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Using a financial adviser for your investment needs is 100% on brand, but what about the other parts of your retirement life? For example, a third of people ages 64 and up have a financial adviser, but only 2% of them asked their adviser to help with their Medicare choices, according to a July 2022 report f rom health care consulting firm Sage Growth Partners.
But Medicare and other non-portfolio topics — like travel and long-term care — can affect your finances.
“We are actively bringing these ideas to our clients, but there are still plenty of advisers out there that are not,” says Crystal Cox , a certified financial planner in Madison, Wisconsin. “They’re still focused just on the investments and the portfolio.”
Here are some questions to ask at your next meeting.
AP Photo/Elise Amendola, File
Using a financial adviser for your investment needs is 100% on brand, but what about the other parts of your retirement life? For example, a third of people ages 64 and up have a financial adviser, but only 2% of them asked their adviser to help with their Medicare choices, according to a July 2022 report f rom health care consulting firm Sage Growth Partners.
But Medicare and other non-portfolio topics — like travel and long-term care — can affect your finances.
“We are actively bringing these ideas to our clients, but there are still plenty of advisers out there that are not,” says Crystal Cox , a certified financial planner in Madison, Wisconsin. “They’re still focused just on the investments and the portfolio.”
Here are some questions to ask at your next meeting.
Your life in retirement may not continue as it has in the past. Do you plan to travel? Do you intend to move to a different state or downsize? How often will you want to buy a new vehicle?
“Most people just think, ‘I need a certain amount of money to live on,’” says Daniel Lash , a CFP in Vienna, Virginia. “What about all the ancillary things that come along with living? All the things you want to do?”
Mapping your retirement plans can help you and your adviser pinpoint when and how you’ll need cash.
“Do you have an idea of where you’re going to move, and what does real estate look like in that general area?” Lash says. “They’ve thought about retiring, not ‘What am I going to do when I retire?’”
Your life in retirement may not continue as it has in the past. Do you plan to travel? Do you intend to move to a different state or downsize? How often will you want to buy a new vehicle?
“Most people just think, ‘I need a certain amount of money to live on,’” says Daniel Lash , a CFP in Vienna, Virginia. “What about all the ancillary things that come along with living? All the things you want to do?”
Mapping your retirement plans can help you and your adviser pinpoint when and how you’ll need cash.
“Do you have an idea of where you’re going to move, and what does real estate look like in that general area?” Lash says. “They’ve thought about retiring, not ‘What am I going to do when I retire?’”
4 things retailers can do to prepare for holiday shoppers
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Although you generally can’t sign up for Medicare until you’re closer to 65 years old, your income in the years beforehand will affect what you pay for coverage. Each year, both Medicare Part B and Medicare Part D base their premiums on your reported modified adjusted gross income from two years prior. So if you filed individually making more than $91,000, or filed jointly making more than $182,000, you’ll pay additional amounts each month.
“Because there’s a lookback on earnings for Medicare expenditures, we’ll adjust plans accordingly, because they might be paying considerably more the first couple of years in retirement than later in retirement,” Lash says.
It’s also wise to consider guidance on Medicare choices in general, because you sometimes can’t change coverage later if your health situation shifts — and Medicare is complicated. “We do an annual meeting with somebody that specializes in Medicare,” Lash says. “All clients are invited to attend.”
AP Photo/Jenny Kane, File
Although you generally can’t sign up for Medicare until you’re closer to 65 years old, your income in the years beforehand will affect what you pay for coverage. Each year, both Medicare Part B and Medicare Part D base their premiums on your reported modified adjusted gross income from two years prior. So if you filed individually making more than $91,000, or filed jointly making more than $182,000, you’ll pay additional amounts each month.
“Because there’s a lookback on earnings for Medicare expenditures, we’ll adjust plans accordingly, because they might be paying considerably more the first couple of years in retirement than later in retirement,” Lash says.
