Tag Archives: Elderly and finance

Easy Peasy

By Larry Luxenberg  

Many people think there is nothing difficult about personal finance. Listen to a few gurus on TV and maybe scan a magazine or two.

That may have once been the case (I would argue not) but it’s certainly not the case after the passage of the Secure Act last December, which was followed quickly by the CARES Act and the possible Heroes Act.

Couple that with other changes to RMDs, add in QCDs, QLACs, IRMAA (Income Related Monthly Adjustment Amounts), partial Roth Conversions, pension options, tax loss harvesting, asset allocation, tax aware investing, market timing and the Social Security formula (the simple part — 35 years of monthly inflation adjusted earnings).

If you’ve got all that, knock yourself out and do your own planning and hope you don’t run out of money in retirement (See Monte Carlo simulations).

If you can’t sort your way through that alphabet soup and want help with ETFs, ETNs, open end mutual funds, closed end mutual funds, ADRs and plenty more, how about turning to a CFP (Certified Financial Planner), CFA (Chartered Financial Analyst) or CSA (Certified Senior Advisor) or better yet someone with all three.

We don’t know all the answers, but we do know a lot of the right questions and a lot of the places to start looking for answers.

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Digital Assets

By Larry Luxenberg  

Digital assets are usually dismissed as a futuristic concern. But every estate I’m involved with now has at least some digital components and they are usually needlessly troubling. We spend much of our lives now in the digital world whether it’s on email or Facebook, Instagram or Twitter.

If we have a small business or a profession, some of the value of our business is certainly wrapped up into the digital world.

Last night I spoke to the Rockland County Estate Planning Council (http://www.rocklandcountyepc.org/   about the growing importance of planning for digital assets.

With many of us this might be small — airline points or deposits at paypal — but for many estates this could already be a big number. Most of us have trouble from time to time accessing our digital accounts. Imagine how difficult it will be for an executor to do this.

A good first step is to make an inventory of your digital assets and accounts and then figure out how an executor might access them. You can give such a person separate authority to act on your digital accounts.

This is not accepted in every jurisdiction but in the fast changing digital world, this is a good first step.

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Preparing Your Estate

By Larry Luxenberg  

Prosperity and cyberspace have combined to make dealing with estates more difficult than in previous times. Rather than leaving a mess behind — the proverbial shoebox of unorganized documents  — one can make the task of heirs a lot easier some simple and easy steps. Put together a list of all of your financial accounts, the institutions where they are held, current balances and contact information. Add to that list the professionals you deal with and relevant passwords. Many people accumulate a hodgepodge of accounts, insurance policies and other assets, some with small balances, and it’s easy for someone not familiar with these accounts to overlook some. The guesswork at an emotional time to piece together someone’s financial life can be daunting even if you do manage to find everything. Many do not. Evidence of that is in every state capital where abandoned or lost accounts total in the billions. Some simple steps can space loved ones a lot of grief so don’t put this off and leave a mess behind.

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Aging and Financial Decisions

By Larry Luxenberg  

Most of us expect that as we age, our capacity for making complex financial decisions diminishes. A professor at Texas Tech, Michael Finke, has compiled research that supports this supposition. From my own experience working with elderly relatives and clients, I believe this to be the case. Most of the “old old” that I’ve dealt with haven’t had the capacity or perhaps the interest in these complicated matters. For many, they simply don’t want to tackle these issues. They are more likely to want to visit with family and friends or pursue their passionate interests or merely handle the tasks of getting through the day. It’s important that we prepare for this stage by designating a trusted relative, friend or professional to step in and handle these matters when we no longer are capable of doing so  at the level we were in our peak years. A decline in skills may be combined with more difficult issues such as the onset of early stage dementia, paranoia or other cognitive impairment. There is no way to sugar coat the difficulty of living through or taking care of someone who is afflicted. But at least if we prepare for the typical decline or even worse issues we can prevent needless financial devastation as well.

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The Sun Doesn’t Always Shine

By Larry Luxenberg  

We now have a solar roof and it takes care of our electrical needs on sunny days but the sun doesn’t always shine. At night, our panels rest. During storms and very cloudy days, the panels aren’t at peak efficiency.

