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TRANSCRIPT
Practical Planning for Aging and
Elder Issues
Presented by:
James Shambo, Moderator
Jean-Luc Bourdon
Dirk Edwards
Personal Financial Planning Section #AICPApfp 2
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Personal Financial Planning Section #AICPApfp 3
About the PFP Section & PFS Credential
The AICPA 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/or investment planning advice to individuals,
families and business owners. (Learn more at aicpa.org/PFP.)
The Personal Financial Specialist (PFS) program allows CPAs to
gain and demonstrate competence and confidence in providing
estate, tax, retirement, risk management and/or investment
planning advice to individuals, families and business owners
through experience, education, examination, and a resulting
credential. (Learn more at aicpa.org/PFS.)
Personal Financial Planning Section #AICPApfp 4
Today’s Speakers
James Shambo, CPA/PFS (Moderator)
Lifetime Planning Concepts, Inc.
Jean-Luc Bourdon, CPA/PFS
BrightPath Wealth Planning
Dirk Edwards, CPA/PFS, JD, MBA
Edwards Consulting LLC
Personal Financial Planning Section #AICPApfp 5
Today’s Agenda
AICPA PFP survey on retirement planning
trends
Retiree health care statistics and studies
Discussing the human issues
Tax, insurance, and benefits planning
Managing documents
Retirement projection issues
Elder care resources
Elders on the move resources
PFP Section resources
Personal Financial Planning Section #AICPApfp 7
Quarterly PFP Trends Survey
Quarterly survey of CPA financial planners on
specific topics
Quantifies trends and issues to talk about
proactively with clients, media and other
professionals
The inaugural Q1 survey addressed general
retirement planning trends
• Use these statistics and trends to open conversations on these
issues with your clients, to broaden relationships with your local
media, and to communicate the value that you can provide to
your clients
• The complete executive summary and the media release can be
found at: www.aicpa.org/pfp/trendsurvey
Personal Financial Planning Section #AICPApfp 8
Dealing with diminished capacity and dementiaissues
Social Secutiy decisions
Longevity concerns
Asset withdrawal decisions
Healthcare costs
Running out of money
% of CPA's that identified this as a concern of their clients
Overall Retirement Planning Concerns for Clients
#1 Concern #2 Concern #3 Concern
79%
56%
50%
29%
20%
19%
57% said running out of money was their client’s top concern, followed
by health care costs and asset withdrawal decisions
Source: 2015 Q1 AICPA PFP Trends Survey
Personal Financial Planning Section #AICPApfp 9
Factors Causing Client Stress About Running
Out of Money
0%
10%
20%
30%
40%
50%
60%
70%
80%
Healthcarecosts
Marketfluctuations
Lifestyleexpenses
Unexpectedcosts
Being afinancialburden
Desire toleave
inheritance
Financialsupport of
children
31%27%
19%
8% 7%
27%
18%
19%
18%
8%
18%
17%
14%
20%
9%
13%
7%
% o
f C
PA's
Iden
tify
ing
Stre
ss F
acto
rs
#1 Factor #2 Factor #3 Factor
A "top 3" concern for:
76%
62%
52%
46%
24%21%
12%
Top 3: staying healthy,
investments, managing
lifestyle
Source: 2015 Q1 AICPA PFP Trends Survey
Personal Financial Planning Section #AICPApfp 10
Unexpected Events Impact Retirement Planning
18%
18%
18%
26%
29%
30%
42%
Adult child returning home
Job loss
Divorce
Diminished capacity/dimentia
Care for aging relatives
Other (most freq: income/market changes)
Healthcare concerns
% of Clients That Experience These Unexpected Events
Source: 2015 Q1 AICPA PFP Trends Survey
Personal Financial Planning Section #AICPApfp 11
Client Attitudes on Potential for Diminished
Capacity During Retirement Planning
In spite of CPA financial planners’ involvement,
• 55% had clients discussing actions but still not making a decision.
• 34% reported clients either ignoring, or reacting to it after the fact.
