January 6, 2022 – “He who has health has hope, and he who has hope has everything.”
This quote by the 18th-century Scottish philosopher Thomas Carlyle sums up the importance of being healthy. Maintaining good health is a high-stakes opportunity that is addressed every day by people worldwide. Good health typically is one of our top 3 life goals, and I would venture to say it is the #1 New Year’s resolution – one more gym membership?
As a Financial Guide, I have experienced firsthand, and have written about, the significant impact that your physical and mental health can have on the health of your finances. (Read HealthCare Planning – The Missing Piece) Unfortunately, statistics show that most Americans are not financially, physically, or emotionally prepared for the challenges they will face in retirement. There are 46 million people in the U.S. over the age of 65. By 2050, 30 percent of the population in this country will be over 60, a staggering rise from the current level of 20 percent! The care of our aging population is one of the most critical social issues facing our country.
The sad fact about human nature is that the body begins to wear itself down, even in the best of circumstances, after five decades of life. Past the mid-sixties, the statistics get much worse. Given the uncertainty surrounding potential problems older Americans face, it is understandable that many seniors worry about what the future holds and that the incidence of anxiety and depression is not uncommon.
I immediately went into ” solutions mode” with this dire set of circumstances as a backdrop. But to be effective, I had to do some research into the top fears/concerns expressed by our seniors. There were many, and I took some liberties to organize them into four categories:
- Loss of Independence
- Declining Health
- Running Out of Money
- Isolation or Loneliness
These results were eye-opening. Working with our clients and their money, we often address concerns about financial preparedness. Most of the time, it revolves around the affordability of health care premiums or the wisdom of purchasing long-term care insurance. But when our aging population lay awake at night worrying, I surmise that financial concerns might not be the leading cause. And while you might think those who had the forethought to plan and are financially prepared for their golden years would not worry, their fears are based on psychological perceptions.
Allow me to address the fears expressed by our seniors, identifying individual concerns and offering some perspective on ways to improve or better cope with the situation.
- Loss of Independence
We spend our whole lives learning to be independent and taking care of ourselves. The aging process brings practical obstacles to this lifelong pursuit, causing significant concern for older adults that is neither physical nor mental health.
To many seniors, the fear of losing their homes is a significant concern. Their home is not just where they live. Their home is full of memories; it feels safe, familiar, and is a massive part of who they are. Recognizing this concern, we can speak with clients at the early stages to provide strategies to help them cope with a transition.
Should there be financial pressure, we discuss the positive aspects of downsizing, including moving to a favorable climate or being closer to children and grandchildren. Should moving not be an option, we can discuss the possible merits of taking a reverse mortgage on their home. Now under the purview of Federal guidelines to protect seniors, this financial product can be the solution for many healthy seniors wanting to “stay home.”
Perhaps the loss of independence is most acutely manifested in fear of the inability to perform the acts of daily living. It starts with reduced mobility and leads to physical and cognitive issues restricting their “normal” lifestyle. Once again, addressing this concern with people early in the aging process lets them realize solutions. Providing outside help at early stages can “condition” seniors to be comfortable with new relationships. Consider bringing on house cleaning help, someone to mow the lawn, or providing home maintenance. Becoming familiar with the merits of receiving prepared meals or the necessary ingredients makes menu planning, shopping, cooking, and cleaning up an election rather than a chore. We all prefer to be around familiar faces. Begin now by developing new outside relationships for seniors, so when the time comes that the need for outside help – especially for intimate needs – is more acute, there will be experiences to help cope with new relationships.
I have come to realize that while the pandemic has wreaked havoc on our society, a small ray of brightness has come with the improved computer skills of our senior population. Zoom meetings, smartphones, WhatsApp touches are all within reach. Providing a tech session with grandma and grandpa could be a “game-changer.” DoorDash and Uber Eats provide meal options at a touch. Online shopping and same/next-day delivery will become comfortable and fun. And allow me to suggest that perhaps the most meaningful long-term strategy to pursue with seniors is to establish a well-funded Uber or Lyft transportation account. Surprising as it may sound, the fear of not driving is almost as significant to seniors as losing their homes. Early on, exposing seniors to reliable transportation for visits to family, friends, health care professionals, and the senior center will provide them with a sense of control when the driver’s license renewal is no longer an option.
