AgingOptions Life Plan: Finance

“Will I have enough assets in order to not run out of money before I run out of life?” is top of mind for all of us in the final third of our lives. In answering this, preservation, positioning and passing of accumulated wealth goes beyond traditional estate planning. It calls for all affected family members to be participants in a model that integrates health, housing and elder law considerations.

Planning decisions to make in retirement

If you’re in your 50s, retirement is on the horizon.  Here are some important financial planning decisions you need to keep an eye on.

Don’t dip into retirement.  With the average employee having seven careers in a lifetime, there’s a possibility that you’ll experience seven or more temptations to cash out an IRA rather than roll it over.  Read here to find out why multiple IRAs may create an unexpected burden.  Then there are college tuition fees, children who want to buy homes, grandchildren’s needs and the list of financial pressures can pile up.  That cache of money you’ve been slowing (hopefully piling up) can be tempting.  Resist the urge.  Hitting up retirement accounts at this point in your life comes with hefty fees and can substantially hurt future security.

Don’t underestimate retirement health costs.  Even without ending up in a nursing home, the typical retiree couple pays $276,000 in medical expenses during their combined retirement years.  Here’s a quick calculator to help you get a rough idea of potential costs.  A recent article covered how something as minor as choosing to retire at 62 can potentially cost you $18,000 extra in the three years between 62 and 65 (when most folks qualify for Medicare).

Don’t jump into retirement too early.  If you’re not financially ready or if you’re not mentally prepared, remember that there are no requirement dates for retirement.  Rethink what retirement means to you.  Some people love their work and keep working all their lives.  Choosing to retire when doing so will seem a loss can be detrimental to your health.  Choosing to do before you are financially ready can be a hardship you’ll never recover from.  Delaying has another potential upside in that remaining in the workforce can allow your Social Security benefits to continue to grow.

Don’t go into retirement with debt.  Someone on a fixed income will be hard pressed to pay for mortgages or other high debt and if you have to take larger chunks of your retirement savings to pay for it, you’ll pay higher taxes (a double ding).  One bad health incident can topple the whole house of cards.  Putnam Investments found that retirees who returned to work had on average just 47 percent equity in their homes.

Don’t rely on factors outside your control.  Inflation, growth in the market, company pension plans, appreciating home loans are all things you can’t do a thing about.  Make a plan to help you deflect the costs of when these things don’t go your way and review your plan and potential costs on a regular basis.

Do defer paying income tax on more of your retirement savings.  Older workers can tuck away more money into both traditional IRA and Roth IRA accounts than their younger counterparts $24,000 in 2015.

Do take the time to consider the pros and cons of a Reverse Mortgage.  Despite how many people look at them, reverse mortgages don’t eliminate your housing expenses in retirement.  Property taxes, homeowner’s insurance premiums and maintenance costs will continue to accrue.  Falling behind on any of those will put you in default with the mortgage company. Read our white paper on reverse mortgages.

Do set realistic goals.  By now you should have a retirement account you’ve been adding steadily to.  How much money is enough money to retire?  As a nation, we are on track to saving enough to be forced to live on 55 percent of our current income at retirement.  Most people don’t find that retirement costs them less money and some actually see their expenses increase according to Fidelity Research.  You can calculate your projected income by estimating your Social Security benefits and using a retirement calculator to see if you are saving enough.  Then review your projected expenses.

Do hire an expert.  Sometimes you really need the voice of experience to help you set goals and get your plan on track.

Do review your estate planning.  Make sure your legal paperwork is in order.  That means Wills, Powers of Attorney, Living Will, and possibly trusts.  These things aren’t age-related, meaning you probably needed them clear back when you were 20 and invincible but they become even more important as you age.

Do decide whether or not it makes financial sense to purchase a Long-Term Care insurance policy.  Doing so will depend upon many factors.  It’s important to have a good understanding of those factors.  You should have a solid understanding of what you can and cannot expect a policy to cover and whether or not you can live with premium increases or without coverage.

Retirement is a long term financial opportunity.  The challenge is in recognizing that it’s at the tail end of retirement when you’ll know whether or not you’ve done an adequate job of planning.  The point of spending time working on it now, when you can make adjustments and corrections is to avoid burdening your children or loved ones later.

