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

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

Your Aging Clients’ Darkest Secrets: Addiction and Substance Abuse

Your Aging Clients’ Darkest Secrets: Addiction and Substance Abuse

Jan 25, 2019 | aging investor, financial advisors, investor

Do any of your older clients have a problem with alcohol or addiction? You may be surprised at the prevalence of these problems in our older population.

Opioid addiction is not just about young people. Some sources tell us that opioid dependency is present among people of all ages, which can include your aging investor clients. According to a treatment facility exclusively for adults over age 50, the number of adults over 50 with substance abuse problems will double from 2.5 million in 1999 to 5million in 2020.

Why should this matter to you, as an advisor? There are several reasons why this client health issue is important, particularly in retirement planning. First, any substance abuse problem can affect financial decision-making capacity. Dependency can lead to desperation, related physical issues added to existing age-related issues and loss of capacity to make reasonable and necessary judgments about any investment. Further, it can destroy family relationships, just when you may need family members to get involved in helping an older client make essential decisions about the portfolio and needed adjustments.

Your aging client may not tell you about being substance dependent but sometimes you can see the signs. They may confess to "a bit of drinking too much", or feeling depressed about their future. Perhaps the client comes to your office reeking of alcohol. Or you see them taking pills right in front of you, with a shaking hand. That behavior doesn't look to you like just some benign blood pressure pill or the like. There's a frantic air to it, needing that pill fix. You can't be sure but your gut tells you something isn't right. Listen to your gut.

Elders with a drinking problem are not often talked about but we certainly hear about the issues they cause at AgingParents.com, where we work with families to solve problems with the elders and their adult children. According to publications at the National Institutes of Health, prevalence rates for older-adult at-risk drinking (defined as more than 3 drinks on one occasion or more than 7 drinks per week) are estimated to be 16.0% for men and 10.9% for women. There is also a substantial proportion of the older-adult population who are binge drinkers (generally, 5 or more drinks per episode). This is not some small problem among us.

You're not a doctor, nor a mental health professional. Why should you care? Should you do anything about a client who appears to you to show signs of substance abuse risk? It can affect your client relationship if you do nothing. Your client can accelerate age-related physical decline faster with substance problems than if they aren't part of the picture. If they decline too much, you can't work with them. If the client can't communicate or can't make decisions, you may have to get rid of the client and the fees you earn on managing that portfolio. The client can ruin your connection to them.

Have a plan

You can think ahead and develop a plan if you suspect these issues are affecting your client.

One essential strategy involves being prepared to reach out to your client's family or close friends for help. Many, though not all investors have done some estate planning. Often they wanted to protect their legacy and had a trust and will drawn up by an attorney. Imagine that all their financial assets you manage are in a trust. The trust will name a successor to your client, who is the person who decided what the trust should contain. The successor trustee can assume authority while your client is living, when he or she becomes impaired. Trusts are written in many ways with no standard applied to when an impaired trustee, your client, must or can step down and let the successor take over.

What to do first

You can speak with your client about whether they have done estate planning. This should be part of your job anyway. You don't want them to fail to do this and have too much of their assets unnecessarily given to taxes after they pass or have them go where the client didn't want them to go. Educate them. That's what you do as part of your services. While you are on the question, find out whom they've appointed as a successor trustee (assuming there is indeed a family trust). Then ask for permission, in writing to communicate with that successor trustee, whom they chose, "in case of emergency" or some other event that may cause them to be unable to function, such as a stroke. For help in getting the permission right, reach out to us at AgingInvestor.com. We can help!

How to use permission to communicate with a third party

That permission will give you one essential thing: the ability to tell the appointed person that you are worried about what you have observed (be specific; e.g., strong odor of alcohol, forgetting appointments, etc.). You can simply request their help. It's up to them to take it from there. You may not be able to solve any problem your client has but with this kind of communication, you are doing all you have a right or obligation to do to be of service. And who knows, your contact with the right and motivated appointee, often a family member, could be the trigger that starts their stepping in to assist with financial decisions.

Try this and you'll sleep better at night rather than worrying that your impaired client may do something dumb with their money, and expose you to scrutiny by heirs for your failure to act. This simple and proactive step can apply not only to a client you think may have a problem, but to any aging client. Make it your practice. It can prevent your loss of management of the client's assets.

Where Will Your Client Live In Older Age?

Where Will Your Client Live In Older Age?

Jan 18, 2019 | aging, aging in place, aging investor, cost of aging, declining health, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors, health, long term care, resources for seniors, retirement planning, seniors finances

Most advisors who even ask this question of their retirement-aged clients never spend time on it. About 90% of those asked say they want to remain in their own homes as long as possible.  That sounds fine. Until one faces physical decline, cognitive impairment or both. The advisor providing competent guidance about financing aging at home had better know the facts.

None of us like to think about losing physical ability or needing help. We abhor the thought of losing our total independence. In our view at AgingInvestor.com, the only advice clients are getting is about the long term picture is whether or not to purchase long term care insurance. Since most people don't do that, the actual costs of living at home can boggle the mind. It's the best advisor's obligation to educate your client about the risks of the plan to age in place, just as it is your obligation to educate them about balancing their portfolios. You are giving the client added value if you take the time to talk them through the risks and dollars they may need to have available.

Here are some briefly stated facts from a real case in which an 89 year old wanted to age in place and his wife promised he would never have to leave home.

At the outset of his declining health, he had about $3M in invested assets. His portfolio was healthy and balanced for his age, according to conventional wisdom. He began to lose his ability to walk due to multiple medical problems. His wife hired home helpers, three days a week at first. As his conditions progressed he needed more and more help.  He had to have a wheelchair, and a special van. A stair chair was installed in their two-story home. By the time he reached age 95, he was spending over $150,000 a year on care and assistance around the clock. In the space of time during which he was steadily losing independence until he passed away at 95, his assets were depleted to the tune of $2M. He lived in a higher end market for the needed help but the reality is that in any market, the kind of care he needed would be very expensive.

For him, aging in place was more costly than a skilled nursing facility would have been. Home modifications, private caregivers, (none of whom were licensed nurses), equipment, medications, adaptive devices, etc. drained his resources by 2/3. And not everyone has as much invested as he had to even start the journey. His wife had her own assets and she paid the cost of household maintenance, taxes, food, and utilities with her funds. Had she relied on him for those things too, there would likely have been little left at the end of his life.

It is not all doom and gloom however. Many clients live rather well in their last years without all the care this gentleman needed.  Some get by with family caregiving help, and some have fewer medical conditions. But if you are going to competently help your clients plan for longevity, it's essential to understand the real out of pocket costs of aging in place or anywhere else outside the home. If you want to add value to your services to older clients, know what they need to know to properly anticipate what can happen with living into one's 90s and beyond. Learn all the actual costs of care for every aging client option in our book, Hidden Truths About Retirement & Long Term Care. Be well prepared to walk your client through the scenarios they could face in their futures.  You distinguish yourself from other advisors when you sharpen your knowledge in planning for longevity.

By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

https://www.aginginvestor.com/books