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Barbara O’Neill, Ph.D., CFP®, AFC®, CPFFE
Owner/CEO, Money Talk
25 Financial
Planning
Strategies
for Older
Adults
“Street Cred”: I Am 65+ Too!
Question #1:
What are some
of the biggest
challenges that
people face in
later life?
* When to claim Social Security
* Taxation of Social Security
* Required minimum distributions
* Estimated taxes (pension, SS, RMDs)
* Medicare and health insurance
* Long-term care planning
* Housing decisions
* Other?
Older Adults
Have Many
Financial
Challenges and
Decisions
* Think about past achievements
* Think about what you still want
to do (“bucket list”)
* Increased interest in “giving
back” and leaving a legacy
* Many people want to simplify
and/or downsize
* “Lasts” and ROLE calculations
Changes in
Aspirations
and Mindsets
* Changing investment strategy
drastically for a certain age or
event (e.g., age 65, widowhood)
*”Forgetting” about the effects of
inflation
* Relying too heavily on financial
salespeople
* Assuming that estate planning
is for “the rich”
Common Later
Life Financial
Errors
* Retiring without planning
out health care coverage
* Not developing a long-
term care plan
* Improper asset
withdrawals
* Lack of communication
about finances with loved
ones
More
Common Later
Life Financial
Errors
Question
#2:
Any
comments
or
questions
so far?
Let’s Discuss 25
Financial
Planning Tips for
Older Adults
(in no particular order)
* Cash flow statement
*Net worth statement
* Specific financial goals
* Emergency fund
See
https://njaes.rutgers.edu/
money/ for online tools
1. Don’t Forget
“the Basics”
* Life insurance
* Health insurance (Medicare and
a supplemental policy)
* Long-term care insurance?
* Property and umbrella liability
insurance
2. Assess Current
and Future
Insurance Needs
* Don’t invest if don’t understand
* Diversify asset classes and types
* Invest for long-term goals (5+ years)
* Have reasonable expectations
* Buy low-cost investments
* Don’t pay attention to market
“noise”
3. Follow
Recommended
Investment
Strategies
Try to simulate a regular income
stream (like a paycheck):
* Annual cash withdrawals (1/12 of
annual amount per month)
* Automated mutual fund withdrawals
* “Laddered” bonds or CDs
* Managed payout mutual funds
* Annuities, pension, Social Security
* Continued employment
4. Create a
Retirement
“Paycheck”
* Applies to Traditional IRAs, 401(k)s,
403(b)s, TSP, SEP-IRAs
*Must begin first distribution no later
than April 1 of the year after the year
you turn 72
* Employer plans: can delay to April 1
of year after one retires
* Withdrawal based on Dec. 31
account balance (in previous year)
and an age-based divisor
Failure to take RMD: 50% of amount
that should have been withdrawn
5. Take Required
Minimum
Distributions
(RMDs) From
Tax-Deferred
Accounts
Reduce income tax to lowest legal
amount possible under tax law
* Tax-deferred investments (e.g.,
employer plans such as 403(b)s)
* Age 50+ catch-up savings
* Long-term capital gains
* “Bunching” itemized tax
deductions
6. Practice Tax
Avoidance
(Minimization)
Who Gets Grandma’s Yellow
Pie Plate?
https://www.youtube.com/wat
ch?v=z3NNoVRQpI8
* Consider interests of family members
* Make a written list of property/ heirs
*Share list with family and executor
* Consider lifetime gifting ($15k per person)
7. Make Plans
for Untitled
Personal
Property
* CPA (e.g., lump sum distribution)
* CFP® (e.g., one-time or ongoing
financial advice or asset management):
www.letsmakeaplan.org/
www.napfa.org
https://www.plannersearch.org/
* Attorney
Go prepared to reduce wasted time
and extra fees
* SHIP, VITA, Area Agency on Aging
8. Get Help
When Needed
There are many ways to leave a
legacy and give back:
* Children and grandchildren
* Creative works (art, music, books)
* Volunteering to help others
* Charitable gifting (outright gifts,
will and trusts, donor advised
funds, QCDs from traditional IRAs)
9. Leave a
Legacy and
Give Back
* Ask executor and a “Plan B”
* Prepare/share a “financial
notebook” and Letter of Last
Instructions
* Discuss/list burial and memorial
wishes (write obituary?)