Giving gifts that don’t make you feel like Scrooge

I’m sure you’ve noticed but in case you haven’t, December is a month filled with holiday traditions including the giving of gifts.  Hard cash is the preferred gift for those between the ages of 10 and a million years of age but a part of me flinches to think that a week after Christmas, the money will be gone and likely whatever they bought with it.  As a childless individual, I am slightly mortified by how much we hand over to children at this time of the year (note, I’m mortified but I still do it).  I don’t think it really hit me until a nephew of mine pulled out his wallet one year and counted out $300 in cash and gift cards at a time when I was barely making it thanks to the beginning of the Recession.  I doubt he was more than 12.  I was appalled because I knew he would just go out and blow it and then be disappointed when it was all gone.  If you’re set on making a monetary contribution, there are options beyond cold hard cash that could potentially provide more bang for the buck.

U.S. Savings Bonds.   At one time, savings bonds were patriotic since they helped fund the war effort.  Today, they are still useful if not as well respected.  I used to stop by one of the bigger bank offices and pick up my form and exit with a receipt that would eventually be replaced with a bond.  Today, you go to the to start an account and then purchase bonds.  (Note:  You can also look to see if you are one of the thousands of people whose bonds have reached maturity but haven’t claimed them.)  It’s a way of giving kids money that allows them to learn that there’s more to life than instant gratification.

529 College Savings Accounts.  These have changed a fair amount since they first became available.  The investment grows tax deferred, you remain in control of the account, they are low maintenance and flexible and they allow you to make substantial deposits.  Washington doesn’t offer a 529 plan but does offer a GET (Guaranteed Education Tuition) for state residents.

Roth IRA.  This is only available for children with earned income since the total amount placed into the account must be equal or less than earned income.  That makes this option unusable for the younger set but can be a good option for teenagers working a part-time gig or adult children that need a boost for retirement savings.

Pay on a loan.  We have all heard how much debt college kids face nowadays thanks to school loans.  Rather than handing cash over, make a direct payment to a mortgage principle or school loan.

Obviously, we’re getting close to the end of all those holidays and so some of these ideas may not make sense for this year.  Still, this is a good time to look back at this year and decide what you might do differently next year.  A financial planner may have ideas or suggestions for the options I’ve listed above but he or she will have a better idea about your own personal circumstances and can help you to make your gift giving more meaningful to both you and your recipient.

Avoid holiday scams by staying in the know

The holidays are a great time for scammers.  We’re all feeling a little more generous and we want to spread some cheer, plus and I hate to say it, but it at least seems like more bad things happen at this time of the year.  Mudslides, earthquakes, floods…all those things that rob people of the joy you expect to experience at the holidays.  So what happens?  We feel bad and we open our pocketbooks.  Here is a list of things you can do to avoid being scammed and feeling like Scrooge.

If someone calls you requesting money for a charity or hits you up at the door to your favorite holiday shop, ask them for information about the charity so you can research the charity before making a decision to give.  Legitimate charities give you the time and space you need to make a good decision about whether or not to donate.

You can research charities by going to or by visiting the Better Business Bureau’s charity rating site, or

You can check a charities tax status by going to the site for Publication 78.

If you are scammed by a charity, please report it so others won’t also be scammed and investigators can put a stop to it.  You can report a scam by calling the FTC at 1-877-FTC-HELP (1-877-382-4357) or by going online at

You can sign up for scam alerts at

Talking to your parents about money

My mom is a math whiz.  Or at least in my family of math-phobic or at least uninterested she seems like a math whiz.  She got her degree in math, worked for a bank for years and, despite three kids and a husband who don’t appreciate the bottom line like we ought to, managed the household accounts.  So I have some obvious reluctance to talk to either of my parents about their financial situation but I’ve been weighing whether or not it might be time to do exactly that.  It’s not that I’m seeing anything indicating that their finances are in trouble it’s that so far so good and I’m worried that one day that won’t be the case.  Unlike my mom, unwrapping where something went financially wrong would take me some time and I might not have the time to take to do so.  My family is long lived and my parents are just about 70 so I’d like to believe they have at least another decade or so before any concern is warranted but still it will probably take me ten years or so to work up to the point of sticking my nose in their financial business.  Which is precisely the point.  Most of us would consider butting in to someone else’s financial life to be ridiculously nosy.  However, if you still have parents, the reality is that at some point you will have to do precisely that.  Here’s some suggestions from the Huffington Post

Will tax-free disability savings accounts become law in December?

Next month the House of Representatives will hold a floor vote on the ABLE Act.  Under ABLE, people with disabilities would be able to establish special accounts at financial institutions to deposit up to $14,000 a year and accrue up to $100,000 in savings without risking losing government benefits such as Social Security and Medicaid.  Those funds could then be used to pay for education, health care, transportation, housing and other expenses.  The Act is modeled after the 529 college savings plans and would allow interest on the account savings to be tax-free.  The bill is expected to win approval.  Read more here and here.