SPECIAL SECTION: AGING WITH GRACE
by Jeffrey B. Roth, photography by Kelly Heck
Early planning can make the difference between a dream retirement and a retirement nightmare.
“We started planning financially when we were in our 40’s,” said David Scott, who along with his wife, Carole, are independent living residents at Carroll Lutheran Village. “In our late 50s and early 60s, we started traveling up and down the East Coast trying to decide if there were some place we wanted to live other than Maryland.”
Married for “fifty-and-a-half years,” David, 73, is originally from Yonkers, N.Y., and, Carole, 71, is a Baltimore native. For eight years prior to moving to Westminster, the Scotts lived in Shepherdstown, West Virginia, David said. The Scotts decided not to consult with a retirement planning expert; and, instead, opted to handle the financial aspects themselves.
“We would say, we have always been somewhat cognizant of the need for planning for retirement, but the need for even greater (financial) planning occurred in our late forties,” David said. “At that point, to supplement future pensions, we began to systematically invest a percentage of our income in diverse investments—IRA’s , mutual funds, CD’s and stocks. This required doing homework on investments and investing wisely, with some discipline. Also, we both took out Long-Term Medical Insurance which will be a financial buffer if we need assisted living or nursing home care in the future.”
Should they have started saving earlier in life?
“Yes,” David answered.
The Scotts said they are vey lucky to have a pension, combined with investments that allow them to have a comfortable and enjoyable life in retirement.
“When investing in the stock market, do so for the long term,” David advised others who are planning for financial security for retirement. “Do not react to the periodic ups and downs of the market.”
Planning should begin long before retirement age, explained Douglas “Doug” P. Velnoskey, senior vice president of The Velnoskey Wealth Managment Group and Westminster branch manager of Janney Montgomery Scott.
“We begin our workbook, (‘Financial Planning Workbook’), to help them organize their thoughts and explore what retirement can really be for them,” Velnoskey said. “The first question to ask is when will the individual be able to retire? Many people don’t really know. They think they’d like to retire at 65, but they don’t really know whether that goal is attainable.”
Without expert financial advice, it is difficult for an individual to determine whether their budget plan is too conservative or not. Velnoskey said the workbook is used to start a dialogue and explore the “what if’s and decisions.”
Barbara Ferguson, a health and physical education teacher with the Frederick County Public Schools, said she is considering retirement after more than a 40-year career in education, but has not made that decision as of yet. Her husband, Jim, is a self-employed artificial cattle inseminator. They sought out financial advice for retirement more than 15 years ago from Velnoskey.
Doug Velnoskey
“Doug (Velnoskey) has been very helpful,” Barbara said. “Understanding the whole investment process, as to when is the best time to take social security and all that—it is good to have someone who deals with that all the time to give you advice, to back you up and to let you know that you’re going to be fine.”
The issue of investing for retirement came in focus about 15 years ago when a co-worker was retiring, who advised her to invest in a 403 (b) plan. At the time, it was a relatively new retirement investment option, she said.
“Sticking with my 403 (b) was not hard at all because you just get used to that money not being there,” Barbara said. “So I really didn’t know what I was missing.”
The Fergusons also opted to invest in a long-term care medical insurance plan. Velnoskey explained the potential benefits of having such a plan. Since there was some family history of a specific health problem, they opted to purchase a plan at a relatively early age.
Other facets of retirement planning include preparing an advance medical care directive, appointing a financial power of attorney and having a current will, said Karen B. Miller, an elder law and estate planning attorney, with the Weisse Miller Law Group, in Sykesville. The first two documents are only in force if the individual is alive.
Karen B. Miller
“My partner, Robin Weisse, and I have been concentrating on the estate planning and the elder law part of the practice,” Miller said. “A living will is a declaration stating that in the case of a terminal illness, where two doctors agree there is no hope of recovery, the patient does not wish to have heroic measures performed to keep them alive.”
For nearly three years, Debra C. Lemke, a professor of sociology at McDaniel College, has been dealing with a bureaucratic nightmare involving long-term care for her mother, who suffers from dementia. The fact that her mother lives in Georgia, only further compounds the complexity of navigating all of the legal issues involved.
“You have to have the hard conversations, and the financial pieces are the hardest to talk about,” Lemke said. “It is hard to give up control. My dad did the cleverest thing I have ever heard of. I had been a signator on his bank account since I was 13-years-old. He wanted me to have a credit rating.”
Prior to his death, Lemke’s father liquidated all his resources and sold all he had so that when he died he had nothing, Lemke explained. Unfortunately, the ongoing situation with her mother is a complicated matter.
“Ironically, my mother, who was supposed to be more savvy financially, left little clue to what she had and where it was,” Lemke said. “There were accounts in every bank in the town she lived in. All under different versions of her legal name.”