11%
55%
21%
13%
Taking proactive steps now to prepare
Discussing but not sure what to do
Reacting to it when and if it happens
Ignoring the issue
% of Respondents
Source: 2015 Q1 AICPA PFP Trends Survey
Personal Financial Planning Section #AICPApfp 12
Q2 Survey on elder planning issues
The 2015 2nd quarter survey addresses elder
planning issues of housing decisions, financial
abuse and fraud, and financial services needed
Plan now to use the results of this survey with your
clients, media, and other professionals
Look for results to be available shortly in the weekly
PFP News and posted at:
www.aicpa.org/pfp/trendsurvey
Personal Financial Planning Section #AICPApfp 14
Annual health care costs study
Percentile Ages 65 to 79 Ages 80 to 89 Over age 90
25th percentile $1,285 $1,452 $858
Median $3,210 $3,417 $3,255
75th percentile $6,219 $6,429 $6,706
90th percentile $10,456 $11,229 $15,976
95th percentile $13,918 $15,492 $28,339
Includes out of pocket uninsured costs of health insurance including Medigap supplemental insurance, out of pocket costs for medical supplies, drugs, hospital care, doctor services, lab tests, eye, dental and nursing home care.
Source: Employee Benefits Research Institute – September 2014
Personal Financial Planning Section #AICPApfp 15
Average couple’s lifetime health care costs
in today’s dollars
Age of Retirement Lifetime estimated costs
Age 62 $271,000
Age 65 $220,000
Age 67 $200,000
Hypothetical couple with life expectancies of 82 male and 85 female
Estimated costs do not include nursing home care, over the counter medications or most dental services and applies only to retirees with traditional Medicare coverage.
Source: Fidelity Benefits Consulting 2014 Study
https://www.fidelity.com/bin-public/060_www_fidelity_com/images/2014-RHCCE-longform-graphic.jpg
Personal Financial Planning Section #AICPApfp 16
Pre-retirees expectations for lifetime health
care costs
Expected Costs Percentage of respondents
$200,000 or more 10%
$150,000 to $200,000 3%
$100,000 to $150,000 8%
$ 50,000 to $100,000 11%
Under $50,000 57%
Source: Fidelity Benefits Consulting 2014 Studyhttps://www.fidelity.com/bin-public/060_www_fidelity_com/images/2014-RHCCE-longform-graphic.jpg
Personal Financial Planning Section #AICPApfp 17
Where are health care dollars spent?
Description Percentage of costs
Out of pocket prescription drugs 23%
Medicare Parts B & D 32%
Other out of pocket costs including co-pays, co-insurance
and deductibles
45%
Source: Fidelity Benefits Consulting 2014 Study
https://www.fidelity.com/bin-public/060_www_fidelity_com/images/2014-RHCCE-longform-graphic.jpg
Personal Financial Planning Section #AICPApfp 18
Cost of health care
Service/Facility National Median Rates
Increase over 2014
Five Year Annual Growth Rate
Homemaker services $20/Hr. 2.63% 1.61%
Home Health Aide Services $20/Hr. 1.27% 1.03%
Adult Day Health Care $69/Hr. 5.94% 2.79%
Assisted Living Facility $3,600/month 2.86% 2.48%
Nursing Home Care – SemiPrivate Room
$220/day 3.77% 3.53%
Nursing Home Care –Private Room
$250/day 4.17% 3.95%
Source: Genworth 2015 Cost of Care Survey
Personal Financial Planning Section #AICPApfp 19
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html
Personal Financial Planning Section #AICPApfp 21
The impact on family caregivers
Caregiver Impact Percent of caregivers
Spent more than 30 hours per week on caregiving 33%
Experienced care related distractions such as phone calls or emails while working
66%
Caregiving duties had a negative effect on their jobs 60%
Source: Genworth 2015 Cost of Care Survey
Personal Financial Planning Section #AICPApfp 22
Retirees in good health face higher lifetime
health care costs than those in poor health.
A typical healthy couple at age 65 can expect to
spend $260,000 with a 5-percent risk of exceeding
$570,000
A typical unhealthy couple can expect to spend
$220,000 with a 5-percent risk of exceeding
$465,000.
Those in good health live longer, eventually become
less healthy, and often need nursing home care.
