Consider these options and strategies to pump up your Social Security benefits

Contributed by: Nick Defenthaler, CFP®

As a frequent speaker on Social Security, I’ve had the pleasure of educating hundreds of retirees on the nuances and complexities of this confusing topic. Over the years, I’ve come to realize that, unfortunately, many of us do not take the decision about when to file as seriously as we should.

In 2018, the average annual Social Security benefit was roughly $17,000. Assuming a retiree lives for 20 years after receiving that first benefit check, you’re looking at a total of $340,000 in lifetime benefits – and that’s not accounting for inflation adjustments along the way!

We work to help our clients receive nearly double that amount each year – $33,500 – which is close to the maximum full retirement age (FRA) benefit one can receive. Assuming the same 20-year period means nearly $700,000 in total lifetime benefits. It’s not unreasonable for a couple with earnings near the top of the Social Security wage base to see a combined, total lifetime benefit amount north of $1,500,000 as long as you are award of the decision process.

As you can see, the filing decision will be among the largest financial decisions – if not THE largest – you will ever make!

Longevity risk matters

Seventy-five percent of Americans will take benefits prior to their full retirement age (link #1 below) and only 1 percent will delay benefits until age 70, when they are fully maximized. In many cases, financial and health circumstances force retirees to draw benefits sooner rather than later. But for many others, retirement income options and creative strategies are oftentimes overlooked, or even taken for granted.

In my opinion, longevity risk (aka – living a really long time in retirement) is one of the three biggest risks we face in our golden years. Research has proven, time in and time out, that maximizing Social Security benefits is among the best ways to help protect yourself against this risk, from a retirement income standpoint. Each year you delay, you will see a permanent benefit increase of roughly 8 percent (up until age 70). How many investments offer this type of guaranteed income?

Let’s look at the chart below to highlight this point.

You can see a significant difference between taking benefits at age 62 and at age 70 – nearly $250,000 in additional income generated by delaying! Keep in mind, this applies for just one person. Married couples who both had a strong earnings history or can take advantage of the spousal benefit filing options receive even more benefits.

Mark’s story

I’ll never forget a conversation I had with a gentleman named Mark after one of my recent educational sessions on Social Security. As we chatted, he made a comment along the lines of, “I have just close to $1.5 million saved for retirement, I just don’t think Social Security really matters in my situation.” I asked several probing questions to better understand his earnings record and what his benefit would be at full retirement age.

We were able to determine that at age 66, his benefit would be nearly $33,000. Mark was 65, in good health, and mentioned several times that his parents lived into their early 90s. Longevity statistics suggest that an average 65-year-old male has a 25 percent chance of living until 93. However, based on Mark’s health and family history, he has a much higher probability of living into his early to mid-90s!

If Mark turned his benefits on at age 66, and he lived until age 93, he would receive $891,000 in lifetime benefits. If he waited until age 70 and increased his annual benefit by 32 percent ($43,500/yr.), his lifetime benefits would be $1,000,500 (keep in mind, we haven’t even factored inflation adjustments into the lifetime benefit figures).

I then asked, “Mark, if you had an IRA with a balance of $891,000 or even $1,000,000, could we both agree that this account would make a difference in your retirement?” Mark looked at me, smiled, and nodded. He instantly understood my point. Looking at the total dollars Social Security would pay out resonated deeply with him.

All too often, we don’t fully appreciate how powerful a fixed income source can be in retirement. It’s astounding to see the lifetime payout provided by Social Security. Regardless of your financial circumstance, it will always make sense to review your options with someone who understands the nuances of Social Security and is well educated on the creative ways to draw benefits. Don’t take this decision lightly, too many dollars are at stake!

Feel free to reach out to us if you’d like to talk through your plan for Social Security and how it will fit into your overall retirement income strategy.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He contributed to a PBS documentary on the importance of saving for retirement and has been a trusted source for national media outlets, including CNBC, MSN Money, Financial Planning Magazine, and OnWallStreet.com.

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Sources: 1) https://www.ssa.gov/planners/retire/retirechart.html 2) https://money.usnews.com/money/retirement/social-security/articles/2018-08-20/how-much-you-will-get-from-social-security The information herein has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making a decision and does not constitute a recommendation. You should discuss any tax or legal matters with the appropriate professional.

What happens to my Social Security benefit if I retire early?

