Financial Planning for Later in Life
ICONS BY DARKOVUJIC / FOTOLIA
Preparing for one’s golden years involves important research and decision making, including calculating retirement income and choosing how to allocate your time. Generations ahead of and behind your own—aging parents, adult children, grandchildren—may also be seeking your support. And it’s never too early to start the conversations about how you want to live your later years and the legacy you’ll leave behind.
The Sandwich Generation: Caring for Aging Parents, Relaunching Adult Children
Women in their 60s are simultaneously, and sometimes precariously, supporting two groups: aging parents who could need long-term care, and adult children who are not yet financially independent. But letting yourself get overwhelmed by supporting everyone else may leave you with little in savings for your own retirement.
Guiding Boomerang Kids
With 32 percent of Millennials still living at home, many parents have to deal with the challenge of deciding when to stop financially supporting their adult children. While it may not be a problem for some parents and adult children to live under the same roof, others may have financial issues they need to address. A parent’s role is to give their children a safety net while still helping them grow into independent individuals. “The parent’s job is to relaunch their children,” says local financial educator Ruth Hayden. “They need to ask what their job is versus being protective.”
Supporting children later in life can have a detrimental effect on savings. Hayden says she’s spoken to several parents who were unable to retire fully or retire on time when children moved back home or needed help paying bills. “It’s hard to teach a mother in her 60s that she has to put herself first,” Hayden says. “She has to unhook herself from guilt and learn to say no.”
Hayden suggests beginning by creating a plan or budget that clearly states how long you can continue to support your child. For example, she recommends giving the child a grace period of about three months before requiring them to find new living arrangements or pay their own bills. (Though it may not be fair to stop help immediately if your child has no other options.) Then be honest and firm about where you both are financially, and why you cannot continue to support him or her. Offer to take your child to meet with a financial planner to discuss budgeting and saving options. “Tell the child what you will do, not just what you won’t do,” Hayden says. And most importantly, stick to the plan you created. It will be better for you and your child in the long run. »
Caring for Aging Parents
Determine what help is needed. Your parents or older relatives may simply need a friend or family member to come in once a week to help with basic home maintenance or cleaning. Family help accounts for about 90 percent of help for seniors, and it is generally free and can be done by someone you love and trust, says LaRhae Knatterud, director of aging transformation in the Minnesota Department of Human Services. If you or another family member is comfortable helping them for now, you can focus on planning for more expensive care in the future.
Ask about priorities. Some people want to stay home as long as possible and hire housekeepers and nurses to help with cleaning, bathing, cooking, and medical needs, but others may want more support and to live near other seniors. Assisted living facilities provide personal care help, meals, and social activities to prevent isolation.
Find out what level of medical care is necessary. Nursing homes have nurses on staff 24/7, which may be more suitable to seniors with progressive conditions such as Alzheimer’s or Parkinson’s diseases, people who fall frequently, or those who could need more involved care than assisted living homes offer.
Research financing options. Long-term care can be expensive, but thankfully there are several alternatives to paying completely out-of-pocket. Costs depend on income level, family size, age, and disability status, so plan early enough to look at all the options. Knatterud notes that savings, social security checks, and pensions can help pay for long-term care and that many people come up short if they plan to use money only from retirement plans. Some life-insurance policies have long-term care options, or you can get long-term care insurance or use a health savings account. Some seniors choose to use a reverse mortgage or sell their homes once they move into assisted living or nursing homes, which can provide funds for a few years of care. Medical assistance is also available, but the requirements are strict: Seniors must have $3,000 or less in assets to qualify.
Implementing Retirement: Planning when (and how) to leave the workforce
Transitioning to working fewer hours, or not at all, means adjusting budgets to accommodate a change in income. But it also means more time for an “encore” career, checking items off your bucket list, and developing relationships.
Deciding How to Spend Your Time
Many people see retirement as a nice, long vacation after decades of hard work, but 20 to 30 years of leisure time is not for everyone. Instead of kicking back in a lounge chair, many seniors continue to work part-time, volunteer, care for grandchildren, travel, or learn new hobbies.
Work, of course, provides more than a paycheck. Kate Schaefers, a local life coach whose consulting business, Encore, focuses on retirement planning, tells clients to think about transitioning into a retirement that can provide the benefits of a career: fostering social connections, achieving goals, and participating in a mentally challenging and stimulating environment. “We always think about the financial side of work, but it’s important to find other things that can recreate that sense of accomplishment on our terms,” she says.
