retirement

Single Women and Longevity Risk Part 3: Planning for Expenses in Retirement

Cash Flow Planning, Financial Planning, Retirement Planning, Women and Money / By /
Planning for Expenses in Retirement

In Part 2 of this three-part blog series on single women and longevity risk, we discussed the importance of investing to supplement your income in retirement and minimize the risk of outliving your financial resources. In Part 3, we’ll explore why planning for expenses in retirement—both expected and unexpected—is essential when it comes to managing longevity risk.  

Estimating Your Expenses in Retirement

Failing to consider and plan for the various costs you’re likely to incur in retirement can lead to a savings shortfall, increasing the risk that you’ll outlive your assets. Thus, creating a retirement budget is necessary to ensure you’re saving enough and investing appropriately.

Of course, there are always uncertainties when it comes to planning for the future. Nevertheless, with the right guidance, it’s possible to project your retirement expenses with a reasonable degree of accuracy.

For example, basic living expenses like food, housing, utilities, and clothing tend to remain relatively steady in retirement and are therefore easier to anticipate. Yet other items like healthcare, travel, and entertainment often rise significantly once you stop working.

In fact, a recent report by the Center for Retirement Research at Boston College found that in 2018, 12% of the median retiree’s total retirement income went toward medical expenses. Moreover, since 2000, the price of medical care has increased at a faster rate than the overall inflation rate.

Meanwhile, with more free time on your hands, you may wish to travel more and take longer, more expensive trips in retirement. Plus, you’re more likely to spend money on other types of entertainment once work no longer demands so much of your time.

No matter your retirement plans, it’s important to consider how your lifestyle goals will impact your budget and plan accordingly. This can help you determine what size nest egg you’ll need to retire successfully and mitigate longevity risk.  

Planning for Unexpected Expenses in Retirement

In addition to the expenses we can reasonably project, others can crop up as we age and our homes, children, and spouses age along with us. Unfortunately, unexpected expenses can mess with the best-laid plans when you’re living off savings and fixed sources of income like Social Security.

Therefore, it’s best to expect the unexpected and prepare for these expenses as best you can. Here’s a list of unexpected expenses you may face in retirement:

Home Repairs & Maintenance Costs

Many Americans own their homes when they reach retirement age. (When I say “own,” I mean they own their homes outright or are still paying down their mortgage as opposed to renting.)

It’s easy to overlook or postpone home maintenance, especially if everything looks fine on the surface. But homes age just like we do, and putting off necessary repairs can become a significant financial expense down the road.

A recent personal experience drove this point home when a routine paint job turned into a major dry rot mitigation project costing tens of thousands of dollars!

When it comes to planning for unexpected expenses in retirement, here’s a best practice to prevent a surprise cost like mine: hire a professional to inspect your home for hidden problems such as dry rot, termites, mold, foundation issues, leaks, and outdated plumbing and electrical systems. Then, develop a multi-year plan to fix the problems and schedule ongoing routine maintenance.

Remodeling Expenses

In addition to the unglamorous fixes a home occasionally needs, it’s not unusual to grow tired of your home decor over time. You may decide to buy new furniture or appliances or update the exterior of your home in retirement, all of which can be costly.

In some cases, you may simply want your home to maintain its value if you plan to eventually sell it. For example, kitchen and bathroom styles tend to change every 10-20 years, prompting homeowners to make major updates.

Or you may need to alter your home so you can age in place comfortably and safely. While no one likes to think about the possibility of losing mobility, it’s one of the realities many of us must face as our bodies age.

Regardless of the impetuous, remodeling costs are common in retirement and can be substantial. Thus, it’s best to expect them and manage your finances accordingly.  

Unexpected HealthCare Costs

The first time many retirees realize Medicare isn’t as cheap as they thought it would be is when they receive a notice from the Social Security Administration about IRMAA. IRMAA, which stands for Income-Related Monthly Adjustment Amount, is an extra charge added to your Medicare Part B and Part D premiums if your income exceeds a certain threshold.

When on Medicare, you pay monthly premiums for Part B, which covers doctor services, outpatient care, and preventive services, and Part D, which covers prescription drugs. But if you’re a high-income earner according to your tax return from two years ago, the government says, “Hey, you can afford to contribute a little more.”

So, they add an extra charge (IRMAA) to your monthly premiums. And the more you earn, the higher your IRMAA charge will be.

Also, Medicare doesn’t cover all healthcare-related expenses in retirement. You’ll still be responsible for co-pays, deductibles, and coinsurance, as well as long-term care, dental, hearing, and eye care. These out-of-pocket costs can add up quickly if you have a significant health issue or need extensive care.

Again, proper planning is essential to mitigate these costs. To avoid IRMAA, you can work with a financial planner to develop a retirement income plan that keeps your taxable income below the threshold.

In addition, you may want to consider buying a Medigap or Medicare Advantage policy to defray the healthcare costs Medicare doesn’t cover.

Medigap policies fill in the gaps in original Medicare coverage, including medical care when traveling outside the U.S. Just keep in mind you’ll still need a separate prescription drug plan (Medicare Part D).

Alternatively, Medicare Advantage (Part C) offers an “all-in-one” alternative to original Medicare. However, these plans are generally in HMOs or PPOs, which may limit your access to certain healthcare professionals or facilities.

Long-Term Care

Another common misconception is that Medicare covers long-term care costs. It doesn’t. This can be problematic, since most older adults will likely need long-term care during their lifetimes.

In fact, the U.S. Department of Health and Human Services estimates that 70% of those turning 65 this year will eventually need long-term care. Meanwhile, women are more likely to need long-term care than men and for a longer duration, according to data from Morningstar.

These services can be costly—typically thousands of dollars a month in expenses. Unfortunately, long-term care insurance is also expensive, and the rigorous eligibility requirements put it out of reach for many.

If you qualify for long-term care insurance and can afford it, you may want to consider your available options, including hybrid policies that include a life insurance component. Otherwise, self-funding long-term care by saving and investing enough money during your working years is likely your best option.

Family Obligations

It’s not uncommon for adult children or other relatives to need financial help occasionally. These requests can be tough to negotiate, especially if your loved ones don’t understand the strain an unexpected loan or gift can have on your finances in retirement.

Although discussing money is taboo in many families, it’s wise to be transparent about your financial circumstances and create boundaries around financial requests. If this isn’t a viable option, be sure to include potential loans and gifts when planning for expenses in retirement.

Losing a Spouse

Morningstar estimates that 90% of women will manage assets on their own at some point during their lifetimes. Many women experience this for the first time in retirement due to the death of a spouse.

Losing a spouse can be emotionally devastating, no matter your stage of life. Yet failing to prepare financially for this possibility can make an already challenging situation even worse.

If you depend on your partner financially, there are steps you can take now to safeguard your financial independence if you unexpectedly lose them. For example:

  • Consider purchasing a life insurance policy to replace lost income or cover funeral costs and other outstanding expenses.
  • If your spouse has a pension, explore your survivorship options before retirement to ensure continued payments.
  • Understand Social Security survivors benefits, especially if your spouse has the higher earnings record.
  • Consult an estate-planning attorney to ensure your estate plan is current and organized for a seamless transition of assets.

With Proper Planning, Single Women Can Minimize Longevity Risk and Thrive Financially in Retirement

Planning for expected and unexpected expenses in retirement is crucial for maintaining financial stability and peace of mind. Yet minimizing longevity risk requires more than managing your expenses. Meeting your savings targets and investing for your long-term goals is also essential.

Remember, the earlier you start preparing financially for retirement, the better off you’ll be long-term. Moreover, you don’t have to go it alone. A fiduciary financial planner like Curtis Financial Planning can provide expert guidance and help you implement the right strategies to secure your financial future. To learn more, please explore our services and free financial planning resources.