Source: Center for Retirement Research at Boston College
Personal Financial Planning Section #AICPApfp 25
Long Term Care Demographics
Description Statistics
Americans over 65 needed LT Care in 2012 9 Million
Americans over 65 expected to need LT Care by 2020 12 Million
% of Americans in need of LT Care who receive care from family and friends
78%
Average age for admittance to nursing home 79
Percent who reach age 65 who will enter a nursing home 40%
Average length of stay - 1999 2.44 years
Percent whose stay will exceed five years 10%
Source: 40 Must Know Statistics About LT Care – Morningstar 8-9-12 article
Personal Financial Planning Section #AICPApfp 28
Medicare means testing – monthly premiums
Lower MAGI limits apply in 2018 (see red $)
Single MAGI Married MAGI Part B Premium Part D Premium
$85,000 or less $170,000 or less $104.90 Your Plan’s premium
$85k to $107K $170K to $214K $146.90 Add $12.30
$107k to $160K $107K to $133.5K
$214K to $320K $214k to $267K
$209.80 Add $31.80
$160K to $214K $133.5K to $160K
$320K to $428K $267K to $320K
$272.70 Add $51.30
$214k $160K
$428K $320K
$335.70 Add $70.80
Personal Financial Planning Section #AICPApfp 29
Extending tax projections for key retirement
dates and year end planning
AICPA Tax Evaluator – Bob Keebler 10 Year
projection periods to manage tax brackets
Key retirement date planning
• 62 early SS
• 65 Medicare eligible
• 66 Full retirement age
• 70 Late SS
• 70 ½ RMDs must begin
Year end medical deduction planning key for retirees
Planning for the surviving “now single client”
Personal Financial Planning Section #AICPApfp 30
Challenge employer benefit assumptions
Always ask if clients are eligible for VA Benefits
including survivor benefits
Expect and explore additional retirement resources
for civil servants and state employees
Seek help in understanding social security spousal
benefit offsets for government employees
Seek help in understanding the windfall elimination
provisions for workers who did not have SS
withheld on at least one job (does not apply to
survivor benefits)
Personal Financial Planning Section #AICPApfp 31
I’ve run out of money – now what?
Medicaid eligibility planning
Finding a Medicaid bed
Resource: www.medicaid.gov
Personal Financial Planning Section #AICPApfp 32
Medicare basics
Part A (paid during working years)
Part B (Means tested premiums)
Part C – Medicare Advantage Plans in lieu of Parts A
and B and sometimes D
Part D – Drug Coverage
Medigap – Supplemental coverage
Personal Financial Planning Section #AICPApfp 33
Before you move
State income, estate and inheritance laws can have
a huge impact on decisions where to live at
retirement
www.leimberg.com – Numbercruncher software
provides state by state estate and inheritance
calculations
Personal Financial Planning Section #AICPApfp 35
Challenges from diminished capacity at
retirement
Ownership/beneficiary designations
Not current, difficulty in updating
• Bank Accounts
• Retirement Accounts
• Real property titling
• Problems after refinancing
Personal Financial Planning Section #AICPApfp 36
Challenges from diminished capacity at
retirement
Trusts not updated for mandatory funding formula
when combined estate under threshold
• Trust protection still appropriate?
• Increased use of disclaimers – burden on administration
Outdated provisions for children issues
• Spouses now ex-Spouses
• Substance abuse
Selection of right current Trustee/Fiduciary
• Sibling issues – leading to litigation
Personal Financial Planning Section #AICPApfp 37
Challenges from diminished capacity at
retirement
Challenge of getting qualified plan assets in trust
• Is goal of deferral still effective
• Have RMD begun, what is real period of deferral?