Start by making a retirement bucket list of all the things you want to do—and then actually do them. Schaefers suggests finding a part-time job or volunteer position you’re passionate about, traveling to the country you always said you’d visit, or even taking a few classes in subjects you love. Put something on your calendar each week or each month that makes you happy.
Retirement is also a great time to deepen the relationships in your life. Some seniors choose to spend their time getting to know their grandchildren or adult children better, though Schaefers warns not to get tied up with childcare responsibilities you cannot handle. She also suggests spending time together with, and apart from, your spouse or partner. Plan activities and trips together, but also plan things alone. “Let there be space between you,” she says. “Develop your own life and make sure you’re reflecting what you want. There will be some differences between you and you should build space.”
Start planning early. Ideally, you started planning when you got your first job. But if you haven’t been saving very long or you’re worried you’ll come up short, consider meeting with a financial planner or advisor to analyze your earnings history and savings, and to discuss your best options for making retirement planning stress-free. Shirley Bachman, a local Thrivent financial advisor who specializes in helping women, says to be honest with your advisor and yourself with where you’re at financially, so you know how long you can comfortably live without dipping into investments or Social Security benefits.
Determine when to draw Social Security. If you start taking out Social Security benefits at 62, you’ll get a smaller sum each month than if you wait until you’re 65 or 70. There’s no universal right answer to deciding when to draw: It depends on your current health, financial needs, and other personal reasons. If you’re curious about finding out how much money you would receive at different ages, Social Security has an online retirement calculator to help you determine the right time to start
Make a practical budget. Ruth Hayden, who teaches financial classes for women, says she tells her students that most people make a “should-budget” for retirement—a plan they think they should follow, but end up deviating from. They add up all necessary expenses, but neglect to budget for hobbies, travel, or things they want to do. Get realistic: a budget won’t stick without a little leeway for fun.
Coming up short. Retirement doesn’t need to mean leaving the workforce entirely. Many seniors use it as an opportunity for a career change—perhaps trading a corporate job for a role with a humanitarian angle, or turning a love of reading into a job at a bookstore. Working part-time is a great way to supplement your income after retirement and keep active, motivated, and sharp.
Estate Planning: Leaving a legacy—no matter what you have
It’s a common misconception that only the elderly or extremely wealthy need to create a will or trust. In reality, estate planning is more than deciding who gets your money or assets. It can affect your financial and medical decisions toward the end of your life and ensures you’re supporting your loved ones the way you want. The most important thing to remember is to do it early: If something happens to you before you make a will, your loved ones could be caught up in long and expensive legal proceedings.
Melissa Hagstrum Bayne, an estate planning lawyer at Larkin Hoffman and a member of Minnesota Women Lawyers, recommends talking to an attorney about whether a will or living trust would be better for you. In general terms, a will is a post-death document that provides your survivors with instructions on how to manage and distribute your assets (which can include property, cars, expensive jewelry, collections, etc.) after you die, and a living trust allows you to distribute assets during your lifetime. It is also important to name a power of attorney and health care directive in your will or trust to make financial and medical decisions for you in case of an emergency.
Choosing who gets what in a will or trust can be stressful, so keep close friends and family members in the loop during the estate planning process. Talk to your children or relatives about who might be suited best for being a power of attorney or health care directive, and don’t hide who gets which assets. “Parents have a good sense of what their kids need and whether they need more or less support,” Bayne says. “Sometimes the surprise of family members being treated differently can create a really challenging dynamic.” Keep family dynamics and personal histories in mind when making estate decisions.
In the end, Bayne suggests that it will be more cost-effective and less stressful to create an estate with an attorney than to figure it out on your own—or do nothing at all. If you don’t have an estate planned, Minnesota laws would dictate who gets what. Typically your spouse inherits all of your assets if you’re married, children inherit everything if you’re single with kids, and your assets go to your parents if you’re single without children. But this can get complicated. The laws may not distribute assets according to your preferences and heirs can rack up thousands of dollars in court proceedings without a legally sound, well-thought-out will or trust. Planning estates early in life will keep your legacy positive.
How to Have the Hard Conversations
It’s not easy to talk about touchy subjects such as estate planning, assisted living, and other problems you may face as both you and your parents age. But not discussing these issues early could result in hurt feelings, additional stress, and financial challenges.
Have the conversations early
Adult children should talk to family members about estate planning and assisted living preferences before it seems necessary. “Don’t wait until an emergency happens to you or a loved one and you have to make crisis decisions,” recommends Kari Benson, director of Minnesota Board on Aging.
