“All great changes are preceded by chaos.” — Deepak Chopra
Question: My father recently passed away, and I’m concerned about my mom, who is retired. What suggestions do you have to help guide her?
Answer: Your mom is lucky to have you, and I’m sorry for your loss. Today, more than ever, our financial well-being and physical health are closely related. Having a solid economic foundation and a strong social network both contribute to the quality of life. Rising and unexpected medical expenses threaten financial security as we age. Anything we can do to stay healthy and positive ultimately influences financial peace of mind too. In working with our clients, here are a few of the common elements we see in those who have well-rounded and joyful lives, both financially and personally.
Create a Social Support System
According to the National Bureau of Economic Research, retirees with strong social ties are more likely to stay healthy. “The Golden Girls,” a TV Series that ran from 1985 to 1992, comes to mind as I recall my grandma’s situation after my grandfather’s death. Grandma found another widow to share her home with during this stage of life before making the transition to an assisted-living arrangement.
Even if your mom doesn’t want to live with someone else, staying connected with like-minded individuals is recommended. Companionship is important and taking on a roommate later in life isn’t uncommon. In 2013, more than 1 million single women age 45 and older were living with a roommate who wasn’t a relative, according to the U.S. Census Bureau’s Annual Social and Economic Supplement.
Make the Most of Financial Resources
According to the 2012 Census, the median income in retirement for men aged 65 and older is $27,612 while it is only $16,040 for women. This means that the average American woman age 65 and up lives on $11,500 less than a man of similar age. This is why we encourage everyone, especially women, to have a plan in place when it comes to financial and lifestyle decisions for retirement.
- Social Security: Depending on your mom’s situation, this is a time to review Social Security benefits. Widows (and divorcées) have more claiming options.
- 401(k): Evaluate all sources of income including employer provided plans and Individual Retirement Accounts. Update beneficiary designations.
- Life insurance: If there are policies, assess the benefits and analyze income levels, debt, assets and any dependents.
- Will and healthcare directives: Document these instructions in writing to ensure that her wishes are in place for transferring assets and making medical decisions. Make necessary updates or changes.
- Portfolio Management: Once your mom has an idea of her monthly cash flow needs, she’ll know if it’s necessary to make withdrawals from her investment portfolio. Evaluate how to transfer funds most efficiently to avoid depleting her accounts.
Not so long ago, my parents and grandparents were able to shift most or all of their assets into conservative investments to provide income and preserve principal. Today’s retirees have unique considerations such as longer life expectancies and lower overall interest rates. “The Wall Street Journal” reported that since 2000 life expectancies for men are up 2 years to 86.6 years, and women’s have increased 2.4 years to 88.8 years. That’s a long time to make our money last. For these reasons, consider using a formalized sequence of withdrawal process and asset allocation strategies rather than just randomly removing funds.
A deliberate process will include three principles:
- Allocate investments among the three major asset classes: stocks, bonds, and cash to match needs and timeframe.
- Diversify within those classes for exposure to growth, income and stability.
- Periodically rebalance investments in response to changes such as health, lifestyle, family considerations, and market movement, both up and down.
The characters in “The Golden Girls” — Dorothy, Blanche, Rose and Sophia — kept moving. Who can forget Blanche Devereaux as portrayed by Rue McClanahan in her sequined workout gear?
Staying, or getting into shape is important because physical health becomes more closely linked to financial health as we age. Avoiding tobacco, exercising and eating a well-balanced diet are ways to reduce the risk of developing heart disease and other chronic illnesses.
Find “Second Act” Activities
The four lovely ladies in the classic sitcom never stayed idle for long. Volunteering or working part-time as a substitute teacher, personal aide, entrepreneur or baby sitter could bring a sense of purpose and maybe even a little income to help your mom’s nest egg last longer.
A Golden Plan
Being newly solo doesn’t mean having to face decisions alone. Assembling a team comprised of family and a trusted financial advisor to optimize your mom’s plan is the place to start. Life is what we make it. Stay focused and invest accordingly.
Views expressed are the current opinion of the author, but not necessarily those of Raymond James & Associates. The author’s opinions are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. The process of rebalancing may carry tax consequences.
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This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email firstname.lastname@example.org Website: www.raymondjames.com/InvestmentInsights