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Single Women and Longevity Risk Part 2: The Importance of Investing

Financial Planning, Investment Management, Retirement Planning, Women and Money / By /
Single Women and Investing

Saving and investing are both crucial for financial health. Yet investing is particularly important when it comes to mitigating longevity risk.  In Part 2 of this three-part series about single women and longevity risk, we’ll delve into the significance of investing and explore how understanding risk and reward can empower women to become better investors.

Differentiating Saving and Investing

When it comes to personal finance, many conflate saving and investing. While both are crucial for financial stability, they serve different purposes.

Saving entails setting aside a portion of your income for near-term expenses or potential emergencies. In other words, your savings should be a safety net that’s liquid and risk-free.

Investing, however, implies allocating money to stocks, bonds, and other assets in anticipation of a potential return in the future. Despite the inherent risks, investing is an essential strategy for single women to increase wealth over time, so you don’t outlive your financial resources.  

Understanding the Risk-Reward Relationship

While investing offers the potential for a higher return on your money, it’s also inherently riskier than saving. That’s why many women hold too much cash relative to their financial goals.

If you tend to be risk averse, you’re not alone. In fact, one Northwestern Mutual study found that in general, U.S. adults prefer to play it safe with their money than take risks.

However, understanding the risk-reward relationship is crucial for overcoming the confidence gap that many women experience as investors. Each investment carries a different level of risk, and effectively managing these risks is essential to achieve your financial goals.

Typically, investments with the potential for higher returns carry a higher degree of risk (although high risk doesn’t guarantee high returns). For example, higher-risk investments like individual stocks and equity funds generally offer the potential for higher returns over time. Conversely, lower-risk assets like savings accounts and short-term Treasury bonds tend to yield more modest returns.

Navigating the Risk vs. Reward Dilemma

Many women face the dilemma of whether to keep their money safe in a bank account or invest it for potential growth. Indeed, research suggests that men are generally more willing to take risks with their finances than women.

However, studies also indicate that as women gain confidence through education and experience, they become better investors. Moreover, women investors are more likely to exhibit traits such as reduced trading, increased patience, openness to advice, more diversified portfolios, and a healthy skepticism towards “hot” investments.

Ultimately, your financial goals determine the level of returns you need from your investments. Saving for a house down payment in the next few years, for example, might require safer investments with less risk. In contrast, saving for retirement that’s several decades away allows for higher-risk investments with the potential for more significant returns.

But you also need to weigh your return objectives against your comfort level with taking on risk. In this case, risk generally refers to the possibility of losing your money. Taking on more risk than you can tolerate can lead you to make rash investment decisions that impede your progress toward your financial goals.

Single Women and Investing: Mitigating Longevity Risk

To mitigate the risk of running out of money prematurely, women must embrace some investment risk. By profiling four different investors, we can illustrate the outcomes along the risk spectrum.

Assume the following savers/investors invest $50,000 for ten years and reinvest all interest and dividends.

  • Investor #1 places her $50,000 in a savings account earning an average annual return of 1.5%. Her account grows to $57.815 in 10 years.
  • Investor #2 places her $50,000 into a certificate of deposit (CD) with an annual yield of 3%. Her account grows to $67,196 in 10 years.
  • Investor #3 places her $50,000 into a diversified portfolio* of 60% stocks and 40% bonds earning a 6% average annualized return. As a result, her account grows to $89,542 in 10 years.
  • Investor #4 places her $50,000 into a diversified portfolio* of 100% stocks, and it earns a 9% average annualized return. As a result, her account grows to $129,687 in 10 years.

A Note on Volatility

While the 100% stock portfolio generates the highest outcome, it also experiences substantial fluctuations over the 10-year period. Meanwhile, the 60% stock/40% bond portfolio exhibits less volatility due to the lower risk associated with bonds. 

Consider the following hypothetical annual return patterns for these two portfolios:

The graphs above illustrate how Investor #4 experiences larger swings in performance over the 10-year period by investing exclusively in stocks than Investor #3. In other words, the price of higher returns is generally increased volatility.

Thus, investors who are unable to weather the ups and downs of the stock market may need to sacrifice return potential to stay the course over time.  

*Diversified portfolio returns were generated using Vanguard Total Market Funds, both U.S. and international.

Striking the Right Balance to Reach Your Financial Goals

The challenge for many independent women investors is understanding their risk tolerance in relation to their need for return.

For example, if Investor #1 doesn’t invest in stocks, will she reach her financial goals and manage longevity risk, or will she run out of money before the end of her life? On the other hand, does Investor #4 need to take quite so much risk, or can she beat longevity risk by investing in a less volatile portfolio?

These are the answers I seek when working with my female clients. Ultimately, my aim is to keep my clients invested for the long term to experience the magic of compounding returns and reach their financial goals.

In the third and final article in this blog series, we’ll look at the other side of the equation: minimizing longevity risk by managing your expenses in retirement.

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SECURE 2.0 Act Cliff Notes (So You Don’t Have to Read the Whole Thing)

Retirement Planning, Tax Planning / By /
SECURE 2.0 Act Cliff Notes

On December 29, 2022, President Biden signed into law a $1.7 trillion spending package, which includes the SECURE 2.0 Act, legislation that changes the rules on saving for retirement and emergencies and withdrawals from retirement plans. The good news is that it opens up opportunities to save more and expands on tax benefits for Roth IRAs and 401(k) plans.

Many of the SECURE 2.0 Act’s provisions take effect on January 1, 2023, while others may take years to implement. Here’s a summary of key provisions in the SECURE 2.0 Act and how they may affect your retirement savings goals.

If you are a client of Curtis Financial Planning, we will discuss these changes as they pertain to your situation, ensuring that you maximize every opportunity.

Changes to Required Minimum Distributions (RMDs)

For those who need to be made aware, this is when you must take withdrawals from your retirement accounts, even if you don’t need the extra income. The IRS wants to collect the deferred tax on these funds. (Remember that Roth IRAs don’t have RMDs, but all other IRAs and retirement accounts do).

The changes:

  • Raises the RMD age to 73 for those who turn 73 between 2023 and 2032. In 2033 and beyond, the RMD age will increase to 75. (Unfortunately, if you turned 72 in 2022 or earlier, you must keep taking RMDs).
  • Reduces the IRS’s 50% penalty for failing to satisfy your RMD before the year-end deadline to 25% of the RMD amount. The liability falls to 10% if an individual corrects the discrepancy promptly.
  • Roth accounts in employer retirement plans (such as Roth 401k’s) will be exempt from RMDs beginning in 2024. Nothing changes for individual Roth IRAs that have no RMD requirement.

Increases to Catch-Up Contributions per the SECURE 2.0 Act

Catch-up contributions aim to help older people make up for not saving enough earlier in their lives in their IRAs or company retirement plans.

  • Currently, if you’re 50 or older and are allowed to contribute to a 401(k) plan at work, in 2022, you can put in up to $6,500 more than younger people. Starting in 2025, individuals between the ages of 60 and 63 can make annual catch-up contributions of up to $10,000 to a workplace plan. This amount will be indexed to inflation.
  • Beginning in 2024, the IRA catch-up contribution amount for those 50 and older will be indexed to inflation. Currently, the maximum catch-up is $1000.00 and has been stagnant.
  • If your wage income exceeds $145,000 in the previous calendar year, you’ll need to make catch-up contributions to a Roth account in after-tax dollars. Those earning less than $145,000 are exempt from this requirement. The impact of this change is that you will not get a tax deduction for the catch-up contribution as you did with an traditional IRA, but the Roth contribution will grow tax-free.

Employer Matching for Roth Retirement Accounts

Employers can now offer employees the option of receiving matching and non-elective contributions to their Roth retirement accounts. Note that profit-sharing contributions do not qualify. The employer will get a tax deduction, but the employee must pay taxes on these employer contributions.