Everyone should know the difference between power of attorney and guardianship, Lemke said. There are four different types of power attorney granted by courts: limited, general, durable and springing. In her mother’s case, Lemke has only a medical power of attorney.
“Having to declare a parent incompetent is morally wrenching,” Lemke said. “Every decision you make you have to document and report. The hard conversation is not about death and dying—it’s about money—how to access what you need to ensure that parents are taken care of.”
Amber Dahlgreen Curtis, an elder law attorney, with Dulany Leahy Curtis & Beach, of Westminster, said many people misunderstand power of attorney. A skilled estate planning attorney can bring to attention the many issues, which need to be considered prior to retirement.
“When you sign a financial power of attorney you give the agent of your choice authority to handle your business matters,” Curtis said. “Financial power of attorney allows someone else to manage the affairs of a living person. You should give a financial power of attorney only to someone in whom you have complete confidence.”
For Lemke, the process has been exhausting and confusing. Each agency and institution Lemke has approached on behalf of her mother has different legal requirements.
“Financial institutions, despite court’s declaration of incompetence require never-ending paperwork, including wanting us to go back to two doctors for letters declaring incompetence again,” Lemke said. “Navigating Social Security is no easy task.”
Lemke’s mother saved every piece of mail she had received. Instead of a lack of documentation, there was “over two tons worth. As a result, they had no way to tell which bills needed attention. In order to simply determine if her mother’s outstanding bills were active.
“For my part, I love my mother and want the best for her, but I am angry with her for leaving such a mess that distracts me from my husband and growing children.,” Lemke said. “I resent that most of the time I have to interact with my brother, (he lives in another state), is spent going over extremely frustrating conundrums that could have been avoided if my mom had done the right thing.”
Miller and Curtis urge people to address legal needs relating to wills, estates, advance medical directives, power of attorney designations, assignment of beneficiaries and countless other legal issues. For more information on Carroll Lutheran Village, visit www.clvillage.org; Velnoskey Wealth Management Group, visit www.velnoskeywmg-janney.com; Karen Miller, visit www.weissemillerlaw.com; and Amber Curtis, visit www.dulany.com.
LONG TERM CARE INSURANCE
The U.S. Department of Health & Human Services, Administration on Aging estimates that 70 percent of Americans who are now 65-years-old will require long-term care at some point in their lives. One way to address the financial implications of long-term care, is to consider purchasing long-term health care insurance, said Collen Kramer-Beal, the senior registered private client assistant, and long-term medical insurance specialist with Velnoskey Wealth Management Group.
“The costs of long term care can be staggering depending upon the type of care needed, the length of care needed and the region where someone lives,” Kramer-Beal said. “Not having coverage for a significant long-term care need could quickly diminish a client’s estate and leave little resources available for a surviving spouse to live.”
To begin a dialogue about long-term care options, Kramer-Beal suggested consulting the “NAIC Buyer’s Guide to Long-Term Care, (LTC), Insurance.” Different long-term care insurance plans offer different benefits.
It is a complex topic.
Premiums for females, she said, are often more expensive than men, because women live longer than men. It is not uncommon for a female’s policy to cost 30 percent more than her male partner. Kramer-Beal provided this comparison an asset based LTC quote and a traditional LTC quote for a healthy 41-year-old male versus a healthy 62-year-old male:
“With the asset based LTC, both clients would pay $10,000 a year for 10 years for a total premium of $100,000,” Kramer-Beal said. “For the 41-year-old, the initial monthly LTC benefit is $7,422/month. If this client needed to access LTC benefits in the first year of purchase, he would have an initial total benefit pool of $576,138.
For the 62-year-old, the initial monthly LTC benefit is $4,740/month. If this client needed to access LTC benefits in the first year of purchase, he would have an initial total benefit pool of $367,930. For both men, benefits compound annually be three percent. In turn, the $100,000 yields significantly more LTC benefits for the 41-year-old.”
THREE TIPS FOR FINANCIAL RETIREMENT PLANNING
- Begin with the end in mind. Establish an estimated annual retirement budget in today’s dollars.
- Collaborate with a competent adviser to create a financial planning analysis projecting your retirement budget over your lifetime adjusting for compound inflation. Then work backwards in the planning process to determine how much you need to save annually and the most efficient investment asset allocation for those savings/investments to meet your annual budget projections in retirement.
- Consider how you will manage the risks, which could derail your plan—disability, a long term care need for you or a loved one; or a premature death which would prevent a client from reaching their earnings and savings/investing potential. Most often, some or the majority of these risks may be addressed through insurance. Existing policies should be reviewed and additional coverage consider as needed. Creation, revisions and reviews of estate planning documents, wills, powers of attorney, and advance directives, are also critical so there is a clear plan of who makes decisions if an individual is incapacitated or when they die.
Source: Doug Velnoskey, Velnoskey Wealth Management Group