Guardianship appointment for yourself
• Mechanics
• Family challenges
Power of Attorney
• Not updated: aged brother-in-law, child resentment
• Financial institution non-acceptance
• Changed jurisdiction
Personal Financial Planning Section #AICPApfp 38
Physician’s Orders for
Life-Sustaining
Treatment (POLST) http://www.polst.org/educational
-resources/resource-library/
Caregiver agreements
Advisor consent to
contact pre-determined
person to notify if
advisor notices
cognitive decline
Other documents to consider
Personal Financial Planning Section #AICPApfp 40
Chronic diseases - one wild card for retirees
The leading cause of death and disability
½ of all adults have one or more chronic diseases while 1
in four have two or more
7 of the top 10 causes of death were from chronic
diseases. Heart disease and cancer accounted for 48%
of these deaths
Arthritis is the most common cause of disability
More than 1/3 of adults and 20% of youths ages 2 to 19
are considered obese
Diabetes is the leading cause of kidney failure, lower
limb amputations and new cases of blindness
Source: Center for Disease Control 2012
Personal Financial Planning Section #AICPApfp 41
Including health care costs in retirement
projections – option 1
Use a present value amount for future health care
costs excluding long term care, dental and over the
counter medications. (Fidelity $220,000 study for 65
year old couple)
• Set this amount aside from retirement resources before running
retirement projections
• Consider creating dedicated accounts for these funds
• HSA accounts
• Additional savings dedicated to health care costs
• Long term care insurance should be used to cover the large
uncertainty not considered in this approach
Personal Financial Planning Section #AICPApfp 42
Including health care costs in retirement
projections – option 2
Considers annual cost projections for different
clients based on health.• Life expectancy tables assume ½ of population will die prior to the
estimated life expectancy
• Health clients should live longer than these tables while unhealthy
clients would be expected to have shorter life expectancies
Uses estimated annual costs based on age and
general health of client. (EBRI 9/14 Study)• Use 25 percentile of expected costs for extremely healthy clients
• Use median costs for clients without chronic diseases
• Use 75 percentile of expected costs for clients with more than one
chronic disease
• Use 90 to 95th percentile for candidates for long-term care needs.
Personal Financial Planning Section #AICPApfp 43
Addressing longevity in retirement
Prepare stress tests to living to older ages in all
retirement projections.
Make sure adequate inflation protection is included
in investments
Own long term care policies for unexpected costs
Consider using up to $125,000 of IRA to buy
Qualified Deferred Income Annuities
Consider adding low cost cash flow products such
as the Single Premium Immediate Annuity
• Reduces initial withdrawal rate on remaining portfolio
• Provides mortality insurance for those who live long lives
Personal Financial Planning Section #AICPApfp 44
Deciding on a withdrawal regime
4% rule – static withdrawal adjusted for inflation
only
RMD rules – withdrawals adjusted for age and
account balances
Safety first rules – focus on covering basic living
needs with social security and other guaranteed
payments
Dynamic rules – withdrawals adjusted for changes
in account values
• Guyton Decision Rules and Portfolio Guardrails
• Vanguards floor and ceiling rules
Personal Financial Planning Section #AICPApfp 45
Addressing other personal risks
Sensitivity to inflation:
Client’s age and life expectancy
Sources of inflation adjusted income (e.g. pension,
rental income, social security)
Fixed expenses vs. inflation sensitive expenses
Sensitivity to survivor longevity:
Expected survivor longevity (e.g. age & health gap)
Pension benefit to survivor
Single vs. MFJ tax brackets
Personal Financial Planning Section #AICPApfp 46
Best practices by creating policy statements
Retirement Savings Policy Statement
• Create a five year plan to use raises to increase savings rate to
at least 15%
Investment Policy Statement
• Establishes investment guidelines based on client specific facts
Withdrawal Policy Statement
• Establishes withdrawal rules and how a client will react when
portfolio losses arise
Personal Financial Planning Section #AICPApfp 48
http://www.medicare.gov/campaigns/caregiver/caregiver.html
Personal Financial Planning Section #AICPApfp 49
http://www.aarp.org/home-family/caregiving/planning-and-resources/
Personal Financial Planning Section #AICPApfp 50