Contributed by: Kali Hassinger, CFP®

Did you know that the benefit shown on your Social Security estimate statement isn’t just based on your work history?

The estimated benefit shown on your statement assumes that you’ll work from now until your full retirement age.  And, on top of that, it assumes that your income will remain about the same that entire time. For some of our clients who are still working, early retirement has become a frequent discussion topic. What happens, however, if you retire early and don’t pay into Social Security for several years? In a world where pensions are quickly becoming a thing of the past, Social Security will be the largest, if not the only, fixed income source in retirement for many. 

Your Social Security benefit is based on your highest 35 earning years, with the current full retirement age at 67.

So, what happens to your benefit if you retire at age 50? That is a full 17 years earlier than your statement assumes you’ll work, which effectively cuts out half of what is often our highest earning years.

We recently had a client ask about this exact scenario, and the results were pretty surprising! This client has been earning a great salary for the last 10 years and maxing out the Social Security tax income cap every year. Her Social Security statement, of course, assumes that she would continue to pay in the maximum amount (which is 6.2% of $132,900 for an employee in 2019 - or $8,240 - with the employer paying the additional 6.2%) until her full retirement age of 67. She wanted to make sure her retirement plan was still on track even after stopping her income and contributions to Social Security at age 50.

We were able to analyze her Social Security earning history, then project her future earnings based on her current income and future retirement age of 50. Her current statement showed a future annual benefit of $36,000. When we reduced her income to $0 at age 50, her estimated Social Security benefit actually dropped by 13%, or $4,680 per year. That’s still $31,320-per-year fixed income source would still pay our client throughout retirement. Given the fact that she’s working 17 years less than the statement assumes and she has the assets necessary to support the difference, a 13% decrease isn’t too bad. This is just one example, of course, but it is indicative of what we’ve seen for many of our early retirees. 

Social Security isn’t the only topic you’ll want to check on before making any final decisions about an early retirement.

You’ll also want to consider health insurance, having enough savings in non-retirement accounts that aren’t subject to an early withdrawal penalty, and, of course, making sure you’ve saved enough to reach your goals! If you’d like to chat about Social Security and your overall retirement plan, we are always happy to help!

Kali Hassinger, CFP®, CDFA® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

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Any opinions are those of Kali Hassinger, CFP and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. The case study included herein is for illustrative purposes only. Individual cases will vary. Prior to making any investment decision, you should consult with your financial advisor about your individual situation. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Raymond James and its advisors do not provide tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

New Year Financial To-Dos Help Keep You on Track

Contributed by: Kali Hassinger, CFP®

As we settle into 2019, the fresh calendar year provides an ideal opportunity to make plans and adjustments for your future. Instead of setting lofty resolutions without a game plan in mind, might I suggest that you consider our New Year Financial Checklist? Completing this list of actionable, attainable goals will help you avoid the disappointment of forgotten resolutions in February, and you’ll feel the satisfaction of actually accomplishing something really important!

New Year Financial Checklist

• Measure your progress by reviewing your net worth as compared to one year ago. Even when markets are down, it's important to evaluate your net worth annually. Did your savings still move you forward? If you're slightly down from last year, was spending a factor? There is no better way to evaluate than by taking a look at the numbers!

• Speaking of spending and numbers, review your cash flow! How much came in last year and how much went out? Ideally, we want more income than spending.

• Now, let's focus on the dreaded budget. Sure, budgeting can be a grind, so call it a “spending plan”. Do you have any significant expenses coming up this year? Make sure you're prepared and have enough saved.

• Be sure you review and update beneficiaries on IRAs, 401(k)s, 403(b)s, life insurance, etc. You'd be surprised at how many people don't have beneficiaries listed on retirement accounts (or have forgotten to remove their ex-spouse)!

• Revisit your portfolio's asset allocation. Make sure your investments and risk are still aligned with your stage in life, your goals, and your comfort level. I'm not at all suggesting that you make changes based on market headlines. Just be sure that the retirement or investment account you opened 20 years ago is still working for you.

• Review your Social Security Statement. If you're not yet retired, you will need to go online to review your estimated benefit. Social Security is one of the most critical pieces of your retirement, so make sure your income record is accurate.

