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.

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

The Advisor’s Role With Your Older Client’s Successor Trustee

The Advisor’s Role With Your Older Client’s Successor Trustee

Jun 6, 2018 | aging investor

Most advisors understand that your aging clients have done estate planning and that at least some of their assets are in a family trust. If you have never discussed this state plan and trust with any client 65 and up, it's a necessity. Why?

Every person is at risk, at some point for losing the capacity to do the job of managing that family trust. The risk rises directly with aging. No matter how healthy and competent your client may be right now, and no matter how educated about finances, the risk remains. No one is immune. There could be a stroke, heart attack or other disabling illness that renders the client unable to do the tasks necessary for making financial decisions. And that most dreaded of all diseases, Alzheimer's can sneak up on anyone, with the chances of it being especially bad for a person 85 and up. Did you know that the odds of having Alzheimer's disease are about one in three, at least, by age 85? It’s downright scary.

Here is what every advisor needs to know about your client's appointed successor on the trust: you have to meet that person and establish a relationship with him or her. Otherwise, you will be groping in the dark if an emergency or cognitive impairment happens to your client.

When is the right time to find out who the successor trustee is if you don't already know? We recommend bringing up the subject at or near retirement. Your client is very unlikely to say to you, "Hey advisor, I'm retiring soon and we'd best discuss what happens if I lose my marbles". Not a chance of that, so we suggest you take the lead.

Here are the points that your client may resist, but that you need to bring up and some suggested ways to do that. This is a script you might use:

  1. At retirement, we all need to take a look at the long run, and how we could age. It is possible that any of us could become physically or mentally disabled at some point in the future. I need to know which people you trust and have appointed to take over for you in the event of an emergency or disability.
  2. Let's talk about the last time your estate plan was reviewed or updated. Are you still comfortable with the person you appointed to be your successor trustee? If so, I need to meet him/her at least by phone. In case of emergency, I need to be able to discuss your portfolio with your appointee.
  3. As a responsible person, I'm sure you would not want to leave managing your portfolio to chance should you have an accident or disabling illness. I need to get your written permission to communicate with your estate planning attorney and your successor trustee. I have a sample letter here for you to sign, granting that permission to me in case of emergency or illness. Does this look all right to you?

You can learn more about best practices with your aging clients at AgingInvestor.com where we cover the gamut of things you are likely to see. Get your Ten Red Flags of Diminished Capacity Checklist here.

 

Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com

Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.

Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.

They are the authors of "Succeed With Senior Clients: A Financial Advisors Guide To Best Practice," and "Hidden Truths About Retirement And Long Term Care," available at AgingInvestor.com offers accredited cutting edge on-line continuing education courses for financial professionals wanting to expand their expertise in best practices for their aging clients. To learn more about our courses click HERE
The DOL Fiduciary Standard & The Future: Your Client’s Heirs Are Watching You

The DOL Fiduciary Standard & The Future: Your Client’s Heirs Are Watching You

Mar 16, 2018 | cost of aging, cost of long term care, financial advisors

With the recent Texas Court of Appeals decision striking down the authority of the DOL to enforce its fiduciary standard, the industry remains enmeshed in its own conflict. Some firms embraced the concept of acting in a client's best interests for retirement accounts. Others fought it tooth and nail. What about your own clients if you are a broker and do not have to follow the DOL rule? Do you think no one is going to question you, your advice, or your commissions and fees?

With the amount of publicity generated in the long fight to get the rule passed in the first place, and the aftermath efforts to have it overturned, the public is more aware than ever of the need for transparency in what you recommend and in what advice you offer. Some clients may trust you and never ask a question about why you suggest a product, but don't count on that being universal. The public's perception of what you do is changing and in a sense, the cat is out of the bag.

In their marketing, firms that embraced the fiduciary standard can brag about it and when you have rejected the premise of prioritizing a client's best interest, you can't brag about it. In fact, prospects may be asking more and more often whether you are a fiduciary. What are you going to tell them?