Changes to Qualified Charitable Distributions (QCDs)

  • Currently, IRA owners can transfer up to $100,000 each year to a charity as a QCD. This $100,000 will now be indexed for inflation.
  • There is now a one-time maximum $50,000 QCD distribution to a charitable remainder trust (CRUT), charitable annuity trust (CRAT) or charitable gift annuity (CGA). However, with the $50,000 limit the administrative costs to set this up may be prohibitive.

Self-Employed Plan Changes

Sole proprietors can now open up new 401(k) plans for the prior year up until the filing deadline (NOT including extensions) instead of year-end. But as before, self-employed can make contributions up to the extended filing date.

More Flexibility for 529 Plan Balances

The IRS will allow direct transfers from 529 plans (open for at least 15 years) to Roth IRAs starting in 2024. The Roth IRA must be in the name of the beneficiary of the 529 plan. The maximum lifetime transfer is $35,000 and is subject to annual IRA contribution limits. The IRS is working out the details on how to interpret this law.

Key Provisions for Younger Retirement Savers

  • Beginning in 2025, employers offering new 401(k) and 403(b) plans must automatically enroll eligible employees at an initial contribution rate of 3%. In addition, employees with low-balance retirement accounts may also have the option to automatically transfer their balance to a new plan when they change jobs.
  • Starting in 2024, employers can add a Roth emergency savings account option to employer plans such as 401(k)s. Non-highly compensated employees can contribute up to $2,500 annually, and their first four withdrawals per calendar year will be tax-free and penalty-free.
  • Beginning in 2024, employers can “match” an employee’s student loan payments by contributing an equal amount to a retirement account on their behalf.

Help for Part-Time Workers per the SECURE 2.0 Act

Currently, if you are a part-time worker at an employer with a 401(k) plan you can only contribute once you work there for at least 500 hours a year for three years or if you work for over 1000 hours for one year. The new rules will reduce the threshold to 500 hours a year for two years starting in 2025.

Changes for S Corp Owners

Owners of S Corporation stock may take advantage of like-kind exchange non-recognition treatment for their sales to an ESOP, beginning in 2028.

The SECURE 2.0 Act: Bottom Line

This is not an exhaustive list of the provisions, but I chose to write about those that pertain to most people. Also, now that Congress has passed the act, the IRS will provide details on how they will interpret some of the provisions, as clarifications are almost always necessary with a bill as far-reaching as this one.

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9 Things You May Not Know About Social Security Retirement Benefits

Retirement Planning, Women and Money / By /
Social Security Benefits

On the face of it, Social Security benefits seem straightforward. You simply fill out some paperwork when you retire and start receiving your monthly amount.

Unfortunately, many people do just that. They may glance at their Social Security statement now and then but don’t put much thought into it beyond that. Meanwhile, others may assume they’re not entitled to benefits and leave money on the table.

The truth is many people don’t maximize their Social Security benefits, either because they don’t understand how the system works or they need the money before reaching their full retirement age. Once you’re aware of Social Security’s many nuances, you can use the system to your advantage.

Here are 9 things you probably didn’t know about Social Security benefits (but should):

#1: Reaching age 62 is significant when it comes to Social Security.

When it comes to claiming Social Security benefits, a variety of important things take place when you turn 62.

First, the Social Security Administration officially calculates your benefit amount when you reach age 62. That’s because 62 is the age you can begin claiming benefits if you choose. Up until this point, the benefit information on your Social Security statements is merely an estimate.

Of course, that doesn’t mean it’s always wise to start your benefits at age 62. In fact, by claiming your benefits at age 62 instead of when you reach full retirement age (currently, between age 66 and 67 depending what year you were born), you may decrease your monthly benefit amount by as much as 30%.

You’re also eligible for cost-of-living adjustments (COLA) beginning at age 62—even if you don’t claim your benefits right away. Since the Consumer Price Index determines COLA, eligibility can pay off in high-inflation years. For instance, some groups are estimating the increase will be as high as 10.8% in 2023 to account for rising price levels.  

#2: Your Social Security statement now shows you how much your benefits will increase each year by waiting to claim them.

Indeed, the Social Security Administration recently redesigned their statements to clearly show the differences in your benefit amount based on the year you start taking them. And you don’t have to wait until you’re eligible for Social Security to see what this means for you.

Check it out! Go to ssa.gov and set up an account, so you can view your Social Security benefits at any time.

#3: You must work at least 10 years (40 credits) to qualify for Social Security retirement benefits.

Once you’re eligible for Social Security benefits, your highest 35 years of indexed earnings determine your benefit amount. Index means that the SSA adjusts your actual earnings to account for changes in average wages over time. However, if you keep working after claiming your benefits and report higher wages, they will replace one or more lower-wage years with your higher earnings.

For example, many women leave the workforce or cut back their working hours to raise children and restart their careers later. Those later years of earnings will replace the zero or low-wage years, thus increasing the ultimate benefit amount. This can also apply to people who change jobs to start their own business or work for a start-up and take a temporary pay cut as a result.

#4: Your Full Retirement Age (FRA) is an important milestone.

Your full retirement age (FRA) is the age you’re eligible to receive your full Social Security retirement benefits. It’s important to note that full doesn’t necessarily mean maximum, however.

If you were born between 1943 and 1954, your FRA is 66. For those born between 1955 and 1960, FRA then gradually increases until it reaches 67. Anyone born in 1960 or later reaches their FRA at age 67.

Reaching your FRA is significant for several reasons:

  • Reaching your FRA does not mean you have to start taking benefits. You can delay your benefits until age 70.
  • Each month you delay taking benefits after reaching your FRA, your benefit increases. This is true until age 70. For example, if your FRA is 66, you can increase your benefit amount by as much as 32% if you wait until age 70 to claim your benefits. Your benefit amount at age 70 would also be roughly 77% higher than if you began claiming Social Security benefits at age 62.
  • If you claim your benefits before reaching your FRA and continue to work, you may be subject to the SSA’s Retirement Earnings Test. This may reduce or even eliminate your benefit temporarily. For example, the Social Security earnings limit is $1,630 per month or $19,560 per year in 2022 for anyone receiving benefits prior to reaching FRA. If you exceed these thresholds, you can expect the SSA to withhold $1 from your benefits check for every $2 you earn above the limit.

Remember: Everything about Social Security supports work. So, your benefit will continue to grow as you continue working and your earnings increase.

#5: Age 70 is another significant age when it comes to Social Security benefits.

You must start taking Social Security benefits by age 70. Delaying past age 70 will not increase your benefits. However, any cost-of-living adjustments will apply.  

If you work past age 70 and your earnings are higher than any of the previous 35 years used to calculate your benefit, your benefit will increase. Those higher earnings will replace a year where you didn’t earn as much.

#6: If you’re married, divorced, or widowed, it pays to understand your spousal benefits.

As with many government benefits, there are many rules when it comes to Social Security spousal benefits. The following flow charts may come in handy to determine your eligibility.

In the meantime, here are a few basics that are good to know:

  • A lower-earning spouse can collect a spousal benefit up to 50% of the higher earner’s FRA. Meanwhile, a widow or widower can collect up to 100% of the deceased spouse’s benefit.
  • Because a widow or widower can collect up to 100% of a deceased spouse benefit, it makes sense for the higher earner to max out their benefit by waiting until age 70 to claim.
  • It may pay to keep tabs on your ex-spouse if you were married for at least 10 years. A divorced spouse can file for a spousal benefit even if the ex-spouse has not yet claimed if both parties are at least 62 years old and have been divorced for more than two years.
  • If your ex-spouse dies, the picture changes. As the surviving ex-spouse, you can claim a survivor benefit as early as 60. You can also allow your own retirement benefit to grow until age 70. Alternatively, you can claim a reduced retirement benefit early. Then, you can switch to a higher survivor benefit at full retirement age.
  • If you’re married, you must wait until the higher earner files for benefits to claim benefits on their record.