Of course, this list isn't exhaustive. The final step to ensure your financial wellbeing is a review with your advisor. Even if you don't work with a financial planner, at a minimum set aside time on your own, with your spouse or a trusted friend, to plan on improving your financial health. Do it even if you only get to the gym the first few weeks of January!

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

IRS Announces Increases to Retirement Plan Contributions for 2019

Contributed by: Josh Bitel

Several weeks ago, the IRS released updated figures for 2019 retirement account contribution and income limits. 

Employer Retirement Plans (401k, 403b, 457, and Thrift Savings Plans)

• $19,000 annual contribution limit, up from $18,500 in 2018.

• $6,000 “catch-up” contribution for those over age 50 remains the same for 2019.

• An increase in the total amount that can be contributed to a defined contribution plan, including all contribution types (employee deferrals, employer matching and profit sharing), from $55,000 to $56,000, or $62,000 for those over age 50 with the $6,000 “catch-up” contribution.

In addition to increased contribution limits for employer-sponsored retirement plans, the IRS adjustments provide some other increases that can help savers in 2019. A couple of highlights include:

Traditional IRA and ROTH IRA Limits

• $6,000 annual contribution limit, up from $5,500 in 2018 – the first raise since 2013!

• $1,000 “catch-up” contribution for those over age 50 remains the same for 2019.

Social Security Increase Announced

• As my colleague Kali Hassinger, CFP® touched on, the Social Security Administration announced a cost of living adjustment, to the tune of 2.8%, starting January 2019.

• Kali also mentioned some slight increases to Medicare Part B premiums to keep in mind as we inch closer to 2019. 

As we enter 2019, keep these updated figures on the forefront when updating your financial game plan. As always, if you have any questions surrounding these changes, don’t hesitate to reach out to our team!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

Are You Retirement Ready?

Contributed by: Sandra Adams, CFP®

In our work with clients, one of the most common questions we get is, “How will we know when we are ready (and able) to retire?”  That can be a tricky question, because there are two sides to being ready for the next phase of your life – the technical side and the personal side.  While certainly you need to be financially secure for the next decades of your life, you also need to be comfortable with the transition from your life as a career individual to what you now wish to become in your next phase – and that is not as easy as it sounds.

From a financial-readiness perspective, many clients target age, monetary or benefit milestones to help them determine when they will be ready to retire:

• “When I have $1 million in assets saved, I will be ready to retire.”

• “When I am eligible to collect Social Security, I will be ready to retire.”

• “When I am eligible to collect my company pension OR I have reached my XX anniversary with my company, I will be ready to retire.”

• “When I am eligible to receive Medicare, I will be ready to retire.”

The real answer is, some or all of these may be true for you, and some or all of these may be false.Every client situation is different and no general guideline can determine whether or not you are financially ready to retire. Unfortunately, it is far more complicated than that. There are numerous financial factors that go into determining financial readiness.Let’s take a deeper look into the issues.

Financial Readiness Issues:

Retirement Savings:

Do you have enough saved?

• What might your other retirement income sources be (Social Security, Pensions, etc.)

• How much income will you need (what are your fixed costs versus lifestyle wants in retirement), and

• What are your longevity expectations (how long might you expect to live based on health, family history, etc.—expect it will be longer than you think!).

Where are your savings?

• Do you have retirement savings outside of retirement plans?

• Do you have some after-tax and reserve cash/emergency reserve savings?

• Do you have different types of accounts to provide tax diversification going into retirement (i.e. IRAs/401(k)s, ROTH IRAs, after tax investment accounts)?

Debt:

Have you paid down your debt or do you have a plan to be as debt free as possible by the time you retire?  This will allow you to control your retirement income for other fixed expenses and wants; it is desirable to have as little debt/fixed expenses as possible going into retirement as possible.

Retirement Income:

A large part to being retirement ready is understanding your retirement income sources, options and strategies and using them to your best advantage.  Take the time to consult with your planner to choose the option that works best for you and your family circumstance.

• Pensions: Do you understand all your options, including the income options available to your spouse as a survivor upon your death.  We find that in many cases it makes sense to choose an option that includes a lifetime income option for you with at least a 65% survivor income benefit for your spouse if you were to die first.

