The financial planning industry has done an admirable job of preparing people for two pivotal moments: Retirement – that magic age when one stops earning a paycheck, travels the world, plays golf every day, and enjoys a life of leisure; and Death – the final moment beyond which our assets and legacy are left to our heirs. It has done a poorer job of equipping advisors to address the financial planning issues of the period in between. Sure, some advisors sell long term care insurance to forty and fifty-somethings for this period, and others sell annuities to seniors skittish about the financial markets, but these are product solutions aimed at the senior market, not financial planning discussions. In a similar way, a walker solves an issue with balance and prevents falls, but a walker is not a comprehensive plan for health and wellness throughout life.
Common Financial Planning Issues
• Ensuring adequate cash flow throughout life.
• Evaluating and addressing risks to financial independence.
• Determining the financial impact of major life events.
• Minimizing income tax.
• Allocating investment resources to accomplish current and future goals.
• Defining a plan for the distribution of accumulated assets at death.
Financial Planning Issues Unique to Seniors
• Plan for downsizing or home modification
• Relocation plan if distant from family
• Plan for continued social engagement
• Family business succession
• Identity and fraud protection
• Annual Medicare elections
• Developing a dependency plan to include
✓ Living arrangements
✓ Persons in charge of financial decisions
✓ Persons in charge of healthcare decisions
✓ Transportation needs
While there are several common financial planning issues for every age demographic, there are also many unique financial planning needs of the senior market.
Home downsizing is a popular trend among many retirees. Today’s blazing hot real estate market has pushed the values of many retiree’s homes to levels they may not see again in years. However, downsizing does not necessarily mean less cost for housing, just smaller living space. Planning for the costs of moving – and ridding yourself of all your accumulated stuff (spoiler alert: your kids don’t want it!) – is an emotional as well as financial decision. If the plan is to be nearer to the kids and grandkids, the cost to acquire housing where they are could be significantly more than in your present locale.
It’s tempting to ask how a plan for continued social engagement is a financial planning issue. With social isolation a major contributor to poor health among seniors made especially apparent during the COVID shutdown1, and healthcare costs absorbing a significant portion of a senior’s resources, a plan for social engagement should be an integral part of the financial planning conversation with seniors.
Annual Medicare elections are another example of an often-confusing labyrinth of decisions that can have significant financial impact for years. Medicare is not a select once and be done with it choice. Each year, its provisions, deductibles, and Part B premiums change as do the supplemental coverages most seniors rely on to cover the ever-increasing Medicare deductibles.
Identity theft and elder financial fraud are estimated to cost seniors between $3 and $30 Billion a year2, and nearly everyone I know over age 70 has been targeted. A plan that addresses identity theft protection as well as vulnerabilities to undue influence inside of familial relationships needs to be included.
Plans for living arrangements, whether aging in place, or facility care, should be discussed long before the actual need arises. Just as saving for retirement doesn’t begin at age 65, neither should plans for where someone lives out the remainder of their life be delayed until the 11th hour.
Family meetings to discuss an aging client’s dependency plan should be also be held long before a dependency event occurs. It helps assure family members that a plan is in place, informs them as to who-does-what-when, and when done early enough and under the direction of the aging client, preserves his or her seat of honor at the head of the table.
Family Business Succession has been a central component of financial and estate planning for years and is the least neglected area of financial planning for seniors among those who own a multi-generational family enterprise. Still, nearly 60% of the small business owners surveyed by Wilmington Trust, do not have a succession plan in place3. With the sweeping tax proposals now being forwarded by the current Administration, there will surely be more attention given to this area.
In conclusion, financial planning does not end at retirement. As one client reminded me years ago, “retirement is just another word for thirty years of unemployment.” It doesn’t look the same for all seniors but when practiced with integrity, it can be extremely beneficial to the entire family, and rewarding for the financial planner who chooses to serve this market.
