independent any longer is really a choice about care, rather than housing. This is not house shopping.  Does a client want to pay for care in her own home when that time comes? Most would say yes, they want to remain at home. They then must calculate what a home care worker costs and whether that is the best way to receive the help they are likely to need one day with their activities. Can the resources be available to enable that choice of where care will be given?

If an elderly client is living alone and can't manage at home anymore without assistance, there are indeed choices, often driven by the degree of care needed and the cost of getting it.  Elders may not be interested any longer in maintaining a house, cooking, shopping, and other necessary chores. For them, assisted living may be desirable because their daily lives will be different and free from the burden of the household that has become unmanageable. The choice to go to assisted living is usually not one a client is going to make because of wanting to downsize into an apartment for its own sake. Rather that is the price of going to the place where assistance is on hand. Again it is to receive care, not because they love the idea of not having their home any longer. For many elders, downsizing from a house to an assisted living apartment is a difficult adjustment, required because of physical or mental changes of aging. From that perspective it is a choice forced upon them.

A factor every advisor should know is that the likelihood of living alone increases with age. Almost half of women age 75+ lived alone in 2010, according to the Institute on Aging. The "choice" of a different living arrangement is brought on by safety and care concerns, often raised by their adult children.

It will be good for every advisor who wants to help clients plan for longevity to consider that their role is to introduce the issue of possibly needing care in the future, as about 70% of us will one day. If your client has you in her life, she already has housing. Planning for "housing" is a misnomer. Focus on places and choices where care can be delivered. Having no care plan can be disastrous, as sudden health crises can force decisions without considering the cost of care in advance.

In helping to educate your client about where he or she can receive care, the costs of all the offerings available in most areas are spelled out in detail in our book, Hidden Truths About Retirement & Long Term Care. You can develop quick expertise on the subject there. Skilled advice about longevity for your aging clients requires knowing your numbers, what care options are available where they live and how much they can expect to spend for that care. Smart advisors gather the data before a crisis happens and urge clients to look at it with them.

By Carolyn L. Rosenblatt, RN, Elder law attorney, AgingInvestor.com