4 non-investment questions to ask an adviser before retiring
Using a financial adviser for your investment needs is 100% on brand, but what about the other parts of your retirement life? For example, a third of people ages 64 and up have a financial adviser, but only 2% of them asked their adviser to help with their Medicare choices, according to a July 2022 report from health care consulting firm Sage Growth Partners. But Medicare and other non-portfolio topics — like travel and long-term care — can affect your finances.
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Using a financial adviser for your investment needs is 100% on brand, but what about the other parts of your retirement life? For example, a third of people ages 64 and up have a financial adviser, but only 2% of them asked their adviser to help with their Medicare choices, according to a July 2022 report from health care consulting firm Sage Growth Partners.
But Medicare and other non-portfolio topics — like travel and long-term care — can affect your finances.
“We are actively bringing these ideas to our clients, but there are still plenty of advisers out there that are not,” says Crystal Cox , a certified financial planner in Madison, Wisconsin. “They’re still focused just on the investments and the portfolio.”
Here are some questions to ask at your next meeting.
1. WHAT RETIREMENT DECISIONS DO I NEED TO THINK ABOUT?
Your life in retirement may not continue as it has in the past. Do you plan to travel? Do you intend to move to a different state or downsize? How often will you want to buy a new vehicle?
“Most people just think, ‘I need a certain amount of money to live on,’” says Daniel Lash , a CFP in Vienna, Virginia. “What about all the ancillary things that come along with living? All the things you want to do?”
Mapping your retirement plans can help you and your adviser pinpoint when and how you’ll need cash.
“Do you have an idea of where you’re going to move, and what does real estate look like in that general area?” Lash says. “They’ve thought about retiring, not ‘What am I going to do when I retire?’”
2. WHAT SHOULD I KNOW ABOUT MEDICARE?
Although you generally can’t sign up for Medicare until you’re closer to 65 years old, your income in the years beforehand will affect what you pay for coverage. Each year, both Medicare Part B and Medicare Part D base their premiums on your reported modified adjusted gross income from two years prior. So if you filed individually making more than $91,000, or filed jointly making more than $182,000, you’ll pay additional amounts each month.
“Because there’s a lookback on earnings for Medicare expenditures, we’ll adjust plans accordingly, because they might be paying considerably more the first couple of years in retirement than later in retirement,” Lash says.
It’s also wise to consider guidance on Medicare choices in general, because you sometimes can’t change coverage later if your health situation shifts — and Medicare is complicated. “We do an annual meeting with somebody that specializes in Medicare,” Lash says. “All clients are invited to attend.”
3. CAN I AFFORD TO SELF-INSURE FOR LONG-TERM CARE?
A person turning 65 now has about a 70% chance of needing some kind of long-term care, and costs are steep: It’s $54,000 a year for an assisted living facility and nearly $95,000 for a shared room in a nursing home, according to insurance company Genworth’s 2021 Cost of Care Survey.
“Some people are well enough off that they’re comfortable self-insuring,” says Kevin Brady , a CFP in New York City. “Others have more limited assets.”
No matter what is the case, it’s crucial to discuss potential costs and whether you have the savings to manage them. If you don’t, you’ll need to run the numbers on products like long-term care insurance or a hybrid policy that combines permanent life insurance with a long-term care rider.
“We’re always working with an expert to do projections and see what makes sense,” Brady says.
4. DO I HAVE ENOUGH MONEY TO HAVE SOME FUN?
A successful retirement isn’t always about the tangibles. For many, it’s a time to realize dreams of travel and other experiences, but spending too frugally can get in the way.
“Often clients are overly conservative for fear of running out of money, but in the process they shortchange the retirement experience,” says Kevin Lum, a CFP in Los Angeles. “By the time they realize their abundance, they’re too old to spend it.”
Talk to your adviser about your big-ticket wishes and whether you have enough money to splash out a little before you settle into quieter spending.
Actual retirement spending looks more like a smile than a straight line, Lum says, with more spending at the beginning on things like travel and more spending at the end on long-term care needs.
“I’m not saying people should spend irrationally,” Lum says. “But thinking about retirement spending as a fixed calculation that doesn’t change across the retirement life isn’t a smart idea.”
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This article was provided to The Associated Press by the personal finance website NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Kate Ashford is a writer at NerdWallet. Email: kashford@nerdwallet.com. Twitter: @kateashford.
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