Budgeting for retirement now can add up later

Reprinted from The Cleveland Jewish News: December 19, 2014
By Ed Wittenberg/Staff Reporter

Americans are living longer than ever, and people in their 60s need to plan for a longer life expectancy, said Rick Kluchin, owner of Encore Wealth Planning in Beachwood.
“The biggest problem I find with people in their 60s is facing the reality of their work life, enjoyment and financial needs,” he said. “They should plan to be more careful in their budgeting, and now that the kids are (typically) out of college, they should pay more attention to their own retirement goals.”
Most “baby boomers” – people borne between 1946 and 1964 – need to put more money away for themselves because they tend to spend more on their children than the previous generation, Kluchin said.
“They should make sure their spouse knows what all their assets are and who their advisers are,” he said. “the biggest mistakes people make are not discussing these issues and not having a list of what to do is something should happen – where the bank accounts and other investments are and who their advisers are, so family members can contact them.”
People in their 60s should review their life insurance policies to be sure they will provide the benefits that are necessary, Kluchin said. They should also identify any long-term nursing care needs, based on family history.
“A lot of people don’t think they will go into a nursing home,” he said. “They fail to realize that in order to protect their assets, they may have to meet with an elder care law attorney to provide the right planning to protect their assets.”
Rachel Kabb-Effron, owner of Kabb Law Firm in Beachwood is an attorney specializing in elder law. She said a life acre plan for people in their 60s includes three domains: legal, care and financial.
“From a legal perspective, they’ve got to make sure their documents are up to date and that they have power of attorney reviewed so they have enough powers to manage things if they would become incapacitated,” she said.
“From the care side, they really have to look at what chronic (health) conditions they have.”
According to AARP, 87.9 percent of people between the ages of 65 and 74 have at least one chronic illness, and 50 percent of those have between two and four chronic conditions, Kabb-Efron said.
“You have to start thinking about where you want to age in place and start to get information about both the chronic condition and resources in the community that can help you,” she said.
From a financial standpoint, Kabb-Efron said it’s a good idea for people in their 60s to start looking at restructuring assets that may be hard to liquidate, such as business assets, boats, condos in Florida, secondary properties, second homes and retirement assets.
“When you put all those things together, it gets a little complicated, so having a plan that involves all three of those domains is really the best way to age successfully,” she said.
“Another thing to look at from the care side is knowing one’s options regarding Medicare, Kabb-Efron said.
“Turning 65 is the biggest thing that happens in this age group, and knowing different types of supplements and insurance options is really critical, “ she said. “Also their rights under Medicare, especially deadlines.”
Kluchin said one of the key decisions for a 65-year-old is when to take Social Security. “If they are working after 65 and are in good health, the decision to delay until age 70 will add almost 40 percent to their social security check,” he said.
If people in their 60s have parents who are still living, they should plan to discuss with them where their assets are, their plans in case of poor health and what their parent’s wishes are, Kluchin said.
“it shouldn’t be left up in the air.” He said. “A lot of people have out-of-town siblings, and the siblings should discuss who will do what for the parents.”
Kabb-Effron said if a 60-year-old has parents in their 80s, he or she is usually looking at some type of long-term care setting and managing that process.
“If you have someone at that age trying to care for apparent with a long-term care need, it can be very difficult to be a caregiver,” she said. “So knowing what resources are available for the 85-year-old is pretty important.”
Kluchin and Kabb-Effron agreed that adult children of people in their 60s should be doing their own life care planning.
“But the children should have communication with the 60- to 69-year-old so they know what their care wishes are, if something does happen,” Kabb-Efron said. “They need to have conversations about hypothetical end-of-life situations.”
Kluchin said if people in their 60s own a business, they should look at issues such as which children should have an interest in the business.
“Sometimes they have children in the business or out of the business, so they need to look at how they equalize the estate,” He said. “They could possibly use life insurance for thr children who are not employed in the business or don’t have ownership in the business.”
Kabb-Efron said, “Knowledge is power, and time is of the essence in terms of making a plan. So knowing what benefits and resources are available is very important. The more they know, the better they can plan.”