- Whether you’re an adult child, parent, or a spouse, it’s critical to talk about money before a health or financial crisis has hit
- It doesn’t matter if the adult child or the parent “goes first”; the conversation needs to get started
- We also recommend finding a qualified financial planner
- Even if you have a high degree of financial literacy, navigating finances as they relate to aging can be tricky
Like physical health, achieving financial health involves work and discipline. By and large, the proven techniques to stay healthy are very much like the ones that are proven to keep you wealthy: there are no quick fixes.
Avoid Impulsive Decisions
Many financial advisors will contend that the best financial decisions are made when emotion is taken out of it. With aging, it’s nearly impossible to remove emotion from the equation; you’re dealing with complicated topics like potential health decline, death, and your legacy.
With many retirees living on a fixed income, it’s essential to avoid rash financial decisions as we age. Here are three tips.
Recognize When It’s Happening
Think about when you’ve made rash financial or health care decisions, especially one you’ve regretted. What were the circumstances? Try to think back: How did you feel beforehand? Were you tired? Were you “pitched” by someone you trust? Was it at an especially vulnerable medical or financial moment in your life? The first step to averting a hasty or bad decision to know when you’re vulnerable to making one.
When you’ve identified yourself as at risk for making an impulsive health or wealth decision, call a “time out” and pause to sleep on it. Slowing the clock also gives you time to consult with other sources that might be more knowledgeable on the subject at hand than you are.
Make Decisions Early in the Day
Most people make better decisions and think more clearly at the beginning of the day. That’s a good time to tackle such a task, as opposed to when you’re tired or irritable. Similarly, when you’re worried, anxious, or under the weather, it's no time to be making investment or health decisions.
Talk Money Sooner vs. Later
Whether you’re an adult child, parent, or a spouse, it’s critical to talk about money before a health or financial crisis has hit. It doesn’t matter if the adult child or the parent “goes first”; the conversation needs to get started.
There are many ways to bring it up: it might feel safer to reference a negative experience you’ve heard about from a neighbor or friend, or you could start by bringing up an easier topic like “housing” as the conversation starter. (“Where would you like to live mom if you could not stay here?” Have you saved enough money for that”?) Discussions about money, living environment, and health invariably coalesce when these issues are broached properly.
When making financial decisions involved in your aging trajectory, the goal is not to remove emotion, but rather to minimize the impact of it. And while there are many ways to do this, it can be valuable to have a trusted financial advisor as a partner along the way.
Hire a Financial Planner
If you’re a financial guru by trade who is skilled in the principles of financial gerontology, it’s possible that you’ll be able to navigate finances without support. Short of that, it’s recommended to get sound financial help from someone who has made this their life’s work. Even if you have a high degree of financial literacy, navigating finances as they relate to aging can be tricky, and finding the right support can be worth every penny.
What to Look For
Finding a financial planner who can help with aging – sometimes known as a “longevity planner” – requires different skills than you might look for in a standard financial advisor. And unfortunately, the landscape is filled with less-than-qualified people who are shilling predatory products and services.
As you evaluate a financial planner, training certifications are important. Make sure whoever you choose has not only a generic financial certification as a CFP (certified financial planner), but ideally, also holds a certification from the AIFP.
It’s important to note that these designations won’t guarantee that you don’t wind up with a scammer, but they do greatly decrease the probability. Be cautious about other designations (like a Certified Senior Advisor, Chartered Advisor in Senior Living, Certified Senior Specialist, or Chartered Senior Financial Planner) suggesting someone has skill in this area. While they’re not necessarily bad certifications to have, don’t assume that because someone has them they’re capable; often these are obtained through mail order degrees.
Additionally, the SEC keeps a list of fraudulent financial “advisors” on their website. It’s a good idea to run a check both there before moving forward with any given advisor.
Assuming all credentials are in place, interpersonal fit is important: you want someone who understands your family and goals, and who you would feel comfortable working with over a number of years. It’s a good idea to talk to at least three advisors before making a decision.
As you go about your search for an advisor, here are other things to keep in mind:
- Always pay for financial advice by the clock, not by commission: When a financial planner makes money from investments, insurance policies, annuities, stocks, or other vehicles they sell you, they’re incentives to point you in the direction of the most lucrative products – for them. Not so from someone who is simply charging by the hour or year. If you’ve encountered an investment proposal that seems reasonable and enticing from a commissioned financial advisor, it’s wise to get a second opinion. Get the advice of another financial advisor who does not work by commission. We often seek second opinions for a medical problem; financial decisions can have long lasting consequences, too.
- Understand that your risk tolerance has probably changed with age: Nearly every financial planning exercise for a new client should involve an assessment of the client’s risk tolerance. It’s important to note that risk tolerance usually changes – in either direction – as we get older. The stereotype of the older person wanting security and guarantee of principal is not always true. Some people become more risk averse as they get older – especially if they must rely on a fixed income investing strategy in retirement to meet monthly expenses – but some become less risk averse. This could be for a number of reasons: they’ve accumulated enough money to “speculate” responsibly and enjoy that, or because major expenses they have weathered in younger life (e.g. children’s educational costs) have been dispatched and they feel a bit freer to chase higher returns. Risk tolerance is not a static feature of human beings as they age; it changes and should be reassessed periodically.
Where to Find a Financial Planner
Start by asking friends and family who seem to manage their finances well if they work with someone and can make a referral.
If that doesn’t yield anything, you can Google around to find a good fit in your area, but be sure to use a service like FINRA’s BrokerCheck to check out their history and make sure they’re properly registered.