It is sad to say that another concern of seniors, and those close to them, is the rampant increase in elder abuse. No one can be sure how many seniors are victims of elder abuse, and law enforcement statistics are unreliable as many cases go unreported. We are attentive to financial or behavioral changes exhibited by our clients. We suggest our clients identify a “trusted contact” that we could speak to should we suspect cognitive deterioration or signs of financial abuse. We communicate the risks of identity theft, phone scams, and slick-talking salespeople to help them avoid what could become an economic catastrophe. Seniors are vulnerable to this abuse and are easy targets. Education and monitoring will reduce the likelihood of occurrence and provide all involved the needed peace of mind.
2. Declining Health
We all know stories about seniors who lived into their nineties without apparent issues. Many were shocked to hear of the passing of Betty White just a few weeks before her 100th birthday. Why? Because while being old, she wasn’t physically or mentally old! In her mind and ours, she was a “young 99-year-old”. But the statistics make these situations the exception rather than the rule.
Without question, the strides being made in medical research are changing this dynamic. Hip, knee, and shoulder replacements are becoming standard “menu” options to help our mobility as we get older. Medications and treatments for chronic physical conditions such as cancer, diabetes, Parkinson’s, osteoporosis, and many others are receiving significant attention to help the aging crisis ahead.
Putting our focus on the here and now, how can we alleviate the concern of many seniors: Accidents – the fear of falling or getting hurt. The Center for Disease Control (CDC) states that one in three seniors fall each year! Falling is a risk that can’t be eliminated, but one that, indeed, could be mitigated and reduced. Look at your aging parent’s home, inside and out. Consider the following ideas as a gift to them on their birthday, a holiday, or just because you care:
- Install grab bars in the shower, tub, and next to the toilet.
- Reinforce existing handrails on all stairs and steps.
- Place anti-slip strips on all steps.
- Create a bedroom on the first floor.
- Increase lighting in problem areas.
- Retain a handyperson to keep Dad off the ladder.
- Hire a neighbor to shovel and salt porches, walkways, and driveways.
And although not covered by Medicare, seniors should seriously consider obtaining a medical alert system, especially if frequent check-ins are not possible.
Learn the signs of cognitive issues and monitor their behavior. Understand the medications prescribed for them, their purpose, and their side effects. Commonly, changes in their medication routine, either forgetting to take them, doubling up, or introducing a new prescription, can lead to mental and physical problems. Get to know their doctors and pharmacists, and feel free to consult them at the first sign of an issue.
When we understand the fears faced by our aging parents, we can dispel many myths about senior living. However, when not vocalized, these fears tend to feed on themselves. Have discussions with them, not every day and not necessarily formally, but introduce it in some informal conversations. Be prepared and temper your reactions when they react unexpectedly. Think back at some of your childhood fears – the monsters under the bed syndrome. These fears now represent their monsters under the bed.
3. Running Out of Money
Now it’s time to take out my calculator, get in my comfort zone, and talk about the numbers to lend my perspective to a significant concern held by all seniors – running out of money. My experience working with clients over the past 20 years has taught me that regardless of the planning done early in their lifetime, and the resulting wealth at their disposal, everyone, at all ages, wonders, “will it be enough?”
Mathematically, the equation to be solved is whether the sum of your “Financial Capital” (the money you have and the return on that money), your “Human Capital” (your remaining earnings potential), and any “Social Capital” (think marriage, divorce, inheritance) will be enough to pay for your lifestyle, ability to give away/leave to others (family and charity) and of course, be required to pay “the man” (Uncle Sam).
I previously mentioned that some of the fears seniors hold may not be based on sound facts. Beware of misguided cocktail party talk (no one ever admits they lost money) and sensational media outlets (scaring you or telling you what you want to hear). Stay away from anyone wanting to work for you who may not be required to keep your best interests ahead of theirs (a fiduciary) and follow the Golden Rule: If it sounds too good to be true, get advice because it probably is. Let me provide perspective on some of the more common fears and misperceptions:
I Can’t Count on Social Security Benefits.
Predicting the demise of the U.S. Social Security program is an easy way to gain attention, whether it be in the press or at the local watering hole. This program is a bedrock social program funding millions of Americans in retirement, and it will not go away. You may see some adaptation of the rules to coincide with societal situations like longevity, inflation, and wealth disparity among participants. We continue to include social security benefits in our financial plans for clients of all ages. We assume the benefit will be available for those who need it to supplement their wealth. For all others, it becomes a decision to adjust priorities over time.