It’s also wise to consider guidance on Medicare choices in general, because you sometimes can’t change coverage later if your health situation shifts — and Medicare is complicated. “We do an annual meeting with somebody that specializes in Medicare,” Lash says. “All clients are invited to attend.”
A person turning 65 now has about a 70% chance of needing some kind of long-term care, and costs are steep: It’s $54,000 a year for an assisted living facility and nearly $95,000 for a shared room in a nursing home, according to insurance company Genworth’s 2021 Cost of Care Survey.
“Some people are well enough off that they’re comfortable self-insuring,” says Kevin Brady , a CFP in New York City. “Others have more limited assets.”
No matter what is the case, it’s crucial to discuss potential costs and whether you have the savings to manage them. If you don’t, you’ll need to run the numbers on products like long-term care insurance or a hybrid policy that combines permanent life insurance with a long-term care rider.
“We’re always working with an expert to do projections and see what makes sense,” Brady says.
A person turning 65 now has about a 70% chance of needing some kind of long-term care, and costs are steep: It’s $54,000 a year for an assisted living facility and nearly $95,000 for a shared room in a nursing home, according to insurance company Genworth’s 2021 Cost of Care Survey.
“Some people are well enough off that they’re comfortable self-insuring,” says Kevin Brady , a CFP in New York City. “Others have more limited assets.”
No matter what is the case, it’s crucial to discuss potential costs and whether you have the savings to manage them. If you don’t, you’ll need to run the numbers on products like long-term care insurance or a hybrid policy that combines permanent life insurance with a long-term care rider.
“We’re always working with an expert to do projections and see what makes sense,” Brady says.
A successful retirement isn’t always about the tangibles. For many, it’s a time to realize dreams of travel and other experiences, but spending too frugally can get in the way.
“Often clients are overly conservative for fear of running out of money, but in the process they shortchange the retirement experience,” says Kevin Lum, a CFP in Los Angeles. “By the time they realize their abundance, they’re too old to spend it.”
Talk to your adviser about your big-ticket wishes and whether you have enough money to splash out a little before you settle into quieter spending.
Actual retirement spending looks more like a smile than a straight line, Lum says, with more spending at the beginning on things like travel and more spending at the end on long-term care needs.
“I’m not saying people should spend irrationally,” Lum says. “But thinking about retirement spending as a fixed calculation that doesn’t change across the retirement life isn’t a smart idea.”
A successful retirement isn’t always about the tangibles. For many, it’s a time to realize dreams of travel and other experiences, but spending too frugally can get in the way.
“Often clients are overly conservative for fear of running out of money, but in the process they shortchange the retirement experience,” says Kevin Lum, a CFP in Los Angeles. “By the time they realize their abundance, they’re too old to spend it.”
Talk to your adviser about your big-ticket wishes and whether you have enough money to splash out a little before you settle into quieter spending.
Actual retirement spending looks more like a smile than a straight line, Lum says, with more spending at the beginning on things like travel and more spending at the end on long-term care needs.
“I’m not saying people should spend irrationally,” Lum says. “But thinking about retirement spending as a fixed calculation that doesn’t change across the retirement life isn’t a smart idea.”
Are you staying at a high-end bungalow or cramming into the cheapest Motel 6 you can find? What activities are you doing? How much are you willing to spend on dinner? Some may be able to pull off spur-of-the-moment Vegas trips, but don't assume everyone can. Talk about these factors in advance.
While we often want to be spontaneous, planning ahead gives friends time to budget, says Flynanced founder Cinneah El-Amin, who teaches working women how to build wealth and save for travel. El-Amin notes that not everyone has disposable income to spend on an Airbnb or flights right away, so time is essential.
The biggest challenge often is getting on the same page about expectations and finding ways to merge the desires of luxury and budget travelers.
"If you don't set those expectations early on in the planning process, it can lead to people feeling like they're spending more than they want to, they are spending more than they can afford to, or just not being able to attend altogether, which is not the best feeling," El-Amin says.