* Prepare/share a “What to
Do/Who to Contact” List
* Discuss living will issues and
personal property bequests
10.
Communicate,
Communicate,
Communicate
* Financial statements (see #1)
* Digital assets:
https://njaes.rutgers.edu/money/
pdfs/Digital-Assets-Worksheet.pdf
* Consolidated list of beneficiaries:
https://njaes.rutgers.edu/money/pdfs/
beneficiary-designations.pdf
* Consolidated list of individual/family
personal finance data:
https://njaes.rutgers.edu/money/pdfs/i
mportant-papers.pdf
11. Keep
Organized
Financial
Records
* See www.medicare.gov
* Contact SHIP/SHINE for assistance
* Stay abreast of changes in retiree
health plan coverage
* Budget for health care costs in
retirement (e.g., Part B premiums,
health plan premiums, copays, etc.)
Healthier people spend MORE on
lifetime health care costs !
12. Learn “The
Fine Print”
About
Medicare
Question #3:
Any
comments
or questions
so far?
* Modify the 4% rule:
Withdraw < 4% of assets if a very
conservative investor
Withdraw > 4% of assets for older
retirees (70s+)
* Try some Monte Carlo
calculators
* Consider hiring a CFP® to assist
you
13. Make
Prudent Asset
Withdrawals to
Avoid Outliving
Income
* Many taxable income sources:
pension, Social Security, RMD
withdrawals, job or self-
employment earnings, capital gains
* Check the IRS Tax Withholding
Estimator:
https://www.irs.gov/individuals/tax
-withholding-estimator
* Avoid under-withholding
penalties (safe harbor: 100%/110%
of previous year’s taxes)
14. Estimate
Tax
Withholding
Accurately
* Learn one new thing every day
about personal finance
*Methods:
Blogs, social media, Wall Street
Journal, other newspapers, classes,
webinars, podcasts, etc.
15. Increase
Your Personal
Finance
Knowledge
* Stagger maturity dates on a
series of bonds and CDs
* Hedges your bets” about
changing interest rates
* Provides liquidity at more
frequent time intervals
*Helps to provide a “paycheck”
16. “Ladder”
Fixed Income
Securities
(e.g., Bonds
and CDs)
* Senior discounts abound:
national parks, movies, theme
parks and attractions, restaurants
* Extra federal income tax
standard deduction for taxpayers
age 65+
* Age 65+ discounts on property
taxes in some locations
* Reduced fees for club or
association dues, flu shots
17. Play the
“Age Card”
* Older adults are PRIME targets: more
wealth, more easily reached, less
technologically savvy, and diminished
capacity risk
*Four common scams: tech support
scams, imposter scams, lottery scams,
and romance scams
* “Red Flags”: requests to wire money
immediately, requests for payment with
prepaid gift cards, requests for advance
payment for services, and secrecy (e.g.,
“don’t tell anyone)
18. Avoid
Elder Fraud
Scams
* Assess your personal resiliency
resources:
https://njaes.rutgers.edu/money
/assessment-tools/personal-
resiliency-resources-assessment-
quiz.pdf
* Build strong social capital
* Relationships are a key factor
in retirement happiness
19. Build
Strong
Resiliency
Resources
20. Get
Comfortable
“Spending
Down”
* Realize how difficult it is to
switch from saving to spending
* Step outside your spending
“comfort zone”
* Automate savings withdrawals
* Answer the question “If you
don’t spend your money, who will?
