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Being in your 70s means much more than investing in
green fees and (finally!) those new golf clubs. Later retirement years pose
sophisticated challenges to retirement planning and saving.
Some common issues for an investor's later
years include reviewing portfolio allocation and investments, 401(k)-plan and IRA income
distributions, and estate planning.
Today, retirement investors in their 70s have more to
consider than they might think. From estate planning to investment decisions to choosing a
health-care strategy, retirement-planning options for this age group are much more
sophisticated than ever before.
Anticipating future income and lifestyle needs is essential
for those in their 70s who want to make the most of their retirement years.
How can older investors possibly anticipate and manage
their family's changing financial needs? It's all in the planning.
Still a Time for Planning
According to the National Institute on Aging (NIA), the
median life expectancy for a 70-year-old, living in an industrialized nation, is another
13 years. Some people in their 70s aren't even retired yet, or are only semiretired.
Robert J. Lovejoy, CFP/CPA/PFS, a certified financial
planner, public accountant, and personal finance specialist based in Burlingame, Calif.
says:
"The whole retirement problem has changed. People are
living longer, and to counteract inflation they'll need a higher return on their
investments. Over the long haul, fixed income just won't do it."
He advises his older clients to maintain an equity
percentage in their investments to maintain purchasing power. This means that if you think
you may live for more than five years, you don't necessarily want to move all your
retirement money out of stocks.
"I tell my clients to act as if they'll live
forever," Lovejoy added.
Another income consideration for older investors is that at
age 70ý required minimum distributions from a 401(k) plan will begin. This rule is waived
if you are still working for the employer that sponsors your 401(k); however, once you
quit, you'll have to start taking the distributions. As of the year you begin taking
distributions, this new income will be added to your taxable income.
Investors also start taking required minimum distributions
from IRAs at this time. If you don't really need the money, you would want to sit down
with your financial planner to figure out a strategy for reinvesting this income.
Some issues you might want to review with your
financial-planning professional include:
- Do I have enough money to last my lifetime?
- Do I have enough insurance/money to carry me through a
medical or other emergency?
- Will I leave anything for my heirs?
The American Association of Retired Persons (AARP)
recommends that investors plan for changes in their medical needs by taking out long-term
care insurance. This insurance can help to preserve income and savings, since neither
employer health insurance nor Medicare pay for long-term care.
Handling Your Estate
Also high on the older investor's retirement-planning
checklist should be to review estate-planning strategies.
Polish up your estate plan with a strategy that minimizes
the assets found in your "taxable estate" — all the assets owned at the
time of your death. Estate-planning strategies that minimize the taxable estate help your
heirs pay as little estate tax as possible.
Since these strategies are situation-specific and involve
removing assets from the taxable estate, an estate-planning professional should be
consulted.
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For a free copy of Wills and Living Trusts,
request publication D14535 on a postcard sent to: AARP Fulfillment, 601 E Street, NW, WA,
DC 20049.
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The only people allowed to draft documents for your estate
are you or your attorney. However, a financial planner, public accountant, or registered
representative can be consulted when working out a plan. Make sure your estate-planning
professional is certified.
The AARP warns against fraudulent estate-planning practices
in its 1999 product report Wills and Living Trusts.
One Family's Strategy
Howard Kearny farmed until his late 50s, after which he and
his wife Alice retired and bought a house "in town" in Wheatland, Iowa. Alice is
in her 70s, and now resides in a long-term care facility about five blocks from their
home, which Howard, 82, still maintains.
Howard and Alice were able to anticipate the eventual need
for long-term care, after Alice was diagnosed with a degenerative illness several years
ago.
"I thought about selling the house to pay for
care," said Howard.
Instead, they did some estate planning that protected them
from having to sell their house to pay for the anticipated expenses.
Every investor's situation is different, so you should
consider meeting with a financial advisor when doing your own retirement and estate
planning. Part of the Kearny family's strategy involved Alice signing a power of attorney
to her husband, so that when the time comes, he can make investment decisions for both of
them.
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"I thought about selling the
house to pay for (my wife's long-term) care."
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| — Howard Kearny,
82. |
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The Kearny's estate-planning strategy provided for Alice's
needs as well as Howard's, and the Kearny family has managed to stay, together, in their
cherished community.
Howard visits his wife at least twice a day, reads, and
meets friends in town. He used to play horseshoes in a league, but because of his own
decreased mobility, Howard has limited his playing the last couple years.
"I go to watch, but I can't play like I used to. My
team is still undefeated, though," said Howard.
Referrals and Resources
Local and national services provide referrals to assist
elderly people. For home care or computer access, transportation or meals for the
housebound, and legal or financial advice, there are resource listings and volunteer
services for retired individuals.
For retirees who may need resources to come directly to
them, the Administration
on Aging has information on Older Americans Act (OAA) services.
OAA services offer delivery to the elderly through the work
of volunteers who operate in local agencies and organizations. OAA volunteer activities
include the following:
The American Association of Retired Persons is a good source of general
information about managing retirement assets.
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For retirees who may need assistance in the
form of resources coming directly to them, the Administration on Aging has information on
Older Americans Act (OAA) services.
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To find care providers and retirement communities, extendedcare.com
provides information on all levels of long-term care, home health agencies, and retirement
communities.
RetireNet covers retirement-planning issues, with a special focus on the
needs of women.
Medicare Rights Center offers information to Medicare beneficiaries.
And, for community support and news, from entertainment to
government and technology, look up Senior.Com. |