In some cases, a friend might offer to cover another's cost. This can provide a sense of relief but also shift the power dynamic, Bhatia says. "There are times that things will be easier for you, and sometimes it might not be as easy for me. So this time, it's my turn to pitch in, and next time, maybe you can pitch in."
If you offer to help a friend pay for a trip and they accept, swiftly follow up with the payment. It's uncomfortable for a friend to have to ask for the money afterward, White notes.
Are you staying at a high-end bungalow or cramming into the cheapest Motel 6 you can find? What activities are you doing? How much are you willing to spend on dinner? Some may be able to pull off spur-of-the-moment Vegas trips, but don't assume everyone can. Talk about these factors in advance.
While we often want to be spontaneous, planning ahead gives friends time to budget, says Flynanced founder Cinneah El-Amin, who teaches working women how to build wealth and save for travel. El-Amin notes that not everyone has disposable income to spend on an Airbnb or flights right away, so time is essential.
The biggest challenge often is getting on the same page about expectations and finding ways to merge the desires of luxury and budget travelers.
"If you don't set those expectations early on in the planning process, it can lead to people feeling like they're spending more than they want to, they are spending more than they can afford to, or just not being able to attend altogether, which is not the best feeling," El-Amin says.
In some cases, a friend might offer to cover another's cost. This can provide a sense of relief but also shift the power dynamic, Bhatia says. "There are times that things will be easier for you, and sometimes it might not be as easy for me. So this time, it's my turn to pitch in, and next time, maybe you can pitch in."
If you offer to help a friend pay for a trip and they accept, swiftly follow up with the payment. It's uncomfortable for a friend to have to ask for the money afterward, White notes.
Someone has to risk putting down their credit card for the hotel. If that's you, El-Amin suggests waiting until you receive deposits from everyone else.
Once you agree on dates and pick lodging, give the group a deadline for payments. Once everyone has paid, then go ahead and book on your card. That way, you're not left in a financially dire situation if friends bail — and people are more likely to commit to something they paid for. "If you're going to put down this deposit, that really means that you're serious about this trip," El-Amin says.
Beyond lodging, other costs can snowball throughout the trip. Activities and meals often are put on one person's card, which can become hard to keep track of, especially if different people pay for each event (then there's the hassle of saving receipts). El-Amin and White both recommend apps like Splitwise, which helps log and divide payments between the whole group or specific members.
"That has been a huge lifesaver, especially amongst friend-group trips, because then there's so much transparency around what people owe," El-Amin says. "And there's not that awkward conversation after a trip being like, 'Hey, girl, you still owe me for this.'" Integrate settling up into your departure day so that loose ends are tied up before everyone heads home.
Someone has to risk putting down their credit card for the hotel. If that's you, El-Amin suggests waiting until you receive deposits from everyone else.
Once you agree on dates and pick lodging, give the group a deadline for payments. Once everyone has paid, then go ahead and book on your card. That way, you're not left in a financially dire situation if friends bail — and people are more likely to commit to something they paid for. "If you're going to put down this deposit, that really means that you're serious about this trip," El-Amin says.
Beyond lodging, other costs can snowball throughout the trip. Activities and meals often are put on one person's card, which can become hard to keep track of, especially if different people pay for each event (then there's the hassle of saving receipts). El-Amin and White both recommend apps like Splitwise, which helps log and divide payments between the whole group or specific members.
"That has been a huge lifesaver, especially amongst friend-group trips, because then there's so much transparency around what people owe," El-Amin says. "And there's not that awkward conversation after a trip being like, 'Hey, girl, you still owe me for this.'" Integrate settling up into your departure day so that loose ends are tied up before everyone heads home.
White remembers splitting the bill at a pricier-than-expected dinner and the sadness she felt about how her budget had been blown. While your friends are on a trip together, it's OK to break into smaller groups to better fit one another's budgets.
White advises being clear about your own boundaries. If the group decides to switch plans and splurge on fancy dining, especially while splitting the bill, others can try a cheaper restaurant. Don't be afraid to do your own thing.
