Concerns shift from financial to health as retirees age
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“Since people are living longer, not having enough money in retirement is a legitimate concern and financial planners should have those difficult conversations with clients about planning for unexpected events and curbing spending if necessary,” said
The survey also found that clients fear being confronted by different unexpected events as they headed further into retirement. During the first ten years of retirement, clients' biggest fears were a sharp decline in the value of their investments (52 percent), followed by serious illness, including dementia and diminished capacity, (24 percent), and helping their children or grandchildren (11 percent).
Concerns shifted from financial to health after ten years of retirement as serious illness, including dementia and diminished capacity, was the primary concern (44 percent), followed by a sharp decline in the value of their investments (28 percent) and moving out of their home to live in assisted care (19 percent). This underscores the importance of proactively planning for these issues while the client is able to make mindful decisions about the future.
“It is understandable that clients are increasingly worried about the financial implications of their health as they age. CPA financial planners can help alleviate these concerns by having frank discussions with their clients and addressing their financial fears,” added Tillery. “The effects of dementia and diminished capacity are devastating on individuals and their families. Making difficult decisions about their living situation and investments proactively can help put their minds at ease and prevent their families from being burdened down the road.”
The survey found that only 18 percent of clients are taking proactive steps to address the issue, while 35 percent are weighing the issue but have not yet decided on a specific course of action. As the population continues to live longer, diminished capacity issues will only become more prevalent. In fact, the survey found that half of all financial planners had a client exhibit signs of dementia or diminished capacity for the first time in the past year alone. This underscores the need for all planners to prepare themselves to address these issues with clients.
“Financial planners need to be aware of the early signs of dementia and be pro-active with their clients and their families,” said
Despite growing awareness about diminished capacity, one third of financial planners say their clients are dealing with dementia on a reactionary basis, and 13 percent are ignoring the issue altogether. While it is preferable to develop a plan before clients begin to exhibit diminished capacity, there are multiple steps financial planners can take to protect a client’s assets in retirement after these issues come to light.
The survey found a vast majority (85 percent) of the planners dealt with diminished capacity in their clients by ensuring that powers of attorney and health care proxies were in place, while 61 percent arranged for themselves to contact their client's other professionals and relatives. Other measures taken by these planners was to obtain authorization to contact their client’s attorney (44 percent), moved money to a trust (35 percent), and automated the client’s annual required minimum distributions from their qualified retirement accounts (34 percent). Eighteen percent had their clients move into a previously selected assisted care facility.
With diminished capacity such an important issue, members of the PFP Executive Committee developed a Diminished Mental Capacity Checklist, with key takeaways for planners highlighted below:
Diminished Mental Capacity Checklist
- Assess the patient’s group of relative’s friends, neighbors, and professionals for people who would swing into action if needed. Make introductions and set authorizations for each to talk to each other.
- Review estate planning documents to make sure they are in place and current. Review beneficiary designations. Identify successor trustee, financial, and medical power of attorney. Make sure they know they are designated and willing to serve.
- Mitigate the risk of elder abuse. Establish checks and balances for Power of Attorney, successor trustee, and key professionals so that abuse can be identified early. Consider such actions as using a credit monitoring service and a monthly reconciliation of financial accounts.
- Discuss housing options – if the client is still living at home, what are the situations that may cause that to change, what are the options and how do they feel about them, and how will they approach this decision? What resources are available to better understand the local options?
A full copy of the Checklist is available by contacting
As people are living longer and issues such as diminished capacity and elder financial abuse are becoming more prevalent, there is great demand for comprehensive financial planning, particularly for high-net worth individuals. A CPA financial planner serves as a trusted advisor who can understand their client’s needs and priorities both from a financial and personal perspective by having open, and often difficult, discussions with their clients and families.
About the AICPA’s PFP Division
The AICPA’s Personal Financial Planning (PFP) Section is the premier provider of information, tools, advocacy, and guidance for CPAs who specialize in providing estate, tax, retirement, risk management, and investment planning advice to individuals, families, and business owners. The primary objective of the PFP Section is to support its members by providing resources that enable them to perform valuable PFP services in the highest professional manner.
CPA financial planners are held to the highest ethical standards and are uniquely able to integrate their extensive knowledge of tax and business planning with all areas of personal financial planning to provide objective and comprehensive guidance for their clients. The AICPA offers the Personal Financial Specialist (PFS) credential exclusively to CPAs who have demonstrated their expertise in personal financial planning through testing, experience and learning, enabling them to gain competence and confidence in PFP disciplines.
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