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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Annuities are best if purchased late in life, as you see yourself in decline. Most good insurance companies have a high probability of lasting 10 or so years. If married, annuities can reduce the risks for your surviving spouse.
Also, if you have grasping, untrustworthy heirs, annuities slow their ability to get your money before you pass.
Radical simplicity is good too: one total market stock fund, one similar bond fund, maybe an international fund if inclined, and something for cash, maybe short-term bond fund or money market. And a bank account for monthly living. Still, there are the tax categories: investments, Roths, and various tax-deferred accounts.
Many spouses and adult kids can learn to manage radical simplicity.
Then keep an accountant or financial planner in the wings, someone fee-based, as you say, and wiling to help your family stay the course.
The above is how I’m planning for the future. I’m 76, no family history of dementia, but lots of heart disease. I expect to go quickly, but some years out. So we’re working together as a family to learn the above as best we can. Our son can manage the money for my wife, if I pass first. We plan to use in-home help if needed. A nursing home is a last resort.
Meanwhile, we’re starting to spend a little more than usual. Some trips. Leased a new SUV. Planning to move to a smaller house in the next year or two.
Finally, if all this fails for some unforeseen reason, well, so be it. At least we tried.
All this depends on being able to see your life as it is: to admit your inabilities, your decline when it happens, your spouses real abilities, your heirs as they really are, and so on. Without such honesty, we should probably hire a financial planner even though they are expensive. Finding one can be hard.
What do you think?
thanks Jonathan.. I appreciate your honesty in these articles. Every day brings another ‘retirement seminar’ offering in the mail. I went to one or two and recoiled in horror from the schemes on offer..
As you say, ten years ago I thought I would manage my own finances, now it’s clear I won’t be able to. So looking around..
The problem with annuities is that now you are relying on the annuity provider to stay solvent. I bought several different term insurance policies when my kids were small. Of course I neurotically researched everything to pick the companies with highest ratings, longest records, etc etc. Twenty years later only one of them is still AA-rated, the others have dropped to B.
That same low-yield environment that makes it difficult for us to generate income, is in place for the annuity companies..
Insolvency is clearly a concern. But — while little publicized — there does seem to be a pretty good safety net in place:
Have been reading & following your advice & column since the WSJ. How do you find a financial advisor who acts as a fiduciary ? I recently added a Vanguard Financial Advisor as a guide. I wish he would put more $ into stock funds & he does as much as V allows but he needs to follow the Vanguard script – certain % of bonds; int’l funds, etc which I am not crazy about. He is good in other ways. How do find an advisor who acts as a fiduciary ? Thank you.
How do you find an advisor who’s a fiduciary? You ask him or her! As a rule, if an advisor is charging a fee rather than commissions (i.e. charging by the hour or a percent of assets), he or she will be a fiduciary. Followup question: Do you act as a fiduciary all of the time? You don’t want someone who charges a percent of assets — and then turns around and also sells you products with a commission.
Thank you for your response – thought provoking. V Financial Advisor program is a % of assets – so not a fiduciary. Will continue to think and search
No, Vanguard acts as a fiduciary. It’s those who charge commissions who are almost never fiduciaries and of whom you need to be leery.
I have had terrible problems with LTC insurance company for my mother. Starting the 5th year now and still a constant battle. No way could she possibly be able to sit on the phone and write letters to them and follow up. I don’t trust any insurance company, for any product that they dupe you into buying. Once you give them any money it-is-theirs and they will do anything they can not to give it back to you!! Hours of my life wasted every week for the last 4 years.
It is not easy to plan for getting older, weaker, and more dependent, but it is important to consider ALL our options carefully and to think about what we can do NOW to prepare to “age in place” as the years pass.
Not sure who said this but it rings true: Old age isn’t so bad when you consider the alternative.
Excellent article. In the last 14 months, my mother-in-law, mother, and father died. As the person who was responsible for their finances, and in the case of my parents, their care too, I’ve been living with the issues in this week’s article.