Mix in group activities or meals that everyone is comfortable with, White says.
"It's so important to honor what it is you want to get out of your vacation and then have a lot of flexibility and patience for what other people's needs might be," she says.
White remembers splitting the bill at a pricier-than-expected dinner and the sadness she felt about how her budget had been blown. While your friends are on a trip together, it's OK to break into smaller groups to better fit one another's budgets.
White advises being clear about your own boundaries. If the group decides to switch plans and splurge on fancy dining, especially while splitting the bill, others can try a cheaper restaurant. Don't be afraid to do your own thing.
Mix in group activities or meals that everyone is comfortable with, White says.
"It's so important to honor what it is you want to get out of your vacation and then have a lot of flexibility and patience for what other people's needs might be," she says.
In her early 20s, El-Amin, now 28, used to travel spontaneously without knowing how she'd pay for it, but it led her into debt. Then she created a separate bank account where she'd deposit a bit of each paycheck to build up travel funds.
"Whether or not I have a trip that I'm actively planning, I'm still making sure that a portion of my paycheck is going towards saving for travel. I can take advantage when friends reach out to me or I see flight deals at a really cool place, I already know that I have the money," El-Amin says.
Designating travel funds creates opportunity and sets financial boundaries. Going over budget on this vacation might mean sacrificing another trip later.
El-Amin also recommends investing in travel insurance on group trips. Say half the group gets COVID-19 and excursions are nonrefundable, then travel insurance could protect you.
In her early 20s, El-Amin, now 28, used to travel spontaneously without knowing how she'd pay for it, but it led her into debt. Then she created a separate bank account where she'd deposit a bit of each paycheck to build up travel funds.
"Whether or not I have a trip that I'm actively planning, I'm still making sure that a portion of my paycheck is going towards saving for travel. I can take advantage when friends reach out to me or I see flight deals at a really cool place, I already know that I have the money," El-Amin says.
Designating travel funds creates opportunity and sets financial boundaries. Going over budget on this vacation might mean sacrificing another trip later.
El-Amin also recommends investing in travel insurance on group trips. Say half the group gets COVID-19 and excursions are nonrefundable, then travel insurance could protect you.
It's important to keep communicating every step of the way. Rising tensions may be due to issues building up over more than just money (like who got which room in the Airbnb or didn't clean up after breakfast).
"Oftentimes, if there is an emotional reaction to something, it's not just about one thing," Bhatia says. "It could be about relationship issues that have come up before and may be a displaced reaction. They may be upset about something else, but that will be the one thing that they might focus on and the reason they got angry or upset."
Bhatia recommends building in time for rest as well as active communication. "Talking things through makes for a better outing."
Dreamstime/Dreamstime/TNS
It's important to keep communicating every step of the way. Rising tensions may be due to issues building up over more than just money (like who got which room in the Airbnb or didn't clean up after breakfast).
"Oftentimes, if there is an emotional reaction to something, it's not just about one thing," Bhatia says. "It could be about relationship issues that have come up before and may be a displaced reaction. They may be upset about something else, but that will be the one thing that they might focus on and the reason they got angry or upset."
Bhatia recommends building in time for rest as well as active communication. "Talking things through makes for a better outing."
FILE - In this Dec. 26, 2020 file photo, children are silhouetted against a pond as they look at Christmas lights at a park in Lenexa, Kan. Custodial accounts are a way to invest for minors and give them a headstart on building wealth. How can you ensure they’re financially responsible enough to manage their assets when they reach the age of majority? One way is to share your money values with them and teach budgeting basics as well as saving tactics early on. (AP Photo/Charlie Riedel, File)
Charlie Riedel
FILE - In this Dec. 26, 2020 file photo, children are silhouetted against a pond as they look at Christmas lights at a park in Lenexa, Kan. Custodial accounts are a way to invest for minors and give them a headstart on building wealth. How can you ensure they’re financially responsible enough to manage their assets when they reach the age of majority? One way is to share your money values with them and teach budgeting basics as well as saving tactics early on. (AP Photo/Charlie Riedel, File)
During my late teens, my mom handed me two worn, blue passport-size books with details of my custodial investment accounts. I had no clue what to do with them, but it didn’t matter, because the accounts were empty anyway. Perhaps for the best, because I’m almost certain my assets wouldn’t have stood a chance.