Don’t start with the hardest topic
“Start a conversation and see what kind of thoughts your parents have about long-term care. It doesn’t have to be serious right away,” says Knatterud, of the Minnesota Department of Human Services. Try beginning by asking about their experiences planning long-term care for their own parents.
Talk honestly about finances
It can be uncomfortable, but adult children need to know what older relatives’ options are for paying for long-term care, and approximately how much money will be left behind for emergency or post-death expenses. “Most people don’t know anything about their family’s finances or where important documents are, and it’s important to know,” Knatterud says. It doesn’t all have to be done in one day.
Frame the conversation as a positive thing
The idea behind planning now is to prevent unnecessary stress and pain later on. Adult children should find out their parents’ preferences for long-term care now to avoid a decision they dislike if something happens. When planning for yourself, be open with your children and close relatives with who gets which assets because it will eliminate financial stress when you pass. “Let your family know you just want to make it as easy as you can on them,” suggests lawyer Melissa Hagstrum Bayne.
At least let your family know you have a plan
“Some people aren’t comfortable with hard conversations, but it’s best to at least tell your heirs there is a will and give them the contact information for your lawyer,” says Cindy Ackerman, a lawyer with Moss & Barnett and member of Minnesota Women Lawyers. Be sure to also let your power of attorney and health care directive know they were named so they know what to expect in case of an emergency. Even minimal information can ease stress in an emergency.
PHOTO BY TJ TURNER
Financial Confidential: My mother died without her affairs in order, leaving our family with legal headaches and strained relationships
"My mother was an indomitable force. She was a stoic, strong, and stubborn mother of seven, widow at 52, and survivor of a broken home during the Great Depression. But at 86, she was a skeleton of her former self. She was confined to a recliner in my sister’s house, as a result of an increasing inability to keep her balance. Her last fall resulted in a two-week hospital stay and she struggled with hallucinations brought on by improper medication dosage. At one point, she attacked a nurse and denounced her family, and the hospital strapped her down to the bed."
"The situation seemed dire, so I flew to New York to see it for myself. When I saw her, my head knew the end was near even though my heart wanted to believe otherwise. Respecting her privacy and her independent spirit, I failed to ask the financial questions that have haunted the surviving family members since her death two years ago."
"Her will was standard legalese and offered little guidance on her personal wishes. Ultimately, the family relied on their own interpretations of what Mom wanted. As the weeks passed, one thing was clear: Her personal finances were in disarray with unpaid bills and personal loans that revealed all-around poor financial management. Mom had an auto-pay set up for her life-insurance premiums, but I discovered someone had disrupted it by changing the access to her checking account, causing her policy to be cancelled three days before she died. She also did not have a savings account and her pension plan did not state any beneficiaries. She had two loans against a reverse mortgage of $110,000. Her home, located in a popular New York City commuter area, once had a value of half a million dollars. However, too many years of neglect, 14 cats, and three dogs, left it in an unsuitable condition to sell."
"Mom’s will left one of my pragmatic sisters as chief executor and my controlling brother as co-executor. When she died, my sister transferred her responsibility to my brother and made him sole executor."
"The will stated that the house was to be sold and all proceeds used to pay off her debts with the balance to be divided equally among us seven children, but my brother was too attached to his familial home and too inexperienced to carry out the task. After the first year of inactivity on Mom’s estate, I requested a lawyer to manage the will, but dropped the topic when my brother reassured me that he would take action."
"Two years later, not much had changed. Finally, my daughter found a realtor willing to try to sell the home. Four days later, a buyer made an offer for $255,000. I found out then that Mom’s home was in the early stages of foreclosure, as there were several liens against the house from unpaid bills."
"When asked about the proceeds from the sale of the house (about $86,250 after all the bills were satisfied), my brother offered a partial payment, saying he wanted to retain $36,000 for any unforeseen expenses, and promised a full return in a few months. However, he had loaned a grandchild money from the estate to buy a house, and his careless disregard for the fiduciary responsibility led to an explosive confrontation among the surviving siblings."
"I called for a family meeting during my annual visit to New York, a morning following two earlier meetings with my brother to create a balance sheet. During the family meeting, allegations revealed longstanding sibling feuds, which led to an acrimonious debate."
"The experience left me with a hollow feeling and makes me think I should have hired an attorney during that first year. Looking back, my mom did leave a final lesson that will have a long-lasting impact: I will have an attorney represent my estate." –As told to Madison Bloomquist