Money After 60: What Older Adults Need

to Know About Money

Dr. Barbara O’Neill, CFP®

Rutgers Cooperative Extension

oneill@aesop.rutgers.edu

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Personal Introduction

Rutgers professor for 36 years

CFP® for 30 years

Extension Specialist in Financial Resource

Management with Rutgers Cooperative Extension

Financial educator and author

In the second half of my financial life

Your Questions?

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Helpful Resource

http://njaes.rutgers.edu/money/pdfs/older-adults-money-advice.pdf

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Program Objectives

Provide face-to-face discussion of five key

topics found in the older adult publication

Provide resources for additional information

Provide “action steps” for each topic

Answer questions and address financial

concerns

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Program Topics

Social Security

Health and Long-Term Care (LTC) Insurance

Later-Life Investment Decisions

Creating a Retirement “Paycheck”

Wills and Estate Planning

Common Financial Errors Changing investment strategy drastically on a specific date (e.g., age 60)

“Forgetting” about effects of inflation

3.5% inflation will double costs in 20 years

Relying too heavily on financial salespeople

Assuming that estate planning is for “the rich”

Retiring without considering health coverage

Not planning for long-term care expenses

Improper asset withdrawals

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Social Security- Need-to-Knows

Reduced SS benefits available at age 62

Full benefits at Full Retirement Age (FRA)

Must be “fully insured” with 40 quarters of coverage

There is no earnings limit after FRA

Before FRA, $1 of benefits withheld for every $2 over earnings limit ($15,480 in 2014)

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Social Security-

More Need-to-Knows It is usually wise to postpone SS benefits if:

You have substantial earnings

You are in good health

You do not need the money for current living expenses

Contact SS about 3 months before retiring

See www.socialsecurity.gov for information and calculators

and http://www.socialsecurity.gov/myaccount/ for personal

benefit statement access

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Social Security- Action Steps

Review annual benefit estimate for accuracy

Estimate/calculate percentage of retirement income

coming from Social Security

Do a Ballpark Estimate retirement savings

calculation. See www.asec.org

Factor Social Security into divorce plans

Must be married 10 years to qualify on ex-spouse’s record

Go Direct (direct deposit of SS benefit check)

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Health Insurance-

Need-to-Knows Medicare covers people age 65+

Medicare has 4 parts: A, B, C, and D

Many beneficiaries buy Medigap policies

Early retirees must cover health insurance “gaps” (e.g., between a job and Medicare)

COBRA can extend group benefits for 18 mos.

Health care law exchanges may be less costly

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Long Term Care (LTC)

Insurance- Need-to-Knows Potential cost of LTC is a big financial risk

Nearly half of Americans will need LTC

LTC covers a wide range of services

Best time to buy is generally age 55 to 60

Key features: amount of daily coverage, length of

coverage, types of benefits provided (e.g., home health

care), elimination period, number of ADLs to trigger benefits,

and method of making an inflation adjustment

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Health and LTC Insurance-

Action Steps

Apply for Medicare within 3 months of age 65

Pay attention to 60-day COBRA deadlines

Safeguard health insurance documents

Contact SHIP for assistance with purchasing

Medigap and LTC policies

Explore LTC options, including insurance and

Continuing Care Retirement Communities

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Later Life Investing-

Need-to-Knows

Later life investing advice often conflicts

Historically, stocks have provided the highest return

of any asset class over the long term

The trade-off is a higher chance of loss

May want to gradually ramp-down stock % of

portfolio asset allocation during retirement

Rebalance portfolio regularly

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Later Life Investing-

More Need-to-Knows Maximize catch-up contributions if age 50+

Maximize employer plan matched savings

Assess your investment risk tolerance

See www.rce.rutgers.edu/money/riskquiz/

Must complete plan rollovers in 60 days

Need $300k saved for every $1k of monthly income

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Later Life Investing-

Action Steps Consider hiring a professional adviser

See www.fpanet.org, www.cfp-board.org, and www.napfa.org for names

of local advisers

Consolidate scattered retirement plans for easier

minimum distribution calculations

Absent health issues, plan on living at least to early

90s (for retirement savings planning)

Take advantage of all savings opportunities before

retirement

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Retirement “Paycheck”-

Need-to-Knows Possible income sources include:

Social Security, defined benefit pension plan, defined contribution plan,

individual retirement accounts (IRAs), annuities, taxable account

investments, post-retirement earnings, home sale proceeds, rental real

estate, income from a reverse mortgage, and other sources

Retirees should not withdrawing more than 4% to 4.5% of

assets per year and less (e.g., 3%) if very conservative

Big fear of retirees: outliving your assets

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Retirement “Paycheck”-

More Need-to-Knows When making withdrawals, generally first tap taxable

investments and tax-free investments

Long-term capital gain rates if assets held > 1 year

Mandatory withdrawals required at age 70½

No withdrawal penalty after age 59½

Roth IRA withdrawals are tax free after age 59½ and if

account is open at least 5 years

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Retirement “Paycheck”-

Action Steps

Calculate whether you can afford to retire and

how much can be safely withdrawn annually Check several online calculators

Seek assistance from a financial advisor

Save as long as possible in tax-advantaged

investments Roth or traditional IRAs

Tax-deferred employer accounts

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Wills and Estate Planning-

Need-to-Knows Spelling out your wishes (e.g., property transfers) is

a gift that you give others

Dying intestate (without a will) may result in

unnecessary hassles and expenses and loss of

control

Three recommended documents:

Will

Living will for health care decisions

Durable power of attorney for financial affairs

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Wills and Estate Planning-

More Need-to-Knows The principal goal of estate planning is to make sure that

assets are distributed as you desire with the least amount of

estate and/or inheritance taxes

Beneficiary and contingent beneficiary designations should be

reviewed periodically: http://njaes.rutgers.edu/money/pdfs/beneficiary-designations.pdf

Three key documents with beneficiary designations:

Wills and trusts

Life insurance policies

Retirement accounts

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Wills and Estate Planning-

Action Steps

Keep an inventory of important family papers:

http://njaes.rutgers.edu/money/pdfs/importantpapers.pdf

See an attorney to draft or revise estate planning documents

Revise documents as life events require

Let trusted persons know where key documents are kept

Prepare a “Letter of Instructions” and consider “digital assets”

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Take Care of Yourself!

“The greatest wealth is health”

Virgil

See www.njaes.rutgers.edu/sshw

for information about health and

wealth connections

Questions? Comments?

Experiences?

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