I am now a mother, have opened a custodial account for my 4-year-old son, and often think about how I can prepare him to take control of his investments in the future. If you’re looking for ways to prep your child for investing, an experienced parent and financial experts have some ideas.
SHARE MONEY VALUES EARLY
Preparation begins as early as possible when it comes to teaching your kids about money, says Cristina Livadary, a certified financial planner and co-founder of Mana Financial Life Design in Marina Del Rey, California. No matter your child’s age, you can start by talking openly about finances and sharing your values around money.
Something I’ve started doing with my son is teaching him the value of giving, by encouraging him to give toys away before buying new ones. An approach Livadary recommends to teach money values is assigning what she refers to as a “job description” to each dollar you give your kids.
“One of my favorite things is taking the dollars and really splitting them up in ways that are really aligned to values,” says Livadary. “So, let’s say you get $3 a week — $1 for giving, another dollar is for saving, and the other dollar you get to spend.”
TEACH INVESTING BASICS
A custodial brokerage account is an investing account opened by a parent or guardian for a minor until they reach the age of majority.
If your child has a job with taxable income, you could also help them open a custodial IRA or Roth IRA.
A good thing about custodial accounts is that although kids don’t control the accounts until they reach the age of majority, you can show them what’s happening.
Michael Costello , a retired consumer products executive based in Miami, and a parent of three, says he prepared his now-grown kids to manage their custodial accounts by teaching them about budgeting and saving early. He also let them view their investment accounts and watch them grow, and he facilitated investing discussions with them.
“We ended up having a lot of conversations about why do you do long-term holding? What should you look at? What are ETFs versus regular stocks? What do bonds do?” he says.
Teaching his kids about exchange-traded funds and other assets made him confident about them having access to the custodial accounts when they turned 18.
There are many ways to teach your kids about the power of investing. Helping them understand what compound interest can do for every dollar they invest could motivate them to invest for the long term. If you think they’re ready to start trading, some brokers offer youth accounts that let teens start investing with parental oversight.
SET GOALS AND TEACH DELAYED GRATIFICATION
Delayed gratification is an important adaptive skill parents can teach kids for them to manage custodial accounts, says Anna N’Jie-Konte, a CFP and founder of Dare to Dream Planning in New York City.
Since custodial accounts are brokerage accounts that can be tapped into at any time, it’s important kids view their investments as long-term money that can buy them flexibility and options in the future, she says. This could help them refrain from spending it now.
“I think one of the superpowers of people that are really financially successful and just successful period, is when they have the ability to say, ‘I recognize that I want this right now, but it’s going to be so much better if I wait and if I keep at it,'” she says.
But for delayed gratification to work, it’s important to have financial goals and a plan, which I didn’t have as a teenager, and why I think investments in my custodial account wouldn’t have lasted long. For the record, my financial plan was to become a rich actress and fund all of my lifetime expenses that way.
When setting financial goals with your kids, it’s fine to set both long- and short-term ones. Why? Some people just aren’t inspired by financial goals that are too far into the future, says Livadary.
“Sometimes it’s buying a house in the next three years, but sometimes it’s taking a vacation … and that’s OK. That’s their version of a life they’re excited to live,” she says.
TRUST THE PROCESS
It’s also OK for your kids to make money mistakes — they can be teachable moments, Costello says.
“You can’t hold back and baby them, you have to give them control, they have to make some mistakes, and then over time, they kind of figure out how to manage money better.”
If despite preparing them, you feel your kids aren’t ready to manage their assets, another option is transferring some of their assets into a trust where you can maintain control beyond the age of majority.