Like many government programs, navigating the social security system is not easy. The financial impact of making a sub-optimal decision, or missing an entitled benefit, could be material. Many focus on the question, “when should I start taking my benefit?” Since the benefit calculations make actuarial assumptions that make any election decision have a similar impact, the only real question to answer is “how long do I think I will live?” Typically, the break-even age for taking benefits early or at your full retirement age is in your early eighties. Remember, Social Security is one of few pension programs that provide for COLA (cost of living) increases.
For example, in the case that the social security benefit is higher for your spouse , many do not realize that you can collect your spouse’s monthly benefit when they die, instead of yours. You could collect on your ex-spouse’s record if you were married for ten years before the divorce became final, are 62 years old and are not married. If you qualify based on multiple ex-spouses, you can collect on all of them. So “run the numbers” before you decide to take the plunge one more time.
I Will Not Be Able to Afford Health Care Coverage.
Medicare is the second most costly piece of the U.S. budget, after Social Security. Likewise, it is a bedrock program that, in all likelihood, will be expanded in response to fears expressed by the American public. We all have experienced spiraling health care premiums in the private insurance market, and the Medicare program faces the same cost environment. Like Social Security, your earnings are “taxed” during your working years to help fund the program. However, the various benefits provided by Medicare (Hospitals, Doctors, and Prescription Drugs) are not free, and you will be responsible for paying a basic monthly premium for coverage.
Estimates of annual healthcare expenses (per person) at the 50th percentile are $5,200 for those covered by traditional Medicare (Parts A and B) and a prescription drug plan (Part D); and $7,900 with the addition of a Medigap policy, which is health insurance that can help pay some of the health care costs that Original Medicare does not cover. No doubt, healthcare is a cost to be acknowledged in the budget of any senior. However, at an average all-in cost of approximately $1,250/month for a married couple, the monetary impact on a typical subscriber is a far cry from a catastrophic exposure to runaway health care costs feared by the elderly.
To shore up the Medicare Program, premium surcharges for Medicare Part B (Doctors coverage) and Medicare Part D (Prescription Drug coverage) services were levied against high-income participants. This surcharge, referred to as IRMAA (Income Related Monthly Adjustment Amount), is set on a sliding scale and determined by the income reported on your income tax return two years prior. If the income reported on your income tax return two years ago was higher than it is now due to certain life events including marriage, death of a spouse, divorce, loss of pension, or the fact that you stopped working or reduced your hours, an appeal for relief can be filed.
Tax legislation, labeled the Net Investment Income Tax (NIIT), went into effect in 2013 as part of the Affordable Care Act that established a 3.8% surtax on high-income earners designed to help pay for mounting Medicare costs following healthcare reform.
It seems we are moving to a methodology called “means testing,” whereby the burden of funding projected shortfalls in our most costly social programs is born by those who presumably have an easier ability to pay. I am not about to opine on the fairness of this practice, but from a financial standpoint, it seems to soften the concerns expressed about the affordability of health care for seniors.
A Stock Market Crash Will Wipe Out My Savings.
This concern usually ranks within the top 5 for people of all age groups. It seems to make sense that those who are out of the workforce and relying on a fixed income should be more worried about stock market crashes than those many years away from retirement. Of course! But let’s explore the genesis of this fear which might provide a different perspective on this particular concern.
The conventional wisdom indicates that investment risk is more acute for seniors than for the general population. Welcome to stress and fear. Financial professionals knowledgeable about the stock and bond markets will define investment risk as a measure of the level of uncertainty of achieving the returns per the investor’s expectations. If you agree with me so far, let me ask the following question: Who do you think is facing more uncertainty in life? Would it be a middle-aged investor working as a manager in a financial institution, with a decent six-figure salary, half of which is variable, a wife that also works to support their lifestyle, and three children looking forward to their college years; or would it be a 70-year-old retired couple collecting social security benefits, who are relatively healthy and enrolled in the basic Medicare Program, own their home with a few years left on the mortgage, and spend any disposable income on travel and gifts to the family?
Over the past 20 years, I have guided many clients that match these profiles.. My experience seems to indicate that the senior couple is facing far less financial uncertainty, primarily due to shorter remaining longevity and a spending pattern that defines their lifestyle as “been there, done that.” As an investment professional, I would describe the investment process for the senior in a “de-cumulation stage” to be more intricate with more attention to cash flow and the tax impact of withdrawals from retirement accounts. However, with less uncertainty about expected (or needed) returns, our recommendations on how to invest their savings (asset allocation) are easier to develop and certainly easier to explain. Stock market crashes are inevitable, and it’s not a matter of if it will occur, but rather when it will. Left on their own, seniors of moderate means will take almost no risk, expose themselves to inflation risk, and over time their fears may become a self-fulfilling prophecy.