#7: Benefits are taxable at the federal level and potentially at the state level.

In 2022, you must pay taxes on your Social Security benefits if you file a federal tax return as an individual and your taxable income exceeds $25,000 ($32,000 for married couples filing jointly). If your taxable income is between $25,000 and $34,000 ($32,000 and $44,000 if filing jointly), you’ll pay taxes on 50% of your benefit amount. For income levels above those thresholds, you’ll pay taxes on 85% of your benefit amount.

In addition, most states don’t tax Social Security benefits. However, some do, so be sure to check your state tax requirements.

#8: Beware of the Windfall Elimination Provision (WEP)

If you also receive pension benefits based on earnings from jobs that Social Security doesn’t cover (and therefore aren’t subject to the Social Security payroll tax), the windfall elimination provision (WEP) may reduce your benefit amount. WEP reductions don’t appear on your Social Security statement. So, they can come as a surprise if you’re not aware of it.

#9: The Government Pension Offset (GPO) may affect your spousal benefits.

The Government Pension Offset (GPO) affects spouses, widows, and widowers with pensions from a federal, state, or local government job. It may reduce your Social Security benefits in some cases. Specifically, if you receive a pension from your government job and didn’t pay Social Security taxes while you had that job, the SSA will reduce your spousal benefits by two-thirds of the amount of your pension. There are exemptions, however.

To Maximize Your Social Security Benefits, Consider Working with a Financial Professional

Social Security is a complex topic that many people don’t fully understand. While the above list certainly isn’t exhaustive, hopefully it gives you a better understanding of how the system works. It may also give you a starting point to do your own research.

In addition, consider working with a trusted financial advisor, who can help you maximize your Social Security benefits. A financial advisor can also help you develop a comprehensive financial plan for your future, so you can retire on your terms.

To learn more about how Curtis Financial Planning helps self-made women and female-led households secure their financial future, please start here.

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Women and Long-Term Care Insurance: Preparing for Your Future Well-Being

Healthcare and Money, Retirement Planning, Women and Health / By /
Women and Long-Term Care Insurance

Long-term care insurance is important for a wide variety of individuals to have. But women face a unique set of challenges that often makes it even more important. For starters, women tend to live longer than men after retirement age, which often means women should be financially prepared for more years than the average.

Long-term care insurance can help you become more financially and emotionally prepared for the future. But that’s not the only reason you might consider it. Women are also more likely to suffer from Alzheimer’s disease or dementia, making it crucial that long-term care insurance is there to fall back on when you need it most. The same is true when your partner falls ill, since women often become caretakers for their husbands later in life.

But the truth is that long-term care insurance is complicated, and it isn’t necessary for everyone. So, let’s talk about who needs and qualifies for it, how it works, and the benefits and downsides.

How to Determine if You Need Long-Term Care Insurance

70% of people turning age 65 will need some type of long-term care services in their lifetime. Long-term care services include assistance with activities of daily living. Activities like bathing, eating, medication management, and dressing are some of the most common. There are many different reasons that someone might need this type of assistance. Often, it’s due to an injury, degenerative health condition, or a cognitive disorder like Alzheimer’s.

When you are working with a professional to determine what types of insurance coverage you need, their first question in terms of long-term care insurance might be: is there someone who will take care of you in the unfortunate circumstance that you may no longer be able to care for yourself? As a result, individuals without spouses or children often seek long-term care insurance earlier in life than others.

Who Qualifies for Long-Term Care Insurance?

This may come as a surprise, but not everyone is eligible for long-term care insurance. There are no age requirements for purchasing long-term care insurance. But getting the timing right is crucial because several pre-existing conditions will render you ineligible. A few of these include:

  • AIDS
  • Alzheimer’s
  • Parkinson’s
  • MS
  • Any dementia or progressive neurological condition
  • A stroke
  • Metastatic cancer

If you’re in good health and eligible, the optimal age range to shop for long-term care insurance is between 57 and 65.  Keep in mind that premiums go up as you get older.

How Does It Work?

The benefits and specifics of your long-term care insurance will vary depending on the policy. Some policies involve direct payments to care providers, while others offer reimbursement to the policyholder. Most policies require that a professional service take place to receive the benefit, regardless of the way it is paid out. This means that individuals can’t receive care from a family member and then request compensation. However, if this family member is part of a home care agency, that is a different story.

Benefits and Downsides

There are several benefits to obtaining long-term care insurance. Typically, these types of care plans are flexible, making it easy to structure them to meet a variety of unique needs. Long-term care can take place in a nursing home, assisted living facility, or in your home, depending on your comfort level and other individual factors.

And having long-term care insurance in place when you need it can help you avoid having your post-retirement budget derailed by exorbitant and unexpected nursing home bills. But there are downsides to consider here, too. Primarily, the health restrictions and cost-prohibitive long-term care policy options.

The best way to determine whether long-term care insurance is right for you is to speak with a professional. Everyone is different, and your needs are different, too. If you’d like to speak with a financial planner about how long-term care insurance may fit into your retirement plan, we’d love to chat.

Download your free guide: What Issues Should I Consider When Purchasing Long-Term Care Insurance?



For more information on women and long-term care insurance, check out our recent Financial Finesse podcast episode:

What Every Woman Needs To Know About Long-Term Care Insurance.


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S3 E1: What Every Woman Needs To Know About Long-Term Care Insurance

Financial Finesse Podcast / By /

As You Plan For Retirement, Don't Forget About Long-Term Care Insurance

As women, we have a number of unique considerations when it comes to planning for a financially secure retirement. One topic that comes up repeatedly with my female clients is long-term care insurance–what is it, who needs it, and is it worth paying for? And the answer is: it depends. 

The truth is, long-term care insurance is a complicated issue. While it may make good sense for some women, there are still many factors to consider before purchasing a policy. To help explain the ins and outs of long-term care insurance and clear up some of the more common misconceptions about it, I invited Liz Eshleman onto the Financial Finesse podcast for a very enlightening discussion. 

Liz is a long-term care planning specialist and founder of Eshleman Insurance Services in Sacramento, California. Her mission is to help individuals and families avoid the devastating financial and emotional consequences of not having a long-term care plan in place.

I’ve partnered with Liz on many long-term care planning situations for my clients and could think of no one better to join me for this discussion. I hope you find this episode as illuminating as I did!

Episode Highlights

  • [04:00] Liz explains who long-term care insurance is for and why a mobility issue might cause problems for you, even if you’re otherwise healthy.

  • [07:38] We talk about the impact the coronavirus pandemic is having on long-term care and your eligibility to purchase insurance if you’ve tested positive for the virus.

  • [08:58] Liz lists some of the more surprising health issues that could make you ineligible for long-term care insurance.

  • [14:50] We discuss the various types of long-term care insurance products on the market today.

  • [20:12] Liz gives a real-life example of when and how an initial claim is triggered.

  • [26:00] Liz shares some of the other benefits of long-term care insurance, specifically having access to a long-term care manager.

  • [40:38] We wrap up our discussion by talking about the potential drawbacks of long-term care insurance for women and how it plays into your financial plan.

Links Relevant to this Episode

Morningstar: 100 Must-Know Statistics About Long-Term Care (Pandemic Edition)

[Of Independent Means] Women and Long-Term Care Insurance: Preparing For Your Future Well-Being

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S2 E2: Sticking To Your Investment Plan In Times Of Uncertainty

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Sticking To Your Investment Plan In Times Of Uncertainty

Staying The Course - Even When It Hurts

In my second episode of Financial Finesse Season 2: What Keeps You Up At Night?, I talk about investing in stocks during periods of uncertainty. And I think we can all agree that things look pretty uncertain right now. The good news is, that doesn’t mean your financial plan needs to suffer. 

