I recently taught a 90-minute webinar, 25 Financial Planning Strategies for Older Adults, for the New York Public Library. In preparation for the program, 75 questions were submitted in advance by registered participants. The questions provide unique insights into the top financial concerns of older adults.
While not a representative sample or empirical data, by any stretch of the imagination, the participants’ questions are instructive for financial educators and other older adults who can relate to having the same concerns.
Below is a list of participants’ six most frequently mentioned concerns and suggested action steps from my class:
Taxes in Retirement
¨ Hold assets (e.g., stocks or mutual fund shares) for more than a year for favorable long-term capital gains rates
¨ “Bunch” larger-than-normal tax deductions into one tax year to exceed the standard deduction and itemize
¨ As part of bunching, consider setting up a donor advised fund to make it beneficial to itemize deductions
¨ Consider a qualified charitable distribution (QCD) from a traditional IRA for a RMD withdrawal
¨ Consider tax-free bonds, instead of taxable fixed-income securities, if appropriate for your income tax bracket
¨ Meet with a certified financial planner® (CFP®) to explore additional tax minimization strategies
¨ Don’t invest in anything that you don’t fully understand and could explain simply to someone
¨ Diversify asset classes (e.g., stocks, bonds, cash equivalents) and securities within each asset class
¨ Purchase stocks, growth mutual funds, and other equity investments for goals 5+ years away in the future
¨ Have reasonable expectations: average returns on stocks are about 10% with lower returns on bonds and cash
¨ Buy low-cost investments such as index funds, exchange-traded funds, and other funds with low expense ratios
¨ Don’t over-react to daily market “noise” on news shows and stay focused on long-term investment goals
Investment Withdrawals and Outliving Assets
¨ Create a retirement “paycheck” with regular withdrawals from savings and/or managed payout mutual funds
¨ Consider the purchase of low-expense annuities to generate a regular monthly income (single life or couple)
¨ Establish a “ladder” of bonds or CDs by purchasing them in a series that pays a regular stream of interest
¨ Begin required minimum distributions (RMDs) from tax-deferred retirement savings starting at age 72
¨ Get help with RMDs from account custodians for questions about making withdrawals and tax withholding
¨ Try some online Monte Carlo calculators or meet with a CFP® to analyze how long your savings will last
Social Security Decision-Making
¨ Pick a starting age from 62 to 70; the longer you wait to claim, the higher your monthly benefit will be
¨ Be aware of the Social Security earnings limit before full retirement age ($18,960 in 2021) if you work
¨ Arrange tax withholding or make quarterly estimated payments to the IRS if your benefits are taxable
¨ Take care of your spouse (e.g., higher earners work longer to assure a larger spousal benefit)
¨ Read all correspondence from Social Security including COLA adjustments and annual benefit amounts
Medicare and Health Insurance
¨ Refer to the Medicare and You publication for specific details about coverage and inflation-adjusted numbers
¨ Contact your local SHIP office for information about Medigap policies provided by trained volunteers
¨ Stay abreast of changes in retiree health insurance (e.g., changes in insurers), if provided by a former employer
¨ Budget for health care costs in retirement (e.g., Medicare Part B and D, copays, deductibles, co-insurance)
¨ Consider strategies to reduce taxable income if you are close to income breakpoints for IRMMA surcharges
Long-Term Care (LTC) Expenses
¨ Develop a LTC plan which may include self-insurance, a CCRC, or the purchase of LTC insurance (LTCI)
¨ Consider LTCI alternatives such as a life insurance policy with a chronic illness rider or a LTC rider
¨ Consider low-expense annuities with accelerated payouts for a chronic illness or LTC expenses
¨ Consider how much income is guaranteed for life to pay LTC bills (e.g., pension, Social Security, annuities)
¨ Consider the feasibility of self-insurance by multiplying the annual cost of local LTC services by 3 to 5 years
¨ Consider a highly-rated continuing care retirement community (CCRC) that will provide lifetime care
¨ Get help, when needed, from SHIP counselors, a CFP®, and/or an elder-care attorney
More Insights “Undercover” at a “Free Lunch” Seminar
In an effort to further understand what is on the minds of older adults regarding personal finance, I decided to attend a “free lunch” seminar held at my 55+ community. I was hoping to hear questions and comments from attendees that would confirm or expand upon the concerns expressed by the NYPL webinar participants.
I used to get invites to free meal seminars when I lived in New Jersey (after I turned 50) but they all say “No brokers, agents, or advisors.” Too many people knew me from my newspaper column and Cooperative Extension programs so I was always afraid of being inadvertently “outed” and publicly asked to leave.
Since few people in Florida know that I am a financial educator, I decided to go “undercover” to observe the seminar content, presentation style, and participants. Here are five “Barbservations”:
There Were No Questions- The presenter never asked any questions of the participants and did not make time for participants to ask any of him. I’m thinking that this was done to create an incentive for people to meet with him.
Door Prizes Required a Contact Form- Raffle tickets would have been sufficient. The form wanted a birthdate, e-mail, phone number, and more. I left birth date blank, used a third tier e-mail, and my old phone number in NJ.
No Financial Designations- Certifications have ethics requirements and fiduciary standards. The presenter was not a J.D. (lawyer), nor did he hold a CFP®, CRPC®, ChFC®, CPA/PFS®, or any other financial designation.
Government and Bank Bashing- There was fear-mongering about future tax increases and cuts to Medicare and Social Security. Also, negative comments about low bank interest rates and promises of “secrets” and “strategies.”
Positive Aspects- The content was correct and much of it was useful. However, it was presented briskly in a series of “teasers” with no opportunity for questions or clarification. The presentation lasted only 40 minutes and then we ate lunch. The lunch from Sonny's BBQ was delicious and relaxed. Interestingly, the speaker did not stay very long to mingle.
In summary, the last third of most people’s lives is the most financially complicated. In addition, many major and/or unexpected events can occur including steep market declines, higher income taxes and fewer tax write-offs, loss of spousal income upon death, needs of grown children and grand-children, rising costs of health care, and long-term care. In addition, many “young-old” people age 65 to 74 have a blind spot and think that their lifestyle will stay the same when they are “old” (age 75 to 84) and “old-old” (age 85+).
Here is the ZOOM LINK for my NYPL webinar, which includes which includes a closed captioning transcript. It will work until July 29 (30 days from my June 29 webinar).
For additional information about financial transitions in later life, consider ordering my book Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life.