Here at AgingInvestor.com, we educate advisors of all stripes about managing aging clients, particularly those with diminished capacity. Our associated site, AgingParents.com, is a resource for those with aging loved ones. At AgingParents.com, we advise and counsel families about watching over their aging parents' finances and we strongly encourage them to review what their elders are doing with their money. When they follow our advice, they are going to be looking at what you've done with the elder's portfolio. If you adhere to a fiduciary standard, no problem is likely. If you don't, beware. Your client's heirs are gradually assuming power over their parents' investments as their loved ones age and become less capable of financial decision making. Dementia is a frequent cause of loss of capacity. Often the adult children can take over as successor trustees or agents who are appointed as power of attorney long before the parent passes.

About 70% of women change advisors after the death of their spouses. Their adult kids will be encouraging them to find someone with a fiduciary standard. Perhaps large numbers of adult children will switch advisors before the death of the patriarch, once they scrutinize what choices you have recommended. They may even get a second opinion about your work.

This is merely a caution to any advisor who does not adopt a fiduciary standard, regardless of whether it is mandated legally. The next generation is looking at a parent's portfolio with fresh eyes and you may lose clients because of this. Keep the older clients in your book  for life and future generations by staying the course as an advocate and making decisions in their best interest, always.

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Add Value By Offering Family Meetings For Aging Clients

Add Value By Offering Family Meetings For Aging Clients

Nov 13, 2017 | aging investor

Some advisors don't have any clients over age 75 and some of you have a book full of them. No matter what you have now, it is certain that if you intend to keep clients long term, you'll have elderly among them. Here is an important way to add value to what you do for them: meet with them and their intended heirs to discuss finances and aging issues.

Initiating family meetings about investments is not something most people are doing all by themselves. They need a nudge and you are the right person to give that nudge. What's the big deal? Don't underestimate the importance of family communication about their assets. Lack of trust and communication between generations causes 70% of wealth transfers to fail.

What that means is that the family wealth is lost when it gets into the hands of the first generation of heirs to follow the matriarch and patriarch. They aren't ready for and don't handle it well. You may be helping your client to build and maintain wealth but the client is not preparing his heirs to receive it. You can certainly help by offering to conduct meetings and explaining the strategy of wealth building and maintaining assets that you do.

There is more to the discussion in a family meeting than investments and the passing on of assets. There is the sometimes long, drawn-out period of an elder in failing health. Does the spouse know what to do and how much things will cost in providing long-term care to a loved one? Do the adult children know? It can get quite complicated if your client, like most people chooses to age in place at home rather than go to a facility to get needed care. Hiring, managing and supervising home care workers is no small task for anyone. You can offer factual information.

When dementia is an issue, you could be looking at a client living with it for 20 years. Each year that passes with this fatal brain disease is a year of greater dependency on others to get by. The possibility of long-term care needs discussion among family members. Starting the conversation may not be within your comfort zone but the skills of how to talk about these emotional subjects can be learned.

Most advisors proclaim that they want to add value to their services and they need to show how they are better than the competition. Have you considered that you can promote your ability and willingness to protect your client's financial safety for life as a selling point? You go way past the "successful retirement planning" line to the things that worry people about aging. You educate, collaborate, and coordinate discussions with their families and help them overcome the resistance to delving into aging issues no one likes to talk about. It is a part of your potential services you should not overlook nor avoid.

To learn some practical tips on how to conduct successful family meetings, check out our anytime on-demand online course here. It's CFP accredited, one hour, and very affordable. Join us today!

 

Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com

Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.

Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.

They are the authors of "Succeed With Senior Clients: A Financial Advisors Guide To Best Practice," and "Hidden Truths About Retirement And Long Term Care," available at AgingInvestor.com offers accredited cutting edge on-line continuing education courses for financial professionals wanting to expand their expertise in best practices for their aging clients. To learn more about our courses click HERE