Working with Seniors: Health, Financial, and Social Issues

Chapter 16: Financial Choices and Challenges for Seniors

John and Susan Roberts are not sleeping very well these days. Their daughter Chelsea’s new baby, George, is the primary reason, and not just because he has yet to learn that nights are for sleeping.

Chelsea, newly single, moved back home to live with her parents. John and Susan recently realized they don’t have any idea about how to help Chelsea save for little George’s college education, and they are concerned. To add to that, Chelsea has no job and is staying home with George, so her parents are concerned about the extra financial burden. John has been thinking about his income and what will happen to the family if for some reason he no longer receives a regular paycheck.

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Dot Parsons, on the other hand, has been sleeping very well. She just received a sizable inheritance. While she is sad about the underlying event, it excites her to have a not-so-small fortune in the bank. Of course, when Dot has her taxes prepared next year she may not be sleeping quite so well. Every penny of the inheritance is sitting in a taxable certificate of deposit.

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Betty and Bob Barnett are wondering what to do. Betty has been offered an early retirement package she cannot afford to pass up. She will receive a large lump-sum payout and will continue to receive 75 percent of her current salary, indexed for inflation, for the rest of her life. Betty and Bob know they need some help, but whom should they talk to, how do they know who to trust, and what should they do now and in the future?

Introduction

By the time people are seniors, they may have been following a financial plan of some kind for years. They may be living on their current income, hoping their investments will continue generating income for their retirement. Or they may not have enough income to do more than pay for the basic necessities of daily living.

You will be more effective as a CSA if you understand this important fact: It doesn’t make much sense for seniors who have not accumulated a large amount of wealth to do traditional long-term financial planning, because they no longer have the length of life expectancy necessary to build wealth over the long-term. Instead, it makes more sense to talk about seniors’ financial concerns and the strategies they can use to:

• make the best use of their current income, assets, and other resources (regardless of the amount);

• afford as many lifestyle choices as possible throughout their retirement;

• leave a legacy to others after their death.

Today’s seniors possess a great diversity of financial needs. Many face new and complex family responsibilities and financial decisions that affect their attitudes about retirement and their ability to save for it. In this chapter we will specifically look at:

• effects of increased longevity and inflation on individuals’ abilities to save and plan for retirement;

• key financial concerns of seniors in three financial groups: high net worth, middle income, and lower income, focusing on the majority of seniors in the middle- and lower-income groups;

• financial needs at the three stages of retirement: active, passive, and final;

• six steps of financial planning that help individuals estimate and plan for their financial needs through all three phases of retirement;

• risk-management strategies, including life and health insurance and tax planning;

• investment strategies and vehicles: growth, income, asset allocation; stocks, bonds, and mutual funds;

• sources of retirement income commonly used by seniors: IRAs and other qualified retirement plans (including

• common investment pitfalls: what they are and how to protect against them.