• Social Security: While many are under the false impression that because you are allowed to take Social Security benefits as early as age 62, they should, we might recommend otherwise.  For most individuals now approaching Social Security claiming age, Full Retirement Age for claiming Social Security is now age 66 and delaying benefits until age 70 results in an 8% per year increase in benefits.  Knowing and understanding the Social Security benefits, rules and strategies that can be employed, especially for married couples, to ensure the largest lifetime benefit can be an added supplement to long-term retirement income. We find that our most successful married couples in retirement employ a strategy where the lower Social Security earner draws at Full Retirement age while the higher Social Security earner waits to draw at age 70, insuring the highest possible Social Security benefit for the spouse that lives the longest.

Investments:

Preparing for retirement involves making appropriate adjustments to your investment strategy.  You should work with your financial planner to adjust your asset allocation to one that is appropriate for your new goals and time horizon. We find that our most successful retirees tend to have asset allocations ranging from 40% Bond/60% Stock to 50% Bond/50% Stock.

Insurance:

• For those retiring before age 65 (Medicare eligibility) and without retiree healthcare, finding health insurance to bridge them to Medicare is a must. 

• Retirement readiness does require addressing the issue of Long Term Care funding Having a plan, no matter what your choice, is something that must be done before retirement.

Estate Planning:

While not exactly monetary, having your estate planning documents (Durable Powers of Attorney, Wills and possibly Trust or Trusts in place) updated prior to retirement is a good idea.Part of this is making sure accounts are titled properly, beneficiaries are updated, and account holdings/locations and management are as simplified as possible going into your last phase of life.

Once you have determined your financial retirement readiness, you need to determine your personal retirement readiness, which may be even more difficult for many folks.  Why?  Many have spent the majority of their lifetimes to this point building careers that established them with titles, credentials and stature. They built reputations, networks, social and business circles and were well respected because of the work that they have done.  And now they are moving from that phase of their lives to another and that means starting over.  What will they be now?  What will their lives mean?  And to whom?

Until you are ready to start the next phase of your life knowing your purpose – what you want to wake up for every day – you are likely not ready for retirement.  Those that have not given the thought to their mission, values, and their “why” for their next phase will be left feeling lost and will likely fail at retirement and find themselves wanting to go back to their former lives.

How can you find your purpose?

• Ask yourself what is most important to you? (family, friends, spirituality, charity,etc)

• Ask yourself what are your life priorities? (family, health, knowledge, etc.)

• Ask yourself what you want to let go of and what you want to give yourself to.

• Realize that the rest of your life can be the best of your life if you embrace it with an open mind and enthusiasm.

• Consider reading the book “Purposeful Retirement” by Hyrum Smith if you need more help!

“Am I ready to retire?”  It is not a simple question and there is no simple answer.  It may take months or years to answer all of the questions and make all of the preparations.  If you think that retirement is in your not too distant future, the time is NOW to start planning.  Don’t let retirement sneak up on you…work with your financial planner and be Retirement Ready!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Social Security Increase Announced

Contributed by: Kali Hassinger, CFP®

The Social Security Administration recently announced that benefits for more than 67 million Americans would be increasing by 2.8% starting in January 2019. This cost of living adjustment (COLA for short) is the largest we've seen since 2011 when the benefits increased by 3.6%. 

The Medicare Part B premium increase was also announced, and it will only be increased by a modest $1.50 per month (from $134 to $135.50).The premium surcharge income brackets have also seen a slight increase in the monthly premium on top of the $1.50 standard.These surcharges affect about 5% of those who have Medicare Part B.The biggest change, however, is the addition of a new premium threshold for those with income above $500,000 if filing single and $750,000 if filing jointly. This will affect:

While the Social Security checks will be higher in 2019, so will the earnings wage base you pay into if you're still working.  In 2018, the first $128,400 was subject to Social Security payroll tax (6.2% for employees and 6.2% for employers).  Moving into 2019 the new wage base grows by 3.5% to $132,900.  Those who are earning at or above the maximum will pay $8,240 in Social Security tax each year.  With the employer's portion, the maximum tax collected per worker is $16,780.  

Social Security plays a vital role in almost everyone's financial plan.  If you have questions about next year's COLA or anything else related to your Social Security benefit, don't hesitate to reach out to us.

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

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Source: https://www.cms.gov/newsroom/fact-sheets/2019-medicare-parts-b-premiums-and-deductibles

Finding Your Social Security Information and Social Security Widow Benefits

Contributed by: Josh Bitel

There are many ins and outs of Social Security and I want to help you stay on top of them (without boring you with a pile of information). Here are easy explanations of two topics that can help you make the most of your benefits:

Where’s my Social Security statement?  