http://www.eldercare.gov/Eldercare.NET/Public/Index.aspx
Personal Financial Planning Section #AICPApfp 51
https://www.livingto100.com/
Personal Financial Planning Section #AICPApfp 52
http://www.aging-parents-and-elder-care.com/Pages/Elder_Care.html
Personal Financial Planning Section #AICPApfp 53
http://www.healthgrades.com/
Personal Financial Planning Section #AICPApfp 54
http://www.medicare.gov/nursinghomecompare/
Personal Financial Planning Section #AICPApfp 55
Digital inventory resources
• http://webcache.googleusercontent.com/search?q=cache:U0lztJ
QTqxAJ:apps.americanbar.org/dch/thedl.cfm%3Ffilename%3D/
RP190000/otherlinks_files/DigitalEstateInformationForm.pdf+&c
d=3&hl=en&ct=clnk&gl=us
• http://www.theconnectivist.com/2013/12/last-digital-will-and-
testament/
• http://www.digitalpassing.com/digital-audit/
Personal Financial Planning Section #AICPApfp 57
https://livabilityindex.aarp.org
Personal Financial Planning Section #AICPApfp 58
http://www.carf.org/Resources/RetirementLiving/
Personal Financial Planning Section #AICPApfp 59
http://blog.aicpa.org/2015/05/how-to-help-clients-understand-retirement-housing-options.html
Personal Financial Planning Section #AICPApfp 61
AICPA PFP Section Member Resources
Estate Tax Retirement
InvestmentInsurance & Risk
Management Practice Management
Legislative/Regulatory
Professional Responsibilities
Consumer Content
PFP Section members, inclusive of CPA/PFS credential holders, have access to resources on the latest planning strategies and trends in personal financial planning services so that they can practice competently and profitably. Visit aicpa.org/pfp/resources.
Personal Financial Planning Section #AICPApfp 62
The CPA’s Guide to Practical Retirement
Planning
Discusses the “science” of retirement planning
• As an advisor, what do I need to “know” to be competent?
• Provides practical application of various research studies
• Discusses impact of assumptions, risks, software simulation
approaches, and product selection
• Identifies components of the planning process including
advisors value, data gathering, and key decisions by age
Recognizes the “art” of retirement planning
• As an advisor, how do I “communicate” in an effective manner?
• Discusses needs of special groups: women, LGBT, divorcees
• Organized according to client decision-making periods:
• Saver, pre-retiree, and retirees in early and late years
• Addressing unique issues during each time-frame
Personal Financial Planning Section #AICPApfp 63
Upcoming PFP Section Events
Webcasts*
• Practical Planning, Thought Leadership and Best Practices for Retirement Planning Series (events are free
to everyone; no CPE offered)
Conferences
PFP/PFS members are eligible to attend 4 free events with CPE. For a listing of all
PFP webcasts, including free events, visit aicpa.org/pfp/upcomingevents.
For the full calendar of upcoming PFP Section events, visit aicpa.org/pfp/events and
click on CPE & Events.
PFP/PFS Members can access the archives (no CPE) for free at aicpa.org/pfp/library.
August 5, 1-2:45pm ET Practical Planning for Cash Flows and Withdrawal Strategies in Retirement
August 27, 1-2pm ET Planning for Spending in Retirement (consumer event)
November 4, 1-2:45pm ET Practical Planning for Social Security and Healthcare in Retirement
January 18-20, 2016 AICPA Advanced Personal Financial Planning Conference (cpa2biz.com/pfp)
July 20-22, 2015 AICPA Advanced Estate Planning Conference
November 16-17, 2015 AICPA Sophisticated Tax Planning for Your Wealthy Clients
Personal Financial Planning Section #AICPApfp 64
CPA/PFS News and Events
PFS Referral Program
• Receive 100% credit to apply toward future CPA/PFS dues by
referring a CPA to become a PFS or sit for the PFS exam
PFS Exam
• Register now for upcoming exam windows
• Discounts, sponsorships and volume pricing available
Education Opportunities
• In-depth courses in estate, retirement, tax, investments,
insurance, and PFP process
• In-person and online PFP Boot Camp
• Self-study PFS exam review course
Learn more at aicpa.org/pfp/pfs
Personal Financial Planning Section #AICPApfp 65
A CPA Financial Planner is a trusted advisor who…
Operates at the highest professional level when
delivering PFP services to clients, acting in the
clients’ best interest.
Adheres to high standards as required by the Code
of Professional Conduct and the Statement on
Standards in PFP Services through the application
of objectivity, integrity, due care and competence
required by CPAs.
Is regulated by state boards of accountancy.
Integrates advanced planning concepts, including
tax and business considerations, with the entire
financial plan.