Financial planning for the rest of life

Mention financial planning and everyone thinks of preparing for retirement. We start thinking about how much to save, where are the best places to save, whether we are properly insured, and whether we have a will.

Seldom do many people, including professional financial planners, consider what happens for the rest of their life after retirement. Statistically, there are 20 to 30 years of living after retirement. Country singer Tim McGraw has a song, “My Next Thirty Years,” in which he outlines his plans. Why do we not plan for the after-retirement years as vigorously as we have planned during the 30 years up to that point?

Financial planning is all about guiding clients with good information so they can make informed decisions and accomplish what they desire. Planning as early as possible for all the years from retirement to death allows someone to live the remainder of their life with dignity, as they are choosing what happens to them when they need assistance or cannot choose for themselves, rather than having those decisions made by someone else. The author’s session at the AICPA & CIMA ENGAGE 24 conference in the Advanced Personal Financial Planning track addressed these desires for the years after retirement.

Financial planning after retirement is not just about the financial aspects. It includes the emotional and physical aspects as well. Let’s start with the basics: Where is a client going to live? They may have lived in one location for many years, or they may have moved many times in their career. They may want to live near their children or grandchildren. They can stay where they currently are, move to a smaller home, move in with family members, move to an active adult community, or move to a continuous care community. They could even plan for further in their life and decide which assisted-living community or nursing home they would prefer. They can list their preferences when they first retire rather than being forced into something they do not want because of a financial or physical problem that crops up unexpectedly.

Certain physical changes occur as we age, at different rates for different people, but they are unavoidable. We become physically weaker as time goes on. Exercising for strength and endurance can slow the effects, but it will happen. We become wiser because we can reach into our past experiences and give sage advice, yet quickly processing numbers or complicated problems becomes harder. People who were active start to experience parts failure. Knees, hips, and shoulders are replaced routinely, allowing a continued active lifestyle, but the artificial parts are never as good as the originals.

Again, planning for the next 30 years as soon as one retires (or better yet, before one retires) is best before aging’s inevitable decline prevents them from choosing the path they most desire. Most readers of this column probably have a family member or client who did not plan. When something did happen, that individual’s fate was decided by other people. Many times, because planning was not done, the person’s choices are limited.

Finances certainly play a role in people’s choices when they age. The types of living arrangements mentioned above come with varied costs. Health care becomes a major cost in retirement. Many people have had their health insurance premiums subsidized by their employer and are surprised at age 65 when they begin to pay for Medicare. The basic costs for Medicare Parts B and D with a supplemental plan can be about $6,000 per year per person. This is why over 50% of the over-65 population have opted for Medicare Part C (Medicare Advantage), with a cost of about $2,500 per year per person. There are advantages and drawbacks to each of these that would need another article to explain. The author was a speaker in a session on Medicare at AICPA & CIMA ENGAGE 24 (“What You Need to Know About Medicare in 2024,” June 5, 2024). An archived recording may be available. The final plan someone would want to put in place is for when they die. Will there be a religious ceremony? Will they want to be buried or cremated? If buried, where? By putting all of these wishes in writing, individuals can ensure there will be no question of what they desired. You have now assisted your client by discussing all of the possibilities and desires they have for the rest of their life and then documented all of this.

The next discussion is who will carry out all that has been planned if the client is unable to do so themselves. You need your client to establish a trusted contact person. This should be someone whom the client explicitly trusts and preferably is in a younger generation.

You can assist the trusted person by creating a binder that includes lists of critical documents and their location, current advisers, all assets and how they are titled, passwords of all electronic records and accounts, and current monthly bills and their providers or the location where they can be found. The binder will also, of course, include the plan you developed with the client for the years from retirement to death.

The last topic we discussed at the conference was elder abuse. Elder abuse comes in many forms: psychological, emotional, physical, and financial.

We focused mainly on the financial aspects of elder abuse. As a trusted adviser to our clients, whom we meet often throughout the year, we are the first to notice differences in behavior and, certainly, differences in their daily and monthly financial transactions. We will be the first to notice excess ATM withdrawals or extra sales transactions in their investment accounts without a corresponding purchase or reason for the disbursements.

It is known that most financial elder abuse is done by a relative of the elderly person. One adviser discovered that his elderly client’s son was taking money from her accounts. After the adviser consulted with attorneys and his client, they were able to convince her to set up irrevocable trusts with her funds, naming an outside third party as trustee of her investments. The son was then cut off from having access to his mother’s accounts without going through the outside trustees.

Another document they were able to change was her will, where, after much research into the dollar amount the son had taken improperly, the adviser was able to change the amount the son would receive upon his mother’s death by first subtracting the amount he had improperly obtained in the past.

We recommended to the conference audience that, when they returned to their offices, they research local agencies that can assist with helping elderly victims of abuse.

Going online to the National Center on Elder Abuse, the Eldercare Locator, your state or local office for the aging, and the National Adult Protective Services Association is a good start to educate yourself on this important issue and also to find the assistance you need when you want to help a client you suspect is being abused.

Financial planning is an ongoing process to guide clients toward optimal choices so they can live their lives as close as they can to their desires. The key phrase is “ongoing process”; it should not stop at retirement.

Retirement planning tends to focus on saving during the working years, but even more thought should be given to the period after a client retires.

Financial planning after retirement is not just about the financial aspects. It includes the emotional and physical aspects as well.

Contributor

Theodore J. Sarenski, CPA/PFS, CFP, is an author and frequent presenter on financial planning, including, recently, on the topic of this column at AICPA & CIMA ENGAGE 24. He also is past chair of the AICPA Advanced Personal Financial Planning Conference, a past chair of the AICPA Personal Financial Planning Executive Committee, and a former member of the Tax Literacy Commission. For more information about this column, contact thetaxadviser@aicpa.org.