* Pick a starting age between 62
and 70
* Understand benefit reductions
before FRA
* Be aware of the SS earnings limit
* Make estimated payments for
income tax on SS benefits
* Take care of your spouse
21. Decide
When to
Collect
Social
Security
* Make goals SMART with a cost
and a time deadline
* Make plans to spend down
accumulated savings
* Develop spending action plans
(e.g., RMD withdrawals)
* Upgrade goals to “first class” if
you can afford it
22. Set
“Through
Retirement”
Goals
23. Simplify
Your Finances
* Consolidate “like” assets (e.g.,
multiple IRAs or mutual funds)
* Close subpar accounts
* Cull automated payments
* Purge and shred documents
* Run periodic “status checks”
with online calculators
* Regularly review income and
expenses
* Do a status check with a CFP®
* Self-insure or purchase LTC
insurance for “the big unknown”
24. Achieve
Financial
Peace of
Mind
25. “Flip
Switches”
Purposefully
“Flipping Switches” is a metaphor for
making transitions in later life. Most
require information and preparation.
35 Later
Life
Transitions
Some Transitions Are Like
“Dimmer Switches” and
Change Over Time
Working
Spending
Investment asset allocation
Downsizing
Disengagement/engagement activities
Simplification
Flipping a Switch
Podcasts and Webinars
Podcast Interviews
 The Military Money Expert - March 2, 2020
 Money Mammals - July 10, 2020
 Wine and Dime- July 17, 2020
Print Media Interviews
 How to Mentally Prepare for Retirement- July 9, 2020
 With Remote Work Flexibility, Some People Opt to Relocate Ahead of
Their Retirement-September 21, 2020
Webinars
 Flipping a Switch (University of Arkansas)-4/22/20
 Navigating the Two Financial Faces of COVID-19 (Rutgers Cooperative
Extension)- 8/31/20
Three Non-Financial Switches with
Personal Finance implications
FINDing Fulfillment After
Full-Time Work
 Leave work with a plan
Don’t disappear for long
Cherry-pick work that you like
Expect Ageism, OK Boomer?
A New Definition of “Busy”
 Schedule around “Big Rocks”
Practice “identity bridging”
 Redefine “productivity”
 Set goals as “guardrails”
 Stay connected with others
Invincible to Vulnerable
 Accept your vulnerability
Stave off disease and delay
Follow healthy lifestyle recommendations
Get recommended vaccines and screening tests
Best Wishes With All of the
“Flipped Switches” in
Your Life
Question
#4:
Any final
comments
or
questions?
25 Financial Planning Strategies for Older Adults-06-21

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25 Financial Planning Strategies for Older Adults-06-21

  • 1. Barbara O’Neill, Ph.D., CFP®, AFC®, CPFFE Owner/CEO, Money Talk 25 Financial Planning Strategies for Older Adults
  • 2. “Street Cred”: I Am 65+ Too!
  • 3. Question #1: What are some of the biggest challenges that people face in later life?
  • 4. * When to claim Social Security * Taxation of Social Security * Required minimum distributions * Estimated taxes (pension, SS, RMDs) * Medicare and health insurance * Long-term care planning * Housing decisions * Other? Older Adults Have Many Financial Challenges and Decisions
  • 5. * Think about past achievements * Think about what you still want to do (“bucket list”) * Increased interest in “giving back” and leaving a legacy * Many people want to simplify and/or downsize * “Lasts” and ROLE calculations Changes in Aspirations and Mindsets
  • 6. * Changing investment strategy drastically for a certain age or event (e.g., age 65, widowhood) *”Forgetting” about the effects of inflation * Relying too heavily on financial salespeople * Assuming that estate planning is for “the rich” Common Later Life Financial Errors
  • 7. * Retiring without planning out health care coverage * Not developing a long- term care plan * Improper asset withdrawals * Lack of communication about finances with loved ones More Common Later Life Financial Errors
  • 9. Let’s Discuss 25 Financial Planning Tips for Older Adults (in no particular order)
  • 10. * Cash flow statement *Net worth statement * Specific financial goals * Emergency fund See https://njaes.rutgers.edu/ money/ for online tools 1. Don’t Forget “the Basics”
