|
|
 |
|
| Feature |
Live Long & Prosper
Elizabeth Harris
12/01/2006
|
One of Book’s clients, an investment banker, sought to retire
at age 54 with a net worth of $6 million, drawing a yearly income of $250,000.
But Book showed him that by retiring early and drawing so much income, he put
himself in danger of running out of funds. The client decided that he had two
choices: either living on less than $250,000 annually, or working a few more
years. He opted to do both. He plans to continue working until age 60 and now
targets a $210,000 annual spending budget for his retirement years.
| One of Book's clients sough to retire at age 54 with a net worth of $6 million, drawing a yearly income of $250,000.
But Book showed him that by retiring early and drawing so much income, he put
himself in danger of running out of
funds. |
Advisors and their clients are also looking for more creative
financial strategies. One approach is to purchase a single-premium annuity, Book
says. For example, an individual could take $3 million that, in a diversified
portfolio, might generate $120,000 to $150,000 in income per year, and put it
instead into an annuity that would produce $250,000 per year. A person who wants
to leave an inheritance could use some of the difference in income between the
two approaches—say $75,000—to purchase life insurance in an amount equal to his
planned bequest.
Nontraditional insurance may also help limit risks to a
portfolio. "Wealthy people have always managed risk through insurance," says Jim
Phillips, an insurance broker with McGriff, Seibels & Williams in Atlanta.
Even those who can afford the best nursing care increasingly perceive the
benefits of long-term care insurance, Rogé says. Today the average American
stands a greater than even chance that he will one day need such care; annual
nursing home costs, calculated by insurer MetLife, continue to escalate, ranging
from $65,520 in Denver to $125,944 in New York. Many individuals are purchasing
coverage that pays for in-home help, believing it will help them retain their
independence. Others see it as a way to remove a financial and emotional burden
from their children, and as a more effective use of funds than paying for these
services in cash later on. Long-term care insurance could also negate the need
to liquidate assets at an inopportune time or in such a way that would trigger
capital gains tax.
Many insurers offer policies designed specifically for affluent
individuals with ample cash flow. For example, MassMutual offers a $160 daily
benefit policy, which a relatively healthy 65-year-old couple can purchase for
$12,509 a year. Business owners enjoy a tax advantage for this type of coverage:
They can deduct all or part of the premiums they pay for qualified long-term
care policies from their corporate taxes, according to Phillips.
Reverse Parenting
Karen Doskow, who lives in Westfield, N.J., worries that her
75-year-old mother, Anne Tofel, lives too far away from her in New York’s
Westchester County. Last January, a severe storm left her mother without
electricity or heat for five days. Tofel, widowed six years ago, endured, but
Doskow worried. That experience prompted Tofel to relocate; she will sell her
home and buy another located just an eight-minute drive from Doskow.
"Ultimately, you can’t force your parents to move," Doskow says. "They have to
come to their decision on their own, and hopefully it will come about before
major-crisis mode."
Tofel enjoys good health now, but Doskow, a marketing
consultant, believes closer proximity will enable her to provide better
oversight. She and her husband, Jeffrey, a cardiologist practicing in Union,
N.J., plan to help supervise any future medical care Tofel requires. As a
family, they turned to their financial advisor, Matt Sinclair of New England
Financial in Tarrytown, N.Y., to help Tofel develop a complete financial plan;
he will also supervise the real estate transactions. Today Sinclair finds
himself working with a growing number of families to devise plans for aging
parents—some of whom are not as affluent as their children. He asks a new
question of his middle-age clients to assess their risk: "In the next 15 years,
will your parents become your dependents?"
 | Sources: NASD, organization websites. (Click image to enlarge)
|
As families ponder this and similar questions, the crowd of
experts hiring themselves out to help find answers is expanding—from elder law
attorneys to financial gerontologists (see above "Senior Credentials,"). Some
of them recommend using a new vehicle designed to streamline decision-making
processes as individuals age: a longevity trust. Adriane Berg, an elder law
attorney in Morristown, N.J., says that these documents spell out when an aging
individual will delegate control of issues, from health care decisions to
financial planning and others. The five documents include:
|
|
|
|
|
|
|
; function voidFunc() { } voidFunc();)
