How Will Baby Boomers Handle “Long-Term Caregiving?

Think Advisor’s article, “Long-Term Caregiving Realities Hit Home for Boomers” says that study participants responded that they’d be willing to do these things to provide care for a loved one:

  • Cut spending: 66%
  • Travel less frequently: 41%
  • Move to a new home: 27%
  • Work less: 27%
  • Stop working: 19%

The study also found that boomers are becoming more aware of the likelihood they’ll require retirement care, and are willing to discuss the issue. This group believed that an adult would start to need physical care or assistance at age 70 or older.

About 45% of study participants thought they’d need long-term care at some point. That number is an increase from 36% in 2013. A total of 66% of them reported that they’d had detailed conversations about how they wanted to receive long-term care. Slightly more than half said they’d had detailed conversations about how to pay for care.

Even so, about 30% of boomers in the study who were caregivers said they still had to use some retirement savings to pay for health care expenses, compared with 19% of those without caregiving responsibilities.

The U.S. Census Bureau says that older Americans are projected to outnumber children for the first time in U.S. history by 2035. This raises the question of who’ll care for the aging population.

It was no surprise that the study found that women were likelier than men to have caregiving experience. 62% of current or former caregivers among study participants were women and 38% were men. A total of 68% of those with caregiving experience said they knew about long-term care insurance, compared with 59% without such experience.

Experienced caregivers were also more likely than inexperienced boomers to have made preparations for their death. This includes communicating funeral preferences (49% vs. 41%), identifying where they wanted to be buried or cremated (51% vs. 37%) and maintaining an up-to-date estate plan (45% vs. 38%).

Reference: Think Advisor (August 8, 2019) “Long-Term Caregiving Realities Hit Home for Boomers”

What Is Your Goal for Heirs?

If you ask most people what their most valuable assets are, they usually say their homes, or their jobs. However, if you ask them to think about it a little more, the answers change and become more focused on people and relationships. As couples and individuals work to generate assets for their retirement and enjoyment, they start to think about the kind of legacy they want to pass to their heirs, says Think Advisor in the article “Annuities and Heirs.”

For many, the ability to leave loved ones with significant financial support is a top priority. This requires good estate planning.

Estate planning can be complex, and the laws do change. Understanding how legacy planning aligns with retirement planning is an important concept.

How do you successfully transfer wealth to the next generation?

The most common approach is to have no strategy at all. This never works well, and usually leads to an expensive estate administrative process, legal battles between heirs, high taxes and the likelihood that the inheritance will evaporate rapidly.

One legacy transfer strategy involves the use of annuities. Because these contracts come in all shapes and sizes, it’s important to understand how these investments work. Annuities purchased for wealth transfer can be set up as income streams to children or grandchildren, especially if they have stretch capabilities. Some annuities allow for greater access to principal than others, and many are designed specifically for wealth legacy planning.

Some of the control levels include:

  • Beneficiaries may choose the method of payout, from a lump sum to various withdrawal strategies.
  • A portion may be paid as a lump sum and the remainder offers a few withdrawal choices.
  • A lifetime stream of distributions is set up for a beneficiary, based solely on the client’s direction.
  • The lifetime distribution is in effect, but if the owner wants to make a change, they can be rescinded. This can only be done with certain annuities. With many annuities, once it is set, there are no changes permitted.

Talk with your estate planning attorney about the kind of legacy you wish to create for your heirs, and what methods and tools they believe will accomplish your goals.

Reference: Think Advisor (Aug. 6, 2019) “Annuities and Heirs”

Is It Possible to Recession-Proof Retirement?

That was a tough time for people who had just retired, but since that time stocks have rebounded in a spectacular manner. However, says Money in the article “This is the Best Way to Recession-Proof Your Retirement, According to Experts,” it is possible that the long rally may be coming to an end.

Is there anything that can be done do to protect your retirement accounts from the next financial disaster? Those who are closest to retirement, are always the most vulnerable to drops in the stock market, and those who are retired and drawing down savings are even more at risk. However, you can build a financial buffer to help your retirement funds survive any downturns.

No one knows when the next recession or stock slide will occur. There will always be one, so it’s best to be prepared. It’s simply an acknowledgement of the real risks of markets. On average, recessions last about 18 months. What can you do?

Build a cushion. Commit to building an emergency fund. That should be three to six months of expenses. And it doesn’t matter how rock solid or large your retirement investments are. If you take money out prematurely, it’s going to weaken your portfolio.

Pay down all debt, or as much as possible. That is key to feeling fiscally secure, once you leave the workforce. This is because less of your assets are tied up in long-term retirement investments. Tackle the highest interest rate debt first.

It’s far easier to adjust discretionary expenses, than it is to add cash to a stockpile. You can skip a vacation. You can’t skip a mortgage payment.

Depending on how close you are to retirement, consider tweaking your investment portfolio.  Portfolios can become unbalanced over time, as assets in different classes grow or fund managers change. Review your portfolio to limit your exposure to volatility. Scrub out any unnecessary risk. That may include putting some money in cash or cash equivalents, like savings accounts, CDs and short-term bond funds.

You don’t have to be very conservative on the entire portfolio. People nearing retirement age usually trim some of their stock holdings. It is not now as black and white. You’ll need stock growth to outpace inflation, so your equity allocation must be fine-tuned.

Many retirees are working part time jobs to keep some cash coming in and minimize what they take from retirement accounts. If you’re earning enough to live on, you can even avoid taking any distributions, except those that are required. Be aware of how your income impacts your Social Security benefits and taxes, if you have already started to take benefits.

There are other advantages to working part time. It keeps you active and engaged with others,  allows your mind to stay sharp and offers the opportunity to socialize with new people.

Finally, make sure your estate plan is in place. You should have a will, power of attorney and healthcare power of attorney. An estate planning attorney can help protect you and your family, regardless of when the next recession arrives.

Reference: Money (March 13, 2019) “This is the Best Way to Recession-Proof Your Retirement, According to Experts”