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Financial Planning for Later Life-45 minutes


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Slides for webinar for River Vale (NJ) Public Library, 1/14/21

Published in: Economy & Finance
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Financial Planning for Later Life-45 minutes

  1. 1. Barbara O’Neill, Ph.D., CFP®, AFC®, CPFFE Financial Planning for Later Life
  2. 2. * 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
  3. 3. * Think about past achievements * Think about what you still want to do * Increased interest in “giving back” and leaving a legacy * Many people want to simplify and/or downsize Changes in Aspirations and Mindsets
  4. 4. New Book About Later Life Transitions Flipping-Switch-Happiness- Financial- Security/dp/1620236869
  5. 5. * 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
  6. 6. * 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
  7. 7. Questions So Far? Let’s Get to the 20 Financial Tips (in no particular order) 20 Financial Planning Tips for Later Life
  8. 8. * Cash flow statement *Net worth statement * Specific financial goals * Emergency fund See money/ for online tools 1. Don’t Forget “the Basics”
  9. 9. * Life insurance * Health insurance (Medicare and supplemental policy) * Long-term care insurance * Property and umbrella liability insurance 2. Assess Current and Future Insurance Needs
  10. 10. * 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
  11. 11. 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”
  12. 12. * 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
  13. 13. 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)
  14. 14. Who Gets Grandma’s Yellow Pie Plate? 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
  15. 15. * CPA (e.g., lump sum distribution) * CFP® (e.g., one-time or ongoing financial advice or asset management): * Attorney Go prepared to reduce wasted time and extra fees * SHIP, VITA, Area Agency on Aging 8. Get Help When Needed
  16. 16. 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
  17. 17. * 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
  18. 18. * Financial statements (see #1) * Digital assets: pdfs/Digital-Assets-Worksheet.pdf * Consolidated list of beneficiaries: beneficiary-designations.pdf * Consolidated list of individual/family personal finance data: mportant-papers.pdf 11. Keep Organized Financial Records
  19. 19. * See * 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
  20. 20. * 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
  21. 21. * Many taxable income sources: pension, Social Security, RMD withdrawals, job or self- employment earnings, capital gains * Check the IRS Tax Withholding Estimator: -withholding-estimator * Avoid under-withholding penalties (safe harbor: 100%/110% of previous year’s taxes) 14. Estimate Tax Withholding Accurately
  22. 22. * 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
  23. 23. * 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)
  24. 24. * 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”
  25. 25. * 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
  26. 26. * Assess your personal resiliency resources: /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
  27. 27. 20. “Flip Switches” Purposefully
  28. 28. Questions? Comments? Experiences?