Remember when you used to get a statement each year a few months before your birthday from the Social Security Administration (SSA)?  Well if you haven’t seen it in a while that’s because the SSA stopped mailing to most folks back in 2011 (at a savings of $70M). 

The SSA will begin mailing benefit statements every 5 years to those who haven’t signed up for online statements (those already receiving benefits get an annual statement).  Paper statements are also mailed to workers age 60 and older three months before their birthday if they don’t receive Social Security benefits and don’t yet have a ‘My Social Security’ account.  If you haven’t checked out the SSA website, I suggest doing so: www.ssa.gov.  You may receive your statement, project future benefit amounts, as well as learn more about one of the nation’s largest expenditures.

Widowed? Research suggests that you might not be getting your fair share.

According to a recent report from the Social Security Administration Office of the Inspector General, as many as one-third of spouses age 70 and older are not getting the maximum social security benefit. The issue arises when a spouse initially receives “widow” benefits as early as age 60 (benefits based on your spouse’s earnings) and then later is eligible based on their own earnings record for a higher amount. As an example, Jan’s husband Paul passed away and Jan decided to begin receiving a widow’s benefit at age 60.  At age 62-70, Jan may want to switch to benefits based on her earnings record if they are higher.  Jan will need to be proactive as the SSA will not inform Jan if she is eligible for a higher amount.  When in doubt – call the SSA and give them your social security number and the social security number of your spouse to learn about all of your options. That way, you can be sure you are receiving the maximum amount allowed.

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

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This Just In: Cost of Living Adjustment

Contributed by: Nick Defenthaler, CFP®

In recent weeks, it was announced that monthly Social Security benefits for more than 66 million Americans will be increasing by 2% starting in January 2018.  Who doesn’t love a pay raise, right?  This cost of living adjustment (COLA for short) is the largest we’ve seen since 2012.  To put the 2% increase in perspective, 2017 benefits crept up by a measly 0.3% and 2016 offered no benefit increase at all. 

Unfortunately, as many can attest to who are still in the work force, your “raise” may be partially or fully wiped away due to the increase in cost for medical insurance through Medicare – enter the "hold harmless" provision.  Medicare premiums for 2018 will be announced later this year. 

If you’re like many, this will probably cause some frustration knowing your increase could very well be going right back out the door in the form of medical premiums.  However, it’s important to remember that Social Security is one of the only forms of guaranteed fixed income that will rise over the course of retirement.  For those lucky enough to still have access to a pension, it’s extremely rare to have a benefit that carries a COLA provision. 

While Social Security checks will be higher in 2018, so will the earnings wage base you pay into if you’re still working.  In 2017, the first $127,000 was subject to Social Security payroll tax (6.2% for employees and 6.2% for employers).  Moving into 2018, the new wage base grows to $128,700 a 1.3% increase.  This translates into an additional $105 in tax each year for those earning north of $128,700. 

Social Security plays a vital role for almost everyone’s financial game plan.  If you have questions about next year’s COLA or anything else related to your Social Security benefit, don’t hesitate to reach out to us.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.

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This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. Opinions expressed are those of Nicholas Defenthaler and are not necessarily those of Raymond James.

Financial Scams Target Social Security and Medicare

Contributed by: Sandra Adams, CFP®, CeFT™

According to the Federal Trade Commission, of the 65 and older population, over 33% are victims of financial frauds and scams on an annual basis. It is not surprising, then, that the latest scams to come out are related to Social Security and Medicare – two of the most widely used social support programs by the 65 and older population. Here is what you need to know about the newest scams:

Social Security:

There are two Social Security scams on the current watch list:

• The first one is where you will receive an official-looking e-mail from the Social Security Administration with an invitation to create a Social Security account so that you can receive your benefits. You land on a webpage where the scammers hope you will fill out your confidential information. DO NOT FALL FOR THIS. Never click on links in any of these e-mails. If you want to sign up for a Social Security Account, go directly to https://ssa.gov/myaccount/ (see our blog with detailed instructions about how to set up your Social Security account here).