  • 11. * Life insurance * Health insurance (Medicare and a supplemental policy) * Long-term care insurance? * Property and umbrella liability insurance 2. Assess Current and Future Insurance Needs
  • 12. * Don’t invest if don’t understand * Diversify asset classes and types * Invest for long-term goals (5+ years) * Have reasonable expectations * Buy low-cost investments * Don’t pay attention to market “noise” 3. Follow Recommended Investment Strategies
  • 13. Try to simulate a regular income stream (like a paycheck): * Annual cash withdrawals (1/12 of annual amount per month) * Automated mutual fund withdrawals * “Laddered” bonds or CDs * Managed payout mutual funds * Annuities, pension, Social Security * Continued employment 4. Create a Retirement “Paycheck”
  • 14. * Applies to Traditional IRAs, 401(k)s, 403(b)s, TSP, SEP-IRAs *Must begin first distribution no later than April 1 of the year after the year you turn 72 * Employer plans: can delay to April 1 of year after one retires * Withdrawal based on Dec. 31 account balance (in previous year) and an age-based divisor Failure to take RMD: 50% of amount that should have been withdrawn 5. Take Required Minimum Distributions (RMDs) From Tax-Deferred Accounts
  • 15. Reduce income tax to lowest legal amount possible under tax law * Tax-deferred investments (e.g., employer plans such as 403(b)s) * Age 50+ catch-up savings * Long-term capital gains * “Bunching” itemized tax deductions 6. Practice Tax Avoidance (Minimization)
  • 16. Who Gets Grandma’s Yellow Pie Plate? https://www.youtube.com/wat ch?v=z3NNoVRQpI8 * Consider interests of family members * Make a written list of property/ heirs *Share list with family and executor * Consider lifetime gifting ($15k per person) 7. Make Plans for Untitled Personal Property
  • 17. * CPA (e.g., lump sum distribution) * CFP® (e.g., one-time or ongoing financial advice or asset management): www.letsmakeaplan.org/ www.napfa.org https://www.plannersearch.org/ * Attorney Go prepared to reduce wasted time and extra fees * SHIP, VITA, Area Agency on Aging 8. Get Help When Needed
  • 18. There are many ways to leave a legacy and give back: * Children and grandchildren * Creative works (art, music, books) * Volunteering to help others * Charitable gifting (outright gifts, will and trusts, donor advised funds, QCDs from traditional IRAs) 9. Leave a Legacy and Give Back
  • 19. * Ask executor and a “Plan B” * Prepare/share a “financial notebook” and Letter of Last Instructions * Discuss/list burial and memorial wishes (write obituary?) * Prepare/share a “What to Do/Who to Contact” List * Discuss living will issues and personal property bequests 10. Communicate, Communicate, Communicate
  • 20. * Financial statements (see #1) * Digital assets: https://njaes.rutgers.edu/money/ pdfs/Digital-Assets-Worksheet.pdf * Consolidated list of beneficiaries: https://njaes.rutgers.edu/money/pdfs/ beneficiary-designations.pdf * Consolidated list of individual/family personal finance data: https://njaes.rutgers.edu/money/pdfs/i mportant-papers.pdf 11. Keep Organized Financial Records
  • 21. * See www.medicare.gov * Contact SHIP/SHINE for assistance * Stay abreast of changes in retiree health plan coverage * Budget for health care costs in retirement (e.g., Part B premiums, health plan premiums, copays, etc.) Healthier people spend MORE on lifetime health care costs ! 12. Learn “The Fine Print” About Medicare
  • 23. * Modify the 4% rule: Withdraw < 4% of assets if a very conservative investor Withdraw > 4% of assets for older retirees (70s+) * Try some Monte Carlo calculators * Consider hiring a CFP® to assist you 13. Make Prudent Asset Withdrawals to Avoid Outliving Income
  • 24. * Many taxable income sources: pension, Social Security, RMD withdrawals, job or self- employment earnings, capital gains * Check the IRS Tax Withholding Estimator: https://www.irs.gov/individuals/tax -withholding-estimator * Avoid under-withholding penalties (safe harbor: 100%/110% of previous year’s taxes) 14. Estimate Tax Withholding Accurately