Yet when it comes to personal finances, I generally come across people whose planning assumes that the sun will always shine.

Many of these people are do it yourselfers where one partner in a couple handles the finances and does it well. But what happens when that person gets too busy or injured or sick or passes away?

What about when old age and diminished mental capacity don’t permit them to perform in the way they’d like?

What happens to a couple who are living together for many years when the storms finally roll in?

Not long ago, someone asked me what happens if the bull market ends? Will the stock market go down?

I told him the question is wrong. We know the market always goes up and down.

The long-term trend for a century has been up but we know the market will go down and we need to plan for that.

We enjoy the sunshine and warm weather, the lazy days of summer. But we don’t throw out our umbrellas and raincoats and keep our flashlights handy.

We know that the sun doesn’t always shine and we always need to keep in mind the possibility of stormy days ahead and prepare accordingly.

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Contingency Plans

By Larry Luxenberg  

The Sun Doesn’t Always Shine
We now have a solar roof and it takes care of our electrical needs on sunny days but the sun doesn’t always shine. At night, our panels rest. During storms and very cloudy days, the panels aren’t at peak efficiency.

Yet when it comes to personal finances, I generally come across people whose planning assumes that the sun will always shine.

Many of these people are do it your selfers where one partner in a couple handles the finances and does it well. But what happens when that person gets too busy or injured or sick or passes away.

What about when old age and diminished mental capacity don’t permit them to perform in the way they’d like. What happens to a couple who are living together for many years when the storms finally roll in?

Not long ago, someone asked me what happens if the bull market ends? Will the stock market go down?

I told him the question is wrong. We know the market always goes up and down. The long-term trend for a century has been up but we know the market will go down and we need to plan for that.

We enjoy the sunshine and warm weather, the lazy days of summer. But we don’t throw out our umbrellas and raincoats and keep our flashlights handy. We know that the sun doesn’t always shine and we always need to keep in mind the possibility of stormy days ahead and prepare accordingly.

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Aging and Financial Skills

By Larry Luxenberg  

 

Diminished Ability to Handle Personal Finances

As people age, they gradually lose their ability to handle their own finances. Often, this process is so gradual that the person himself and those around him are unaware of what’s happening until something serious happens. The elderly control the most assets and are the most susceptible to financial scams and poor choices. As people get older, their financial affairs often get more complex. They must deal with complex choices on healthcare, long-term care, taxes, life insurance, pensions, Social Security and estate planning. Often just handling the routine chores of daily financial affairs become beyond reach. Recently The New York Times had an article discussing the research behind the loss of cognitive skills needed for personal finance. Steps to mitigate these inevitable problems include striving to simplify your financial affairs — consolidating your holdings in a small number of financial institutions, trimming your actual number of holdings, avoiding complex or exotic instruments. Another common solution is to use automatic bill paying where possible. People should also find trusted family members, friends or professionals who can step in when needed. Appropriate advanced directives such as powers of attorney and health care proxies also need to be in place. Planning for the inevitable will help avoid many of the worst potential pitfalls.

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Scams for Elderly

By Larry Luxenberg  

Protecting Against Financial Scams

Financial scams are getting much more sophisticated and are a growing problem. It’s easy for anyone to momentarily let down their guard and get nailed. It’s especially easy for the elderly. So much has changed in recent years and the elderly often have a tough time sorting out the legitimate advances from the smooth talking con artists. A recent study showed that the elderly who have been working with a financial advisor or some other trusted advisor are much less likely to fall victim to scams. Financial products have gotten much more complicated over the years. With the advent of cheap computing power it became possible to add many more features to products. Now consumers have choice about everything but it’s much more difficult to sort out what is really important to them, what they need and what they are paying for. As we age, our brains become less agile and can get overwhelmed with this growing complexity. Nowadays, everything comes with an inch thick instruction manual. While there’s no sure way to ward off all scams, the one good rule is that if something sounds too good to be true, be especially wary.  Recently, Financial Planning Magazine ran an article on protecting against scams: http://www.financial-planning.com/30-days-30-ways/protecting-elderly-clients-more-scams-2692756-1.html?utm_campaign=30%20days%2030%20ways-may%202%202015&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4297713%3A1591a%3A&st=email

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