If investing in stocks feels scary to you, you’re not alone. Many investors can’t stomach the volatility that comes with investing in the stock market, so they either avoid it altogether or end up selling their stocks when they start to lose value. This presents two problems: first, investing in stocks is necessary for most people to achieve their long-term financial goals; and second, trading in and out of stocks at inopportune times can lead to permanent loss of capital. 

In this episode, I go into some of the technical details of why these two problems occur, but more importantly, I explain why having an investment plan and sticking to it over the long run is the best way to avoid them. I hope you find my message reassuring, and as always, don’t hesitate to get in touch if you want to discuss your investment plan in more detail. 

Episode Highlights

  • [00:01] I begin this episode by explaining the importance of investing in stocks to outpace inflation and support your lifestyle in retirement.
  • [04:57] I talk about how staying in the market is critical--especially when you feel most fearful--and why women in particular need an investment plan.

Links Relevant To This Episode

Goldman Sachs 10-Year Annualized Returns

Morningstar Women & Investing Statistics

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S2 E2 Transcript: Sticking To Your Investment Plan In Times Of Uncertainty

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00:01

Hi, I’m Cathy Curtis, welcome to Season Two, Episode Two of the Financial Finesse podcast. In this season, I’m talking about what keeps you up at night. And as investments in the stock market are right up there when it comes to things that people worry about, I’m going to talk today about sticking with your investment plan during periods of uncertainty. And let’s face it, how much more uncertain can things get than they are right now.

There are two key money concepts that I’d like to get across to you today, that will hopefully give you greater peace of mind when it comes to investing. One is that you must invest a good portion of your savings in stocks, in order for it to grow, and last your lifetime. And second, how important it is to have a long-term view when it comes to investing.

Now I’m just going to take a brief moment and explain something, a couple of concepts that you’ll hear me talking about a lot. When I say stocks throughout this podcast, I don’t necessarily mean that you can go out and buy individual stocks, that that’s what you’re going to do. Investing in stocks includes investing in mutual funds or exchange traded funds as well, both passive index funds and actively managed funds. And when I say the market, I’m using the S&P 500 as a proxy for the market. The S&P 500 is a stock index made up of 500 of the largest US companies. It’s as good a proxy as any for the US economy and for the concepts that I am explaining to you today.

All right. So in order to accept these concepts, that you must invest a good portion of your savings in stocks, and how important it is to have a long-term view when you do, you have to understand and embrace the fact that investing in the stock market is risky with the capital or the way you know stocks are risky is by their volatility. Markets go up and down day by day, week by week, month by month. Sometimes they go down a lot. And for a longer period of time that is uncomfortable. But that’s a characteristic of stocks. And it’s what we must endure to get the higher returns that stocks reward us with over longer periods of time.

So just to visualize this contrast, investing in stocks to investing your money in a CD, a CD’s value doesn’t fluctuate, you buy it knowing you’re going to get a certain amount of interest. But currently, you’ll get less than 1% invested in a CD with no upside potential. So for example, if you invested $10,000 in a CD, today, at 1%, in 10 years, you’d have a little over $11,000 in 20 years, you’d have a little over $12,000. Contrast to investing in the stock market, with the average 8% return in 10 years, you’d have over $21,000, and in 20 years, you’d have over $46,000. This is a perfect example of the power of compounding interest, and why the higher return you can get from the stock market compounds exponentially over time.

The greater return on stocks is particularly important when you take into account inflation. Inflation means that your living expenses go up year after year, and they’ll definitely be higher in retirement. If you are earning 1% on a CD and inflation is 2%. It won’t be long before inflation as eroded the spending power of the money in that CD. In contrast, if you can earn a higher return on stocks, it will outpace inflation, and keep your spending power intact for your retirement years when you are no longer earning an income or a salary.

When you pay too much attention to the volatility of the market, it’s really easy to get scared and want to sell out to feel safe. This is a mistake because it is too hard to know when to get back into the market. While you are trying to decide you will most likely, proven by many, many studies, miss out on the very best days and hurt your long-term returns. Many people, maybe even you, got scared out of the market in 2008 in the depths of the global recession, and you may or may not have gotten back in. Yes, it took longer than past recessions for markets to fully recover. But by 2013 you would have been back to where you were and probably better off if you had rebalanced your portfolio when the markets dropped.

04:57

According to Goldman Sachs, the 10-year annualized return between 2009 and 2019 was 15%–higher than the normal and one of the highest 10-year returns since 1880. The typical 10-year return since 1880 is 9%. But again, it wasn’t always smooth sailing in that 10-year 2009 to 2019 period. If you recall, at the end of 2018, there was a scary market crash of about 20%. But that has recovered quickly as well.

Let’s just look at this year as an example, when COVID was spreading quickly to the US in February, investors panicked, and their widespread selling of stocks caused the S&P 500 to go down 34%. Since March 26, however, the index has completely recovered and more.

If you were one of the people that panicked and sold, then watched the market go up, up, up, since then, you’re probably thinking, well, now it’s overvalued, so I’m going to sit out longer. This isn’t the way to run a sound investment plan.

So how do you stick with your investment plan in times of great uncertainty? Well, the first step is to believe in your plan from the start. So let’s take the steps. To make a long-term plan, it’s important to write down the kind of lifestyle you want for the future, along with what expectations you have for the next 30 years. Because that’s really why you invest your money, to make sure that you have it when you need it after you retire. And you no longer are able to earn a salary income, your portfolio becomes your source of income along with social security or if you’re lucky, a pension. So you’re making a plan to get there. And I have to say that most people I know don’t want to reduce their lifestyle in retirement. And investing is one way to ensure that you don’t have to.

Secondly, you’re going to implement the plan, which a big part of this is determining the amount of risk you need to reach your goals and invest accordingly. For most people, this means a majority of their money should be invested in stocks. But whether it’s 60%, 70%, 80%, 90%, you need to stay with it and rebalance periodically and ignore the short-term volatility.

Lastly, you need to stick with it. No matter what, stay with your plan. Unless something drastically changes with the United States or global economic systems, history should be a comfort to you.

Now I’m going to talk about why sticking with an investment plan is so important for women in particular. Unfortunately, the statistics show that women are more likely to have a savings shortfall than men in retirement. There are many reasons for this, including the fact that women get paid less than men for the same work, and that women are more likely to be in and out of the workplace because of family care needs. Therefore, they can’t save as much as men over their lifetimes. Until these realities change, in order for women to close the savings gap, they need to have a plan, stay with the plan even in times of great uncertainty, save and invest more than you think you need, and get over the fear of investing.

Thank you for listening. Again. If you’d like to hear more from me, follow me on Twitter: @CathyCurtis, or on Facebook. I have a business page called Women and Money.

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Episode 5 Transcript: What Advisors Do For Their Clients

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00:00

Welcome to Episode Five of the Financial Finesse podcast. In today’s podcast, I invite you into my financial advisor mastermind group. If you don’t know what a mastermind group is, it’s a peer to peer mentoring group where you get support and advice on issues you may be facing in running your business or in your life.

00:23

My mastermind group has been invaluable to me in supporting me in building my financial advisory practice, keeping up on industry news, and deepening my knowledge of issues that affect my clients.

00:40

There are five of us in our group, and we live in all different parts of the country. And as we are all lifelong learners, we met through a professional development program. We all clicked, and we decided to take our meetings on a more intimate level and start this mastermind

01:00

program.

01:02

And for today, we’re not going to do our usual masterminding. Instead, I’ve asked all the group members to share a story about how they’ve helped a client and a little bit about their firm. And this way, I hope you’ll get an insight into how financial advisors help their clients build really successful financial lives.

01:36

And Maura, why don’t you start?

01:40

Hey, thanks, Cathy. So, to introduce myself, my name is Maura Griffon. My firm is called Blue Spark Financial, and we’re based in New York City and in the Berkshires of Massachusetts, where we have been sequestered here during the shutdown.

