RETIREMENT PLANNING
How to help your clients with the older-adult housing decision
By Rick Miller and Laura Williams
Helping clients make decisions about older-adult housing can be challenging because the future is unpredictable. No one knows ahead of time how much care they will require or how quickly those needs will arrive. Despite the uncertainty, planning can be extremely valuable. While clients’ specific needs are unknown, we do know the general tendencies of aging. Clients can plan with those possibilities in mind.
Helping your clients prepare in advance can reduce the risk of a sub-optimal outcome. Without a plan, circumstances may force a hastily arranged change in living arrangements that clients and their families may come to regret.
Framing the conversation with your client
Financial advisors are often well-positioned to encourage their clients to think about the future and the possibility of needing care because they have built trust with their clients over years of working together. Older-adult living is a conversation best held over several years as clients explore possibilities and preferences.
Clients may resist thinking about how their capabilities may change over time. As people age, they are less physically active and strong, and so-called “fluid” intelligence declines. Framing a capabilities conversation with clients can be difficult under those circumstances. One way to start is to encourage them to reflect on how their lives have already changed over time. Life was different at age 40 than it was at age 20. The same will be true if clients compare their lives at age 80 to age 60, or age 100 to age 80.
Illness can also cause changes—immune system effectiveness declines, the risk of some illnesses rises, and some illnesses require more help and support. Clients may have an easier time coming to terms with potential future changes due to illness rather than changes due to declining capabilities.
It’s quite possible that, despite these common developments, your client may not ever need assisted living or nursing care. Nevertheless, you can add value by encouraging them to plan for these possibilities now, in case they do need help in the future. Statistics show that 21% of men and 30% of women end up needing care by their early 90s (see “Men’s Care Needs by Age” and “Women’s Care Needs by Age”). Having a plan in place for the “where” can allow for loved ones to focus on other key issues and helping with the transition.
Exhibit 1: Men’s Care Needs by Age
Exhibit 2: Women’s Care Needs by Age
IADL: Unable to perform instrumental activity of daily living
ADL: Unable to perform activity of daily living
No Cog: No cognitive impairment
Cog: Cognitive impairment
Source: 2004 National Long-Term Care Survey, analysis from NEW EVIDENCE ON THE RISK OF REQUIRING LONG-TERM CARE, Leora Friedberg, Wenliang Hou, Wei Sun, Anthony Webb, and Zhenyu Li, CRR WP 2014-12, Released: November 2014, Revised: October 2015
Assessing their current situation
As a starting point, you can encourage your client to assess their current housing situation. The most obvious considerations are physical. As they age, will they face issues climbing stairs, reaching objects on high shelves, moving from room to room? Thinking through these questions can help clients discover how their housing may need to change as capabilities change.
It is less obvious but still important to consider the emotional energy required to adapt to changing circumstances. Renovating a home to make it more accessible is a lot of work, requiring both many decisions and managing others’ activities. It’s also costly. But moving to a new residence also becomes more difficult as clients age. Advisors can help their clients think ahead so that they have a plan in place for when they face these situations and decisions.
Help may not look like medical care
While advisors know that long-term care is not medical care but help with activities of daily life (ADLs), clients are often uninformed about the distinction. Even if a client has long-term care insurance, they may need help with some activities unlikely to be covered by their policy. These Instrumental ADLs are in the last row of the table below.
| Activities of Daily Living (ADLs) |
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| Severe Cognitive Impairment |
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| Instrumental ADLs |
|
How will your clients manage transitions over time?
It is also important to have your client consider how much of any transitions they want to manage for themselves. If they want to remain at home and independent, they will have to take responsibility for planning for greater needs, or get help from others to assist them. On the other hand, they may wish to consider living options specifically designed to help make transitioning over time easier. For example, continuing care retirement communities provide multiple living arrangements with progressively higher levels of care and a process to help make transitions as they are needed.
Who will provide essential help?
Clients should start asking themselves additional important questions related to their older-adult living decision and who will be involved with providing care if they should need it.
Where do their friends and family live? Where do they want to receive care if they need it? Can they rely, or do they want to rely, on any family members to help? And what help do they want from family members: direct care, emotional support, support with transitions over time?
Who will help with life management issues such as finances, decision-making, getting things done? Family and friends may provide some support. Clients can also engage professionals such as care managers, elder law attorneys, daily money managers, and professional fiduciaries.
Clients’ ability to self-manage may change over time. At the start of the process, they may be fully engaged and interested in the management of their housing and potential care needs. But they may become less able or interested in managing these needs over time. They may notice they need help but be too embarrassed to ask for it. This is risky for your client and can also induce anxiety in their family and loved ones. Without thoughtful planning, your clients may find themselves in an emergency with limited choices. They may end up in a living situation they would not have chosen. However, trusted financial advisors are positioned well to help older clients create a plan for future living arrangements within their financial capacity that also align with their preferences and needs.
Rick Miller, CFP®, holds a Ph.D. in economics from the University of Chicago. He started Sensible Financial 20 years ago. He is a longstanding NAPFA member who has presented at several NAPFA conferences. Laura Williams, CFP®, ChSNC®, has a degree in finance from Bentley University and has been with Sensible Financial since 2014.
image credit: istock.com/KatarzynaBialasiewicz