Interestingly, some seniors who are fortunate to have achieved significant wealth share similar concerns about volatility in the stock market. I understand their fear because those who have “made it” really do not want to risk “losing it.” In these situations, it is often helpful to have clients identify a purpose or cause that would justify any additional risk on assets above those required to fund their desired lifestyle and stated personal goals.
Our seniors face countless other fears. Many children of aging parents may also share these fears, making it challenging to provide appropriate guidance. My suggestion is to educate yourself, focus on what you can control, and seek competent professional advice from a true fiduciary.
4. Isolation or Loneliness
Some researchers have concluded that loneliness may be the greatest fear of our elderly population. The fear of being alone also presents significant mental health issues. The loss of a spouse is a catastrophic life event and is often accompanied by grief, depression, anxiety, and the very real problem of loneliness.
The senior loneliness epidemic has been thoroughly studied, and the statistics are compelling: (https://stonegatesl.com/one-is-the-loneliest-number-combating-senior-isolation/)
- Loneliness increases the likelihood of mortality by 26 percent.
- Lacking social connections is as damaging to health as smoking 15 cigarettes a day.
- Coronary bypass patients who report feeling lonely have a mortality rate five times higher than other patients 30 days post-surgery.
- Lonely individuals have a 64 percent increased chance of developing clinical dementia.
- People who are lonely report 5 percent more severe symptoms in the common cold than those who are less lonely.
- Those who are extremely socially isolated cost about $130 per month more in Medicare spending than their non- or less-isolated counterparts.
Loneliness is taking a heavy toll on our nation’s seniors, and they deserve our best thinking on how our society can support them. A global survey was given to the elderly in 28 countries asking, “How often do you feel lonely?” The results published by Statista (https://www.statista.com/statistics/1222815/loneliness-among-adults-by-country/ )indicate 31% of the U.S. elderly surveyed expressed feelings of loneliness slightly lower than the global average of 33%, but double the experience of the elderly in the Netherlands (15%).
Cultural differences aside, I would suggest that the best way to help our seniors cope with loneliness is to put them in a position to not be lonely. It may be a simplistic view but the visits, video calls, birthday cards, and gifts are incredibly effective with seniors. Try to make these contacts meaningful. Spend an appropriate amount of time, maybe even an overnight stay. Have a meaningful conversation, reminisce about the good times, try to listen more than speak, and empathize with their situation. Don’t be distracted, leave your phone at home or think that watching reruns on T.V. is time well spent. Bring recent photos and relay new experiences. Consider gifting them a Nixplay – a device that can provide a continuous stream of pictures and video for their consumption. And hit a home run with an unexpected visit from a grandchild or, better yet, a great-grandchild!
To fill the loneliness void, arrange for participation at the senior center even more. It may prove to be awkward at first, but I have some clients that I know not to call between 10 am and 2 pm, lest I disrupt lunch or an exciting game of Bingo. Many locations have transportation services for seniors, including shopping, social events, and doctor’s appointments. Or fund their Uber account.
As nature takes its course, seniors might need to consider an alternative housing solution. The decision-making process is very different for cases requiring physical or mental health care versus the realization that a change in a social setting with on-premise support might be a route of choice. If this change also corresponds with a relocation closer to family, all the better. The need for these types of facilities has captured the interest of Wall Street. While their interest does support the social good, the end game is a return on their investment. In either case, we are seeing more and more real estate opportunities supporting the needs of an aging population. Imaginative minds realize that institutional care (i.e., nursing homes) is an “end of the funnel” solution. Instead, continuing care communities (CCC’s) provide housing and ancillary medical and non-medical services that present an opportunity to move from independent living to assisted living and possibly avoid the need for institutional care.
The suggestions to alleviate the fear of isolation and loneliness faced by the elderly require someone willing to refocus their time to address someone else’s concerns. In our society, this responsibility is likely to fall upon an immediate family member, a relative, or a close friend. Yet, the statistics show that many seniors are not fortunate to experience that support mechanism. May I suggest that the next time you consider allocating your volunteer time, consider a local nursing home or assisted living facility? Bring your pet, display a particular skill you might have, or spend time talking with the residents. It will be incredibly rewarding.
My research into the topic of the fears faced by our elderly population has once again led me to a continuing theme: achieving one’s optimal life is less about the money you have and more about the choices you make with that money!