Jonathan brings up very real issues here. I couldn’t agree more with the need for simplicity. After my parental experience, I am also assuming I will lose my cognitive skills along the way. Having a contingency plan for when you lose your marbles is essential. Identifying a financial advisor or financially competent child who can step in to protect you when that happens is a wise move.
Excellent article about some of the most important and difficult decisions that accompany aging. The following article highlights a difficult issue that should be discussed with our closest family members.
Dementia may cause major financial problems long before diagnosis, making early detection critical
It would be interesting to hear how you go about finding a financial advisor such as you describe. I tried searching for a independent fee-only advisor several years ago (on the advice of Tes Vigland and the old Marketplace Money show). They requested statements from all my accounts, which seemed reasonable. But when I realized that I was turning over information that, in the wrong hands, could be ruinous, I asked about what measures they took to insure the security of the data.
Long story short, we agreed that we were not a good fit for each other. I looked briefly for advisors at large firms (that presumably have good security measures and large E&O insurance policies), but pretty much gave up.
You make a good case for pursuing this kind of service, and as it’s 10 years further down the road, the idea only become more weighty for me.
I’d also be curious to hear what a reasonable fee for such a service would be.
Vanguard personal financial advisors are 30 basis points. They are a fiduciary. Talk with you at the very least quarterly. Invest in low cost index funds. I gave them 1/3 of my portfolio as an experiment almost 9 months ago and have been satisfied. I am 64 years old and retired 1 year
Thought provoking article. Would you mind sharing what percentage of your anticipated income needs/desires you intend to cover with annuities and at what age you expect to purchase them?
We took the same approach as Jonathan: SS + our DIAs should cover fixed living costs, what Bernstein calls our ‘liability matching portfolio’. In our case, total DIA premiums should be ~15% of our target portfolio value at age 70. Wrote an HD article after going through the experience of buying our first. The next DIAs we get will start earlier than the first one, likely at age 65.
You can read more here:
I haven’t settled on how much to allocate to immediate annuities. But, between those and Social Security, I may endeavor to generate enough monthly income to cover my fixed living costs. That would make my financial life far easier, plus it would free me up to be quite aggressive with my remaining portfolio.
A friend told me to choose a lawyer and a doctor who are younger than me, and I think that is excellent advice.
Yes after an old lawyer experienced in elder law gets you set up properly. Young physicians are not trained like old physicians, watch out.
I’m curious, how has physician training changed over time? And are all the changes for the worse?
Current residents work about 2/3 of the 1990 residents. Also current residents are trained to work for a hospital or hospital based group, not ready to go it alone or leave the AMA ranch . Also after years of practice old physicians are more experienced in all areas. Many Holistic physicians are helpful to older folks because many extra treatment options are considered. My wife is physician. Thomas I wish you luck in the hunt.
Interesting, thanks for the reply!
It’s becoming increasingly clear that the rise in Alzheimer’s flows from the catastrophic dietary guidelines of the last 40+ years; that is, from the mass embrace of low-fat, high-carb eating. These guidelines constitute one of the greatest, most epic failures of “experts” ever seen. And now we’re paying for this “expertise” with Alzheimer’s, cancer, heart disease, diabetes…. These “experts” are truly sickening. It’s just as easy to buy off a scientist as it is a politician.
The Alzheimer’s Antidote, by Amy Berger
Also see a recent interview of Dr. David Bredeson on the David Perlmutter Youtube channel.
Also sub to these low-carb YT channels:
Dr. Cywes the #CarbAddictionDoc
Low Carb Down Under
Dr. Ken Berry
Tuit Nutrition – Keto Without the Crazy
Adapt Your Life
agree, you don’t have to suffer any cognitive decline as you age if your body is given the proper building blocks throughout life.
