By Sandra D. Adams, CFP
The statistics are clear. People are living longer. According to the U.S. Administration on Aging, a 65-year-old couple has a 72% chance that one will live to age 85; a 45% chance that one will live to age 90; and an 18% chance that one will live to age 95. In addition, over 40% of those over age 55 and over 50% of those between the ages of 55 – 64 will spend time caring for family members according to the Health and Retirement Study conducted by the Urban Institute. Over the next decades, a major issue facing those approaching and in retirement will be that of aging and all of the issues that come along with it. How can we prepared for how the aging process may impact our later retirement years? Or how our possible caregiving duties for family may impact our own retirement plans? I suggest we do this by making aging planning part of our overall retirement planning process.
The normal retirement planning process traditionally involves reviewing clients' retirement income needs based on goals, and then determining if their goals can be met over their lifetime based on their income and investment resources. The goals most often planned for and considered in a traditional retirement plan are those of early retirement — travel, enjoying hobbies, spending time with family, satisfying other desires that could not be satisfied while clients were still working. Where our planning falls short is when neglect to plan for things like retirement health care/Medicare, long-term care, housing in later retirement, financing of care, etc.
To be more specific, I suggest we think about adding aging planning to overall retirement planning from the very beginning of the process so that it is built into the plan. The goal is to make sure that each client ensures that their plan is solid and that they feel comfortable knowing that they won't run out of money no matter what should happen during their lifetime, even if aging doesn't go as smoothly as planned.
To most effectively go through the aging planning process, my best recommendation is to use the CARE conversation model developed by Dan Taylor, author of "The Parent Care Conversation". CARE stands for the following:
CARE is applied to aging planning to help guide conversations. Aging planning within the CARE conversation model can be broken into the following categories:
- Big picture aging/overall aging plan
- Money/Financial plan for aging
- Care Facility/Care Attention
Within each of these categories, the CARE conversations are applied in the following way to help put the plan together:
Challenges: As you look forward over the next years as you age and you are thinking about XX as you age, what are the challenges you see yourself facing?
Alternatives: What do you see as the alternatives or options for meeting those challenges?
Resources: What are the resources you see available to you to help you meet those challenges?
Experience: Assuming you can meet those challenges successfully, how would you describe the experience you would like to create for yourself and those around you?
Let's look at an example from a sample client case and the Big Picture conversation:
C) As you look forward over the next few years and you are thinking about your care from a big picture viewpoint, what are the challenges that you see facing you?
- Maintaining your privacy and security – these are BIG issues for you
- Maintaining your independence
- Maintaining your "alone" time
- Maintaining good health and having the health insurance coverage to be proactive/preventative regarding health-related issues
- Maintaining lines of communication amongst and with family
- The ability to ask for and receive help, when it is needed
- Knowing and acknowledging limitations ("diminished ability to do what you used to be able to do")
- Maintaining the ability to live actively in faith and to access a faith community (be active in church, continue to help others, etc.)
- Ability to drive (especially to/from church); winter driving is an issue
A) What do you see as the alternatives or options for meeting those challenges?
- Staying in your own home independently
- Remaining cognizant of issues surrounding fraud (especially through the mail)
- Staying as healthy and active as possible, for as long as possible, by keeping a positive attitude and a strong faith, as well as by taking action to prevent medical issues before they happen
- Maintaining open/honest communication with family (all three children)
- Arranging transportation with friends and/or through the church to make sure it is possible to get to church services
R) What are all the resources that you see available to you to help you meet those challenges?
- Friend Margaret (who is a trained nurse)
- Other Professional Advisors (The Center for Financial Planning, Inc., CPA, etc.)
- Other community resources that may be available to help with transportation, etc.
- Financial Assets and Insurances
E) Assuming you can meet those challenges successfully, how would you describe the experience you would like to create for yourself and those around you?
You would like to stay independent and maintain your privacy – alone time is very important and you don't like to feel like you are being crowded. You would prefer to stay in your current home – it is comfortable – without having strangers come into the home (not trusting of those you don't know). You would like to remain active in your church and in actively living your faith in the community. You would like to continue to help others. You don't want your family to worry about you; you would rather be helping your children and grandchildren than have your family helping you.
Incorporating these aging planning conversations and developing real long term action items that are working in coordination with each client's overall retirement and financial plan is the best way to design a plan that takes into consideration retirement needs for the early, mid and later years of retirement and considers all possible contingencies. Failing to plan only leaves things to chance, which is a big risk and can limit choices, especially in a situation where there is a fall, sudden illness or end-of-life situation. Aging planning is the best possible way to try to ensure that the client stays in control of their aging life by planning ahead and putting things in place before they happen, saving future personal and financial stress for themselves and their families.
About the Author: Sandra D. Adams, CFP®
Sandra D. Adams, CFP® can be reached at 248-948-7900 Center for Financial Planning, Inc. 24800 Denso Drive, Ste. 300 Southfield, MI 48033. Securities Offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
Any opinions are those of Sandra D. Adams, and not necessarily those of Raymond James
Got Questions About Your Taxes, Personal Finances and Investments? Get Answers!
Email Jeffrey Levine, CPA/PFS, chief planning officer at Buckingham Wealth Partners, at: AskTheHammer@BuckinghamGroup.com.