Built for Ease

Jonathan Clements

MY FATHER LOATHED the idea that he would spend his final years in a nursing home. In the end, he never had to confront that possibility: At age 75, while riding his bicycle, he was struck and killed by a speeding car.

Still, I think often about his reluctance—because I share it. Despite exercising every day, I know I’m not as flexible or as fast as I once was, and it takes longer for the stiffness in my muscles to ease each morning. Meanwhile, I’m well aware that two of my four grandparents had dementia at the end of their life.

Perhaps, as I age, the idea of some form of assisted living will grow more appealing. Perhaps I won’t have any choice. But for now, as I make decisions big and small, I think about what it’ll take to maintain my independence and how to make matters easier for my octogenarian self. Like almost everybody else, I want to stay in control of my life for as long as possible and I hate the notion that I might end up heavily dependent on others.

That desire was a big factor in my recent home purchase. I bought a house that’s close to my daughter and where I could live on one floor. While I’d like my new home to be my final stop, I’m not entirely sure it will be. If necessary, I might move to an apartment—perhaps one I’d rent, so my kids wouldn’t have to worry about selling the place after my death.

Now that housing is settled—at least for now—I’m thinking more about my portfolio and how I’ll generate income later in retirement. This is an issue that others are also wrestling with: I get frequent emails from readers who want to make sure their finances will remain manageable, even if they suffer some cognitive decline, or who want to ensure that their spouse can easily take over the household finances.

Worried about either or both of those issues? Here are three steps I’m toying with:

Radical simplicity. Today, I have four bank accounts, four credit cards and 11 different mutual funds—and, in some cases, I own the same fund in multiple accounts, because I have a taxable account, a traditional IRA, a Roth IRA, an inherited IRA and a solo 401(k).

I’m not ready to do it yet, but at some point I plan to cancel all but one credit card and eliminate two of my four bank accounts, so I have just one checking account and one savings account. Meanwhile, I may move all of my fund holdings into a single target-date fund, though I’ll end up owning that one fund in multiple different accounts, because I’ll still have a traditional IRA, Roth IRA and so on.

Lifetime income. As I’ve discussed in earlier articles, I plan to delay claiming Social Security until age 70, while using some of my bond fund money to purchase immediate fixed annuities that pay lifetime income. There’s a host of reasons for this, including hedging the risk of a long life, generating more income in an extremely low-yield environment and giving myself the leeway to invest more heavily in stocks, which—assuming I live to a ripe old age—could offset the money lost to the annuity purchases, thanks to higher overall portfolio returns.

But to this list of reasons, let me add another: If I suffer some cognitive decline, arranging a healthy stream of lifetime income should make my financial life relatively easy to handle. Every month, I’ll get income deposited into my checking account from Social Security and my immediate fixed annuities. The only potentially tricky part is calculating and taking my required minimum distribution from my retirement accounts each year, though even that can be automated.

Hiring help. Instead of going the route of a radically simpler portfolio and buying immediate fixed annuities—or perhaps in conjunction with those steps—I might hire a financial advisor to oversee my finances. I’ve always handled my own portfolio. Hiring an advisor would have struck me as unthinkable a decade ago. But later in retirement, having someone to manage my finances may be the price I’ll need to pay to avoid self-inflicted financial wounds.

What would I look for in a financial advisor? Someone who’s low cost and fee only, legally obligated to act as a fiduciary (and not just part of the time) and who builds portfolios using index funds. He or she will also need to be significantly younger. After all, I’ll need someone who will still be working when I’m at the end of my life. One other criterion: He or she will need a thick skin. I suspect my octogenarian self will make for an ornery client.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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