02:00

So we manage about 130 million for 70 families, households, mostly headed by single women. So that is basically our clientele, is women who are on their own, either because of divorce, or death of a spouse. Sometimes it’s women who’ve always been single, and their parents have died, or they’ve adopted a child and that child is now going to college. But people who have something going on in their lives that’s caused a transition and a shift in how they think about money. Many of them have never managed money

02:43

on their own, for these big issues, maybe they’ve saved money, but they don’t. They’re now approaching retirement and they don’t know how to de-accumulate. Sometimes that’s a word, they’re like, oh, I love that word. I know how to accumulate but I don’t know how to de-accumulate.

03:00

So and it’s, it’s emotional. Money is emotional, especially in these times. And so if there’s a common denominator to all of all of our clients, it’s that,

03:13

again, mostly women, but also they’ve got a finite portfolio of money, a pot of money that they need to last them for the rest of their lives. And, you know, I think it’s that combination of emotional support, as well as, you know, deep understanding of the technicalities of taxes and estate planning, and basically all the components of what goes into true financial planning. And I you know, I also want to mention that we are, we’re fee only fiduciary firm, which means that we put our clients’ interests above our own, that we’re not salespeople. We’re acting on the, we’re on the same side of the table as clients.

04:02

The you know, we often ask questions like, what does money mean to you? And you know, often people are not even thinking about money. They’re thinking about having enough of it, but they’re not thinking about what money can do to get them their best lives. And so it’s you know, it’s peeling apart that onion of how to use the resources and create align your values with what they want, what they’re spending on and what their goals are.

04:39

So it’s a lot like coaching in that way. It’s helping people find their purpose, and then being able to create a financial plan around that purpose and goal, that aligns the financial planning and the investment planning as well.

04:59

Most of

05:00

My clients tend to be, you know, conservative because they are worried about, you know, having this money last. And so at the core of what we do is what we call an endowment method of investing. Some people call it a, it’s similar to a bucket strategy, which some of you may have heard of, but it’s basically it helps clients sleep at night because it approaches the investment portfolio, not from a position of are you conservative, or are you risky, it’s a matter of a timeline. And so say that from now to five years out, we have that is the safety portion of the portfolio. So they know they can pay their bills, and that no matter what the market does, it can have wild swings up and down, but they know that their income is steady, and they’re going to be getting that monthly paycheck. And that helps

06:00

A lot of people and then there’s that five to 10 year portion of the portfolio. And that’s got big cap stocks, dividend paying, it’s got REITs, it’s got, you know, kind of solid equities, but a little out on the risk scale from bonds and cash equivalents. And then that 10 years plus, which, as we all know, the economic cycle goes up and down. But that can be invested in riskier and riskier equities, like small caps and international and emerging markets and some of those things that have their cycles and have their day. But that’s and that feeds then into the safety portion of the portfolio. So it’s an ongoing dynamic strategy. Maura I love that you’re going into the details of this and

06:51

I really appreciate it so our viewers can get an idea of like a practical way that we help. Can you give

07:00

A brief story of a client situation that you where you really felt like you added some value to their financial life, given all of these things that that you do, and we all do for our clients. Sure. So I have one client who

07:19

lost her husband. And so again, had had a pot of money that was largely invested in US large caps. She hadn’t paid much attention. And you know, it, it was a time when the market went down. And so she saw her portfolio, go from one number to another number, and it was frightening and so to be able to reallocate that portfolio, according to her needs, and to see what she was going to spend it on. So that means untangling a lot. A lot of issues like, like spending and upcoming taxes.

08:00

And how to, you know, digging into the best ways to save on taxes. And basically creating that timeline using assumptions about the future because obviously we can never know. But that calmed her and to be able to see it as it’s not just a lump of stocks and bonds that this is it’s invested according to her needs and timeline. I’m sure she gets a lot of comfort out of that. Had she ever used an advisor before? I know her husband had, okay. Yeah, and that’s pretty common with women where the husband handles the financial matters solely. And then the woman’s on her own and really needs some support. Precisely she said that she would had never been invited to the meetings and when she did they, the advisor didn’t talk to her.

08:58

So she tells me that she

09:00

loves working with me because I listen.

09:04

Good listening skills are critical. And I think many of us women have them. Don’t you know you all agree? Yeah.

09:15

Anything else you’d like to add?

09:19

Just that I love this group. And thanks Cathy for putting this together. Great. Thank you, Maura, great stories. And good. I know you do great work for your clients. Thanks Bev would you like to go next? Sure, sure. Um, my name is Beverly Cox. I’m an independent Certified Financial Planner and a chartered advisor in philanthropy. And I’ll go a little slightly different direction than Maura and just tell you a story of a particular client but I have been a financial planner for 30 years. And I have lots of stories and the ones that I really appreciate the most are the ones where I’ve been allowed to be

10:00

for decades involved in someone’s financial and really their whole life because of that relationship. So they have grown up with me obviously over the last 30 years and accepted me into their lives and allowed me is which is the way I look at it to love and support and be of service to them as they evolve through their own lives. So in those days, 30 years ago, most people came into financial services business through the insurance store, and that was me as well. So

10:36

and then I’ve evolved into the CFP and of financial comprehensive financial planning, but I have a number of widow clients that I seem to attract and I have a great deal of affinity for them. As single women who are usually as Maura was saying not been at the table or not been as involved when they when they did have a spouse

11:00

and so they do appreciate the help and they need the help. And I like that situation. So this is a story of one of them. So her name is Jane, which is not her name. And she was happily married with two children, one in high school and one in in junior high school. Both she and her husband who was an older man were working at well-paying but high stress jobs. And one of the biggest financial goals that they had from early on was to pay the total cost of college for these girls and particularly at name brand schools they wanted.

11:39

Although he had some health problems, Jane’s husband tragically, unexpectedly died. And

11:48

it was a horrible time, I was there for that as well. And it was heartbreaking. And so other than taking care of her needs of the moment in terms of cash and

12:00

making sure she felt secure, I did very little planning, we really, I think it’s part of my job as a planner, to hold space for that experience that you have to allow the person I believe to go through. There is a process of grief and loss and, and it’s not where your head is right? It’s like you have to emotionally allow that process to happen. So my job is to be there and to stay with that and then to when that client  is signaling and allowing me to talk about her future then we can go more into okay, let’s make some plans. So and in my experience, it can take more than a year to get my particular widow clients to that point. And that’s fine with me. That’s fine with me. So a quick question here during that year, how often do you meet with this client and is it via phone, face to face

13:00

kind of setups? Coffee dates,

13:04

which she was probably an hour away from where I was living and we would, we talked a lot, we actually did and I in those days especially I was going to client’s homes, so we probably went together.

13:18

We probably saw each other four or five times that year, then would be on the phone. So it’s like, you know, what I think we represent is we are a safety connection, right? A connection you’ve allowed me in, you allowed me to know what’s going on with you financially. Now use me and use my strength when you don’t have it. Use me for questions. If I don’t know the answer, I’ll go find the answer for you. So I just feel like we are a resource that is so much beyond managing money as well, right? That if you allow us to, if you let us have this kind of relationship with you, then you get the full

14:00

foundation of talents and skills that we can bring to the table. So, that answer your question? Yes. Very good. So I want to go on with this story if it’s okay. Okay, so in the first few years after we, we made it through and she was ready to do some planning, we actually did a lot of the plans that are in place and solidified her future. And that and she was tenacious, and this was a wonderful quality and she deposited and contributed to her 401k to the max every year. And part of that was matched by her company, which was great. We took some of the insurance proceeds from her husband’s policy and purchased a permanent life insurance policy for her and that was to cover some of the responsibilities if she were not there for her girls. She also had a large policy through her employer as well for that