• The second one is where the scammers actually create an account for someone and redirect their payments to a bank account controlled by them, not by the victim. To prevent this from happening, create your own MySSA account with a strong username and password. This is similar to filing your tax return early before the scammers file a fake return and steal your refund. In addition, a recommended and increased security measure is that when you create your MySSA account, go to the settings and choose the option that any changes to the bank account into which your check is electronically deposited can only be done in person at a Social Security brank office and not done using your online account.

Medicare:

This scam is related to Congress’ passage of the Medicare Access and CHIP Reauthorization ACT (MACRA) in 2015 which is requiring the Centers for Medicare and Medicaid Services to remove Social Security numbers from all Medicare cards. Thus, they will begin reissuing Medicare cards in 2018. The current scam has scammers calling Medicare beneficiaries claiming to be Medicare and saying that they must confirm their current Medicare numbers before sending them a new card. Others call saying there is a charge for the new card and are collecting beneficiaries’ personal information. Please note that there is no charge for your new card and Medicare will never call you for your information. They already have it. 

As an additional note, there are still tax scams continuing to occur. We wrote a blog about tax season scams earlier this year -- please take a moment to review this information to protect yourself and your loved ones.

Always Remember:

• A government agency will not contact you by phone or e-mail to request personal information or to demand money/payment from you.

• You will always be contacted by mail or registered letter by government agencies and if money is owed, you will be given an opportunity to dispute charges.

If you suspect fraud related to these examples or any other type of financial scams or fraud, please contact the U.S. Senate Special Committee on Aging Fraud Hotline at 1-855-303-9470 or contact your financial planner for assistance.

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Sandra Adams, CFP® , CeFT™ is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

The Responsibility of Handling Other People’s Money

Contributed by: Sandra Adams, CFP®, CeFT™

More and more often as we meet with clients, a recurring topic of conversation is the responsibility of handling the financial affairs of others. Whether that’s for an older adult parent or relative, or whether it’s the handing off of that responsibility to a son, daughter, friend, or other trusted party that concerns our older adult client. As the population continues to age, there is a growing need for older adults to plan for the shift of the responsibility of handling their financial affairs, either now or in the future, to someone else for a variety of reasons—medical, dementia or other incapacity issue, or simply the desire not to have to handle one’s own day-to-day financial affairs.

It is important to be aware that there are a number of roles that you might be assigned to in order to handle the financial life of an older adult; and it is important that these be planned for in advance to avoid potential conflicts in the future:

• Social Security Representative Payee – The Social Security Administration allows for a representative payee to be assigned in the case that there is an incapacitated recipient of Social Security (family or friends of the recipient that must be 18 years or older).

• Long Term Care Insurance Lapse Provision Designee – Someone assigned to receive notices in the case that long term care insurance premiums are not paid on a long term care insurance policy. The designee has the responsibility of making sure the premiums get paid until the insured needs to go on claim.

• Agent for Funeral Decisions – Some states (now including Michigan) permit the appointment of an agent to manage the funeral arrangements for a person, which can be separate from the Executor of the Will.

• Power of Attorney – General Power of Attorney for General/Financial Decisions allows the power to handle bill paying, banking, investments, IRA and other distributions, and any other financial decisions on the person’s behalf, serving as their financial fiduciary (and making decisions based on their best interests).

As the Power of Attorney, use the resources you have available to you:

• The professional team – the client’s Financial Planner, CPA, attorney, physician, etc.

• The client’s Personal Record Keeping Document and Letter of Last Instruction, if they have one.

• The client’s Financial Plan and history with their planner – this will tell a story about how they have lived their financial life and their historical patterns (especially helpful if you are assisting someone who has developed dementia or cognitive impairment). It’s helpful to begin to attend meetings with the client and their financial adviser, if the client is comfortable, as soon as you know there is an issue and if you know you will be involved in assisting the client now or in the future.

Planning ahead for your involvement in handling money for an older adult is always suggested, so that you can get familiar with the client’s situation, the team members involved, and the resources available. Being a financial fiduciary is a big responsibility, one that you don’t want to take lightly or push off until the last minute to tackle. Contact your planner or myself, at Sandy.Adams@CenterFinPlan, if we can be of assistance in handling these or other Long Life Planning matters.

Sandra Adams, CFP® , CeFT™ is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Raymond James Financial Services, Inc. and its advisors do not provide advice on tax or legal issues, these matters should be discussed with the appropriate professional.