Most baby boomers will face seven key events in their last stage of
life that will color their finances and investments. Prepare for these
events by thinking about them now.
It can be dangerous to generalize about the baby-boom
generation, but there are seven key events that nearly
everyone will face as they move through the last third of
their lives. Unlike earlier, happier events such as getting
married, having children, and moving up the career
ladder, some of these events may be anticipated with
dread. For this reason many boomers may put off facing
them. But lack of preparation can make a bad situation
even worse.
Warning: the terminology used here is rather blunt.
1. Your parents will get old
If your parents are still living active lives, you will have
to face the fact that your parents will eventually get
old. You should start thinking about this now and begin
gathering resources so you won’t be at a complete
loss when your parents can no longer function
independently. There is nothing worse than to discover
that a parent has lost the ability to pay bills, make
nutritious meals, or seek proper medical care when a
little attention and advance planning can allow you to
step in before your parents harm themselves. Here are
some of the things you should begin discussing with
your parents:
Health status. As parents age and the possibility of
medical complications increases, make yourself aware
of your parents’ health status.
Long-term care. Every family needs to consider the
possibility that the parents may someday become
unable to function independently. What type of care
would your parents want? What plans have they made
to pay for it?
Power of attorney. By signing a durable power of
attorney for health care and a durable power of
attorney for finances, your parents can appoint you or
another family member to step in and make decisions
and execute financial transactions should they become
unable to do so.
Estate planning. Do your parents have a will? Does an
existing will need to be updated for new grandchildren
or other family members?
2. Your parents will die
Sorry to be so blunt about it, but this is the natural
order of things. You will face both emotional and
financial issues when your parents die. Go to A Healing
Place (www.ahealingplace.org) for insights and
resources that can help with the emotional issues. As
far as financial matters go, this is what you will face:
The estate must be settled. If you’ve never
experienced a death in the immediate family, you may
not realize that there are many steps involved in settling
an estate. Knowing about these ahead of time will help
prepare you for your responsibilities.
Inherited assets must be managed. Financial
institutions across the nation are just waiting to swoop
down on boomers who will be receiving some trillions
in inherited wealth. Find an advisor now that you can
trust so that if and when you come into these assets,
you’ll have a ready source of guidance.
3. You will fight to stay healthy
Boomers are starting to come to terms with aging, but
serious illness is still largely unexplored territory for
most of them. More and more, boomers will be paying
attention to their health, either working hard to stay
healthy or managing chronic illnesses. Here is a glimpse
of what’s ahead:
Navigating the health care system. Boomers who
have been healthy all their lives will be in for a shock
if they encounter insurance deductibles, co-pays, and
denied claims resulting from inadequate insurance and
lack of preparation for expenses they thought would be
fully covered.
High out-of-pocket costs. Even with private health
insurance and/or Medicare, many boomers will find
themselves paying out-of-pocket health care expenses.
These may include premiums for Medicare Part B
(outpatient care) and Part D (prescription drugs) as well
as the costs of alternative treatments and other privatepay services for boomers who want the very best in
health care.
4. You will reach retirement age
Whether or not you ever plan to retire in the traditional
sense of the word — and many studies have shown that
you won’t — the vast majority of boomers will reach
traditional retirement age. This is the age at which
you may take advantage of certain tax benefits and
entitlement programs developed under the traditional
retirement system. Boomers who aren’t thinking about
retirement as such will still want to take advantage of
them.
Social Security. Full retirement age is the age at
which full Social Security benefits may begin. For baby
boomers born between 1943 and 1954, full retirement
age is 66. You can apply for Social Security anytime
between age 62 and 70. Get some help deciding when is
the best time to file.
Medicare. To avoid a 10% penalty on Part B premiums,
you’ll need to apply for Medicare at age 65 unless
you are covered by a health plan at work. Go to www.
medicare.gov for more information
on Medicare.
Tax issues. The IRS calls people age 65 and older “the
elderly.” Boomers are not likely to identify with this
term, but if you can admit to turning 65, you can claim
an extra standard deduction for the elderly and/or
blind. See IRS Publication 554, “Tax Guide for Seniors,”
for more tax issues that will come up as you age.
5. You will need to manage multiple sources of income
Even boomers who say they’ll “never retire” will likely
have multiple sources of income that will need to be
managed. These may include the following:
Self-employment income. Boomers who leave
their primary careers to do consulting or freelance
work will need to ensure that this new form of income
is adequate to meet their needs and that they make
estimated tax payments as necessary. They will also
need to consider how their earnings will affect their
Social Security benefits.
IRA distributions. Whether you start these early under
a program of substantially equal periodic payments
or wait until you are forced to take required minimum
distributions at 70-1/2, you will need advice and
counsel on how to plan out your IRA withdrawals over
your remaining life.
Investment income. If you are used to receiving regular
paychecks from an employer, you’ll need to shift your
mind-set toward paying yourself. That means carefully
managing all investment accounts to ensure sufficient
inflation-adjusted lifetime income.
6. You will get old
Boomers can barely imagine it now, but like their
parents, boomers themselves will get old someday.
And they — and their children — will face the same
issues you faced when your parents were getting
old. What types of assisted living arrangements will
you want to consider? How will you pay for it? What
can you do now to make this phase of life more
comfortable?
Another term that is commonly used under traditional
retirement and entitlement systems that boomers
tend not to relate to is “disability.” Definitions vary
depending on the program, but any boomer with a
chronic illness or condition may qualify for various
private or public disability benefits.
7. You will die
Again, sorry to be so blunt, but you know it’s going to
happen. Boomers seem to be somewhat more open
to contemplating their own deaths than their parents’
generation, perhaps because they still see it as a long
way off.
Life expectancy. Go to the Living to 100 website
(https://www.livingto100.com), and take a test to
estimate how old you will live to be, along with list of
things you can do differently to increase that age.
Legacy planning. As they review their lives, boomers
are starting to consider legacy planning and ethical
wills. This life-centered approach to death can lead
to some of the estate-planning tasks you should be
executing now, including advance directives and wills.
It’s a good idea to review your estate plan or specific tax
situation with your estate attorney.