From elder planning to implementation

Not to beat a dead horse, but the population in the United States is getting older and older. Most everyone has heard the statistic that 10,000 baby boomers turn 65 every day. Couple that with the fact that life expectancies continue to grow. According to the Social Security Administration, a 65-year-old woman today can expect to live to nearly 87, and a 65-year-old man can expect to live to 84.

The picture is clear: Advisers have a big job not only helping clients reach a secure retirement but also helping them live through that retirement without becoming indigent.

Now, any adviser worth his or her salt knows all the investment products available to meet those goals and how to structure a portfolio in a way that allows clients to sleep at night. Where it becomes a little squishy is in the area of Social Security and long-term care.

Social Security as a concept is pretty straightforward, but when the time arrives for clients to file to claim their benefits, it can get complicated. File and suspend, restricted claims, and on and on. It behooves all advisers working with clients anywhere near retirement to bone up on all the claiming options so they can present the best ones to those clients. Plenty of online tools, advice books and sophisticated software are available to help advisers do just that.

Long-term care, however, is another animal.

Long-term-care insurance has been a popular supplement to help with expenses generally not covered by health insurance, Medicare or Medicaid. Over the last several years, however, LTC policies, as they are known, have become scarce as insurers struggle with low interest rates, which hurt the returns carriers earn on their bond portfolios, and longer life expectancy among the insured.

This one-two punch of low rates and longer lives has led insurers to raise premiums on existing clients and dream up ways to help clients handle them.

POLICY IN ACTION

Advisers can certainly help clients to be able to pay higher premiums, but where they are falling short is when clients have to put those policies into play.

When long-term-care issues arise for clients, emotions can quickly take over and sound decision-making can go out the window.

At InvestmentNews’ recent Retirement Income Summit, Thomas West, an adviser with Signature Estate & Investment Advisors, told such a story, drawn from his own experience. When his in-laws suffered a long-term-care event, they wanted him to pull their investments from the stock market at just the wrong time. Mr. West was more focused on being a supportive husband and son-in-law than a financial adviser, and so he allowed the withdrawal. It wasn’t the right move.

“When people are under a lot of emotional stress, the different parts of your brain that are responsible for objective arm’s-length analytical decisions aren’t firing the same way,” Mr. West said.

Advisers need to know the ins and outs of LTC insurance, he said, with all the concomitant issues of funding and financial needs, tax consequences and additional planning.

For instance, did you know that there are different degrees of long-term care? There’s coverage for rehabilitation, stabilization and to help manage a dignified death. Each type has different financial requirements and different outcomes.

Other LTC-related issues include: making sure clients have enough cash for unexpected events not covered by regular health care coverage, knowing which LTC expenses are tax deductible, figuring out whether clients should accelerate IRA distributions and realize gains and, finally, writing down the plan of action for the post-LTC crisis period.

As Mr. West put it: “We are telling people to plan ahead, but we’re absent when something like that actually happens, and we’re unable to help in the moment. That’s a shortcoming.”

Indeed.