14:59

and but it also

15:00

There’s cash value life insurance provided a place to accumulate excess reserves money that she could get to if she needed to and was also not at risk. So we had this safety net again, emergency money if needed. So we obtained as well an investment that can be turned into a guaranteed stream of income for her retirement. If that were what we needed to do. We wanted to put the potential in place so that we knew there were these streams of income that could serve her. We reviewed long term care insurance policies, alternatives, and we chose a traditional Long Term Care Policy for her because now Jane as a widow with these two girls, she wanted very much to protect

15:46

any kind of devastation financially that might happen to her own future. So that was important to her and that policy gives her a lot of peace of mind and it still does. So those early investments have been the foundation of what

16:00

We have done as she has, has had more money, we have done more with her money in terms of investments. And again, she’s socking as much as she can into her 401k. Every year, we went to a good estate planning attorney together, and we had the documents drawn up. And through the years, she has gone now since two more reviews with that estate planning attorney and we are always involved in any changes, suggestions that estate planning attorney has. So we’ve kept her docs up to date, which also gives her a great deal of peace of mind. So we also did a lot with cash flow. So cash management and I have found this with lots of clients that allow me a lot of time in their lives is that a lot of it is about a transition that they’re going through at some particular moment where it’s like okay, how do we finance that? How do we find the money for that? So we were going from you know, they had two good incomes to now we’re at one

17:00

income. She does have a widow’s pension, but it was still a different financial situation. There was lots of jockeying and balancing for different conflicting things that are going on. How are we going to save for these girls’ colleges, run a household, buy and sell cars, she had some relatives that needed some financial assistance sometimes, and then maintaining and repairing, refreshing her longtime home through all these years. So all those extra expenses were identified as we could and planned for. And through the years, we did take advantage of the cash value in this life insurance that she had accumulated. A HELOC a home equity line of credit that we had in place on the home. And even credit cards with zero percent programs were taken advantage of over the years if you needed the money and that’s where you could get it. That’s a financial transaction to manage. And that was my job. So she was super helpful to me. Because

18:00

she was a good saver. So I worried about and planned for the big picture. And then she just kept plugging away. So that’s an important part of any of any relationship is to have that enthusiastic client that’s helping her own situation. So have you, what your story is telling a perfect example of what a truly comprehensive financial plan is, where you’re looking at everything, you’re looking at cash flow, you’re looking at risk, and you’re helping them with insurance, and you’re looking at their estate plan and all the other issues that go into a truly comprehensive plan. So I’m really glad that you shared with us that broad array of issues that we help our clients with. So thanks so much for that story. Thank you. And Steph, would you like to go next, Stephanie Bruno? Sure. Cathy, I love your podcast, and I’m honored to be here.

19:00

Part of it today and I’m really honored to be part of this group of women who are so smart and also bring me a lot of joy. I’m Steph Bruno, my firm is Sea to Peak Financial Advisors. We have offices in Denver and Seattle, and I too am a fee only firm. So I enjoy working with executives that are complex and busy. Most of my clients are first generation wealth, they have just worked hard and done very well and they just need really good help. It’s important to me to not only help my clients grow their wealth, but to also see that make a difference in their lives. So I’ve incorporated life planning, you know, Cathy talked about before, it’s sort of brainstorming our client situations. I look at it if you think of like a jigsaw puzzle. Some people can do a jigsaw puzzle without looking at the picture on the box which is really difficult but

20:00

I think if you look at the picture on the box, and you look at all these pieces that we have, and then you say, what’s the best way to organize these pieces to get to that picture? I think about that’s what we do. And that’s what we can do if we have a really good life plan.

20:17

I’ll give you an example of how I think this made a difference. And one of my clients lives, I have this great client, she’s an environmental engineer, loved her work, loved the purpose behind it. But she had been working 60 to 80 hours a week. She had a lot of international travel. And she was also a little tired of the corporate bureaucracy. So she wanted to do something different. So we engage a life planning process to figure out, well what do you really want your life to look like? And what we came up with is she really only wanted to work about 40%. She wanted to spend about 20% of her time doing some nonprofit work. She wanted to spend about a

21:00

another 20% of time working on a novel. And really then just having a lot of fun. So once we figured out what the end what she wanted it to look like, the next stage that we went to is she had to figure out what that work was going to look like. So we work through an encore career handbook. So that helped her figure out what is this work I’m going to do, that’s going to be 40%, but yet still really fill me up as a person and meet that purpose piece of it. So she enjoyed the work that she did. She just wanted to do less of it. So she decided she was going to do some consulting work. And that also she was going to serve on corporate boards as well. And so that would provide some income. She had been on her board at her company, so it’s going to be a nice steppingstone to doing that work. And so once we had these two pieces in place, then the next part was to look at what does the financial plan look like?

22:00

We had to look at a lot of different scenarios, you know, starting off, what if she doesn’t make any money the first year? Or what if over this timeframe, she makes enough money to support herself, but not enough to save for retirement. She also had corporate stock. So we had to look at, what if the corporate stock dropped by 50%? How was her plan going to be affected? We were working to reduce that concentration. But she still had some. And of course, we wanted to look at what if it all worked out, right? Like, what’s the dream here? And if everything goes according to plan, what is that going to look like?

22:37

When I think of this client, she is a rock star.

22:42

I think all of my clients are. I love the work that I do, and I love my clients, but I think she in particular, really embraced this process. And I think that’s part of what made it successful.

22:54

We also had to look at what were some of the technical issues around her benefits. So as I mentioned,

23:00

I work with executives. They’ve got a lot of complex benefit plans. And they have different distributions and payouts and those types of things as well. And so one of the things we knew was that at age 55, she got much better deferred compensation payouts. Also at age 55. As she stepped away from work, she would be able to withdraw money from her 401k plan without penalty, should she need those funds. And of course, we had to plan for the fact that she was going to need some liquidity, right. We wanted to make sure that we had some safe cash set aside. So as she embraced this next phase of her life, that she really wasn’t worried about the money. She was secure in that process and could really go for it.

23:44

So this client, she went through this process, and today she has a consulting practice where she

23:53

does consulting projects, but only the ones she picks and chooses. She does work for two corporate boards.

24:00

She’s about ready to send her novel into her agent. And this is not just a novel she wrote over the weekend. She’s worked for three years with a writing coach, and is sending it off, and her encore career has been so successful, that we just updated her life plan to include her home on Martha’s Vineyard where she’s currently spending the summer so

24:23

yeah, yeah. Yeah, it just shows to me that when you have really good planning, combined with a good vision of what you want your life to look like, what can truly happen.

24:36

Steph that is such a great story. And you know, it’s a perfect example of something that we all do called scenario planning, where you look at several different iterations of the plan, depending on what they want to do, you know, their most audacious goals and then maybe if that doesn’t work out a little lesser, but it sounds like she reached all her audacious goals, which is amazing.

25:01

I’m sure she loves you for it. I’m sure she thinks you’re a rock star too.

25:06

Cathy.

25:08

Okay, thank you. Tanya.

25:11

I am Tanya Nichols. I love being with you guys. This group is one of the most I look forward to our time together. Every two weeks more than just about any other meetings I attend.

25:25

I really get a lot out of just hearing just all of these ladies telling their stories, even today, you can kind of pick up all the strengths and talents that they have in their brain to their clients. So thanks for having me. Um, I run an investment firm for women within a few years of retirement in northern Minnesota and Duluth on Lake Superior. And

25:49

I just was going to my kind of story for today was about a new client actually. And she was referred to me and she’s not quite divorced, yet.

26:00

In the process of going through a divorce, and I loved Steph’s story where, where her, her client was able to really get clear about her vision. And then step by step get through it. And this client is in this phase of transition, where her vision is really clouded by uncertainty. Much like what Bev was talking about with widows for example, and the major transition with something like losing a spouse or, or even retirement, all those transitions can make things somewhat cloudy. And so she is getting divorced. And it’s been discussed, but it’s not quite. It keeps getting there’s hang ups and anybody who’s ever been through one kind of knows how that goes.