It might be better to follow the diet and lifestyle of people who are living to 100+ at a statistically significant rate compared to every other place on earth:
The Blue Zones Solution: Eating and Living Like the World’s Healthiest People https://www.amazon.com/dp/1426216556/ref=cm_sw_r_cp_api_glt_fabc_ABRW4WXPVH8PGV288DNF
People are also living longer than ever before. And the #1 predictor of getting Alzheimer’s is age–the likelihood of developing Alzheimer’s doubles every 5 years after age 65. Given changing demographics, it’s entirely expected that the incidence of Alzheimer’s is skyrocketing. Poor diets may play a role, but the evidence for that is still rather weak and tentative at the moment (in fairness, the correlational data are more supportive). And even the healthiest people can still get Alzheimer’s.
It’s also worth noting that leading nutritionists have not advocated low-fat, high-carb diets for several decades now. Instead, they emphasize the importance of food quality rather than specific macronutrient ratios.
Zeke Emmanuel’s Atlantic article about ordering no life-saving medical treatments after 75 strongly influenced me. Every person I’ve described it has the same reaction I did – “Good idea – make my ‘target date’ age 85 not 75.”
Keep a second credit card in case something goes bad with the first, like a fraudent charge that causes the company to change the last four digits, etc.
(In later stages of geezerhood I won’t be traveling, but for now I keep my No. 2 card [AMEX] with a passport card and a couple hundred bucks in a sleeve tucked into the never-leaves-my-side computer bag.)
I share all your concerns and I’m well ahead of you in the journey being 78 and my wife 81. Playing a round of golf is not as easy as it once was, but as long as I can play, I’ll be happy. The possible inability to travel haunts me every day. I don’t want to give up.
I think about consolidating investments, simplifying banking and all the rest, but now I need to stop procrastinating and do it. I have the advantage of pension income and my wife will have a survivor annuity, but still it’s all on my mind.
This discussion makes me think of the comments on a FB group of younger folks planning to retire. Many say they will retire in their fifties, they shun the thought of an annuity even telling others to take their pension in a lump sum. They are (over) confident they can manage their investments. And my favorite is many say they can live comfortably on 50-60% of pre-retirement income. I’m thinking about that as I write a check for $5,000 to cover dental work on one tooth for my wife… after a senior citizen and cash payment discount.
my last tooth cost $5k out of pocket, after insurance paid the pittance of their contribution.. next time I’m just going to have it pulled and leave a gap.
I think these are all good tactics. I hope the right-to-die movement makes more progress between now and a point I might decide I’ve lived long enough.
No problem they leave the morphine syringes for mouth near the bed.
The number one reason for elderly folks entering nursing homes is falls. So you want to avoid falling. Take fall precautions in your house (non-slip bath mats, night lights, etc.). Do balance exercises. Stretch – so that if you do fall, you’re flexible, so things bend and stretch instead of snapping and tearing.
Yes my mother fell broke arm and hip wearing stupid slippers inside. Now locked up in NY NH for a year no visitors.
My mother in law fell broke leg when walking bare foot on ice getting paper from mail box at 7 AM. Both dumb moves cautioned about hundreds of times. Now both are demented one recent NH and one daughters home. Both 95 assume daughters will do everything going on 15 years now. Also do not get me started on not using hearing aids and walkers.
My father had a stroke and recovered immediately with the shot. Then he decided to get an operation for minor aneurysm. My MD wife explained the operation was not necessary. I said you just had a stroke enjoy the summer and rest up. So he moved up the surgery to June and had a massive stroke during surgery. He spent the next 4 years in NH complaining. He 84 died at NH after visit home.
My father in law ate right and walked daily. He had many more medical problems than the other 3 parents combined and powered thru all with work and responsible actions. A negative word NEVER crossed his lips. He was hospitalized and blood pressure went low due to wrong medication administered at hospital took out his kidneys in a couple days. He 88 died peacefully at daughters home 2 weeks later.
We are childless so responsible planning and actions are required every day.
Stupid actions result in NH stays repeat a thousand times.
Oh your $5000 hearing aid is on the table. LOL