  • 25. * Learn one new thing every day about personal finance *Methods: Blogs, social media, Wall Street Journal, other newspapers, classes, webinars, podcasts, etc. 15. Increase Your Personal Finance Knowledge
  • 26. * Stagger maturity dates on a series of bonds and CDs * Hedges your bets” about changing interest rates * Provides liquidity at more frequent time intervals *Helps to provide a “paycheck” 16. “Ladder” Fixed Income Securities (e.g., Bonds and CDs)
  • 27. * Senior discounts abound: national parks, movies, theme parks and attractions, restaurants * Extra federal income tax standard deduction for taxpayers age 65+ * Age 65+ discounts on property taxes in some locations * Reduced fees for club or association dues, flu shots 17. Play the “Age Card”
  • 28. * Older adults are PRIME targets: more wealth, more easily reached, less technologically savvy, and diminished capacity risk *Four common scams: tech support scams, imposter scams, lottery scams, and romance scams * “Red Flags”: requests to wire money immediately, requests for payment with prepaid gift cards, requests for advance payment for services, and secrecy (e.g., “don’t tell anyone) 18. Avoid Elder Fraud Scams
  • 29. * Assess your personal resiliency resources: https://njaes.rutgers.edu/money /assessment-tools/personal- resiliency-resources-assessment- quiz.pdf * Build strong social capital * Relationships are a key factor in retirement happiness 19. Build Strong Resiliency Resources
  • 30. 20. Get Comfortable “Spending Down” * Realize how difficult it is to switch from saving to spending * Step outside your spending “comfort zone” * Automate savings withdrawals * Answer the question “If you don’t spend your money, who will?
  • 31. * Pick a starting age between 62 and 70 * Understand benefit reductions before FRA * Be aware of the SS earnings limit * Make estimated payments for income tax on SS benefits * Take care of your spouse 21. Decide When to Collect Social Security
  • 32. * Make goals SMART with a cost and a time deadline * Make plans to spend down accumulated savings * Develop spending action plans (e.g., RMD withdrawals) * Upgrade goals to “first class” if you can afford it 22. Set “Through Retirement” Goals
  • 33. 23. Simplify Your Finances * Consolidate “like” assets (e.g., multiple IRAs or mutual funds) * Close subpar accounts * Cull automated payments * Purge and shred documents
  • 34. * Run periodic “status checks” with online calculators * Regularly review income and expenses * Do a status check with a CFP® * Self-insure or purchase LTC insurance for “the big unknown” 24. Achieve Financial Peace of Mind
  • 35. 25. “Flip Switches” Purposefully “Flipping Switches” is a metaphor for making transitions in later life. Most require information and preparation.
  • 37. Some Transitions Are Like “Dimmer Switches” and Change Over Time Working Spending Investment asset allocation Downsizing Disengagement/engagement activities Simplification
  • 38. Flipping a Switch Podcasts and Webinars Podcast Interviews  The Military Money Expert - March 2, 2020  Money Mammals - July 10, 2020  Wine and Dime- July 17, 2020 Print Media Interviews  How to Mentally Prepare for Retirement- July 9, 2020  With Remote Work Flexibility, Some People Opt to Relocate Ahead of Their Retirement-September 21, 2020 Webinars  Flipping a Switch (University of Arkansas)-4/22/20  Navigating the Two Financial Faces of COVID-19 (Rutgers Cooperative Extension)- 8/31/20
  • 39. Three Non-Financial Switches with Personal Finance implications
  • 40. FINDing Fulfillment After Full-Time Work  Leave work with a plan Don’t disappear for long Cherry-pick work that you like Expect Ageism, OK Boomer?
  • 41. A New Definition of “Busy”  Schedule around “Big Rocks” Practice “identity bridging”  Redefine “productivity”  Set goals as “guardrails”  Stay connected with others
  • 42. Invincible to Vulnerable  Accept your vulnerability Stave off disease and delay Follow healthy lifestyle recommendations Get recommended vaccines and screening tests
  • 43. Best Wishes With All of the “Flipped Switches” in Your Life