26:44

But she’s been in a situation where she has felt no personal agency over her money. She’s been a really successful executive. She’s been the earner in her family. However, she’s had no agency over her

27:00

wealth creation and the money that she’s saved over the years. Her husband has been primarily responsible for that. And so as a result, there’s like a lot of money avoidance going on for her. And so what was interesting about her and these kind of cases, I love to get involved with at this stage, just finding me by she asked some friends for introductions and referrals. And through a friend of a friend, she came to my website and check this. And

27:35

she scheduled this first call and just that exercise for her because she’s never had an advisor. She’s never even logged into her accounts at this point. Her husband handled everything and she’s a successful high-powered executive yet at home, she did not have this power. And so just purely making that phone call to me was

28:00

Like step one in her taking her financial life on and taking control of her future. And then by call two, she had every login for every single one of her accounts, and she had a list for me of her net worth and all of her assets. And watching that unfold for someone is really exciting because a lot of my clients are really successful, yet they don’t feel good about their money. They’re women in this retirement age who grew up and likely became successful in an industry, which most industries where leadership was dominated by males. And so they found a way to get a seat at the table, sometimes by shrinking and yet now here they are, and they’re successful, and they’re the ones who run the table. Yet they still are almost hiding their success or they feel almost bad about their money. And so part of the work that we’re doing or that we hope to do is really help all of our clients feel good about their money and their wealth and their success. So

29:00

This particular client, we’re just getting started. And some of the most important work we’re doing at the beginning, is just giving her permission to let go of you can’t do everything at once, which is what many of my brilliant colleagues have alluded, alluded to. So for her, I could spend all day talking about are you saving enough for retirement, even though she’s close to 60, it’s not the priority, the priority is getting moved on this divorce. And so stage one, we resolved that the first step is to build a reserves out of her investments and help her decide which investments she could use to fund a reserve account, so that she feels secure and that she’s got her own, you know, bucket of cash reserves to take care of these immediate expenses, like lawyers bills and a new condo and some of these things that she needs to act on. And then her homework is really to go meet with that divorce attorney and get moving on this divorce because until she does that, I think it’s

30:00

gonna be really hard to get clear about where she’s going. So, stage one for her is building these reserves and getting her all of her different accounts. She’s got like 13 different accounts at different places. And so we’re going to work to get all of those consolidated and simplified so that she can continue with this personal agency over her dollars. And then we’ve postponed some of the planning, like regarding retirement, and how much should she be saving and is there enough and where she’s going to live permanently, all that is kind of set to later, but I’m giving her permission to say or helping her give herself permission to say I’ll get to that. But right now we need to address these items first. So our mission really is to help our clients feel good about their success and their money. And as Beth mentioned, it’s like one of the greatest privileges to be involved in these stories with people.

30:53

So I feel grateful to be doing this kind of work with people.

31:00

I can’t tell you how valuable it is to hear you all share your stories. There’s been pieces of every single one of your businesses that I’ve brought into my own with my client relationships, and to brainstorm and solve for some of these issues with clients is just invaluable to me. So thanks for having me, Cathy. I agree with you, Tanya. This group is invaluable and I wanted to touch on something that you said and it’s a theme throughout as, as you could see a lot of us work with women, not exclusively not we don’t all work with women exclusively. But there is a common theme with women where they don’t own their power financially. And I think that all of us are really dedicated to helping women do that. And either in ways where they can feel more free to spend, or we also let them know when maybe they need to not spend so much and but in all ways we want them to get empowered around their

32:00

money. So thanks so much for that story, Tanya.

32:05

So now it’s my turn.

32:07

So I work with mainly independent women. And when I say independent women, I mean women that are responsible for the finances, and it could be whether because they’re widowed, divorced, maybe they’re in a partnership, but they make the money and they have the decision making over money, things like that. But mostly women, I do have some men clients. And a typical situation for me, is a woman who is retired and has lived in the family home for decades. And all of a sudden starts to think about how much longer do I want to live in this home? And, and do I want to keep maintaining it, the roof and the yard and you know, it’s hard as you get older, you lose your

33:00

strength you, you have to be careful of getting up on ladders and doing all those things. And but it’s such an emotional decision to leave the family home. So the first thing you do is you tackle that, right? You have conversations around, doing that making that big giant decision to sell the family home and move into more of a retirement community situation. So I’m there to support them through the thought process. And in doing that, secondly, it’s the financials. And this is where the number crunching comes in, where you determine whether they can afford to sell the family home and I’m thinking about a woman in particular that I’m working with right now. But this is fairly common situation for me and my clients. So I use specialized software to input all the numbers. What if you sold your home for this much or you got this much proceeds? And what can you afford to buy? Is your next place a retirement

34:00

community and will that work for you for the rest of your life. And we have such long lifespans, I usually use 95 to 100 for lifespans to make sure that they don’t run out of money if they make this big move. So I give them peace of mind over the financial decision. First, it’s helping them get through the emotions. And then next is the finances. And there are a couple of other issues involved with this move. And that is, what do you do with all the stuff you have in your house? This is a daunting thing. This one particular client was a single child and one of the only nieces in the family and she ended up with all the silver, like five sets of silver and five sets of China. Well, and you know, you can imagine all the furniture and everything else she inherited over the years. So that made this move even harder and more gut wrenching for her because her kids, nobody wants that stuff anymore. Her adult

35:00

children did want it, what do you do with it? So it’s working through things like that, helping them let go of things and, and issues that will help them move forward. So I find great satisfaction and in helping clients through situations like that, because I really feel like I’m being a helper to them and, it just makes them feel better about such a major life transition.

35:31

So I hope that um, now that we’ve all told our stories and let you know who we are, I hope that you’ve enjoyed this and got a little bit of a peek into the kind of issues that financial advisors help their clients with, and how we support each other through this wonderful mastermind. And I want to say to all of you, I love you all. And thank you so much for participating in this podcast. And maybe we’ll do it again sometime.

36:00

Thank you, Cathy. Thanks Cathy.

36:06

Bye.

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Episode 5: What Advisors Do For Their Clients

Financial Finesse Podcast / By /

Client Success Stories From My Financial Advisor Mastermind Group

In this episode of Financial Finesse, I’m pleased to welcome the brilliant ladies of my Financial Advisor Mastermind Group:

  • Maura Griffon of Blue Spark Financial
  • Beverly Cox of B. Cox Planning
  • Stephanie Bruno of Sea To Peak Financial Advisors
  • Tanya Nichols of Align Financial

The five of us meet twice per month to share ideas, support each other in developing our businesses, and deepen our knowledge on issues that affect our clients. I’ve learned so much from this group of women, as they are all successful, independent financial advisors and business owners who go above and beyond when it comes to the work they do with their clients. 

Which is why I’m so grateful they agreed to be part of today’s episode and share their client success stories. I hope our conversation gives you a deeper understanding of how exceptional financial advisors help their clients. In addition, I believe it’s a great example of how participating in a peer-to-peer mentoring group like this one raises the bar for all of us–and ultimately elevates the level of service we provide. 

Episode Highlights

  • [04:02] Maura describes coaching her clients towards finding their life purpose and building a financial plan that supports that vision.
  • [11:00] Bev talks about the importance of holding space for her clients who have just experienced a major life change and letting them process their emotions before making any big financial decisions.
  • [19:00] Steph shares the life planning work she does with her clients by helping them design their ideal life and looking at various scenarios to get them closer to it.
  • [28:00] Tanya talks about her mission to give women agency over their finances and helping them feel good about their money and success.
  • [32:07] I share an example of how I support independent women through big life transitions--specifically, working through the emotions and decisions that go into selling the family home and downsizing.

Links Relevant To This Episode

Blue Spark Financial

B. Cox Planning

Sea To Peak Financial Advisors

Align Financial

Here's The Full Conversation

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