Talking to your parents about a move to assisted living can be challenging. You may have different views on when is the right time to plan the transition or concerns about the long-term cost.

For those hoping to talk to their parents about assisted living, getting a handle on the cost and the process involved is a good place to start. From there, you can approach the topic with confidence, offering them the peace of mind that the financial side is taken care of.

Here, we’ll look at things to consider when talking to your parents about assisted living and share tips on how to financially plan for their future.

What to consider when arranging assisted living for your parents

Aside from the emotional aspect, there’s a lot to consider when arranging assisted living for your parents. You may have questions about how the process works and – ultimately – how much it will cost.

When moving into assisted living, there are both short and long-term costs to consider. In the first instance, many assisted-living communities require a down payment to secure a place. Then, there’s a monthly charge covering accommodation, care, and other costs, such as food and activities.

The thing to remember about assisted living is that the cost will vary greatly depending on the level of care your relative needs. If they can live almost independently, rent will be the largest portion of the ongoing cost, with additional fees based on their care plan.

Let’s take a look at some of the other things you’ll need to think about when talking to your parents about assisted living:

• Relocation – would your parents be willing to relocate to an assisted living community, perhaps one that’s closer to your home? Or would they prefer to stay in their local area?
• Comfort and amenities – what kind of facilities and amenities do they require? And would they benefit from social activities and community events? Naturally, this can have a notable impact on costs.
• Moving date – how far in advance are you planning a move to assisted living? This will affect availability and affordability, so it’s something to look into sooner rather than later.
• Long-term healthcare – are you anticipating that your parent will have long-term healthcare needs? If so, you should factor this into their retirement plan, as they may need to transition into other types of care down the line.

How to financially plan for moving into assisted living

If your parents are independent but ready for a little extra help, assisted living is a great option. It’s also not as expensive as you might expect, though the costs vary based on the factors discussed above.

That said, planning ahead for a move to assisted living is important from a financial standpoint. With both short and long-term payments to cover, you’ll need to consider available assets and work out where the money will come from.

Sitting down with your parents to discuss their finances can be difficult and emotional. But it’s important to get a handle on the assets they have available – whether that’s pensions, social security, taxable investments, or the equity released should they sell their home.

As with any transition to a retirement community, the earlier you start planning, the more options available and the longer you’ll have to pay the down payment. Even if their move to assisted living is five, 10, or 15 years away, we’d always advise acting early to make the transition as simple and affordable as possible.

It’s worth remembering that many assisted living communities often have long waiting lists of two years or more and require a down payment to guarantee a place. You can usually cover this deposit in installments to help spread the cost, which is another reason to plan ahead.

Understanding the difference between assisted living and CCRCs

When talking to your parents about assisted living, keep in mind the difference between this and other forms of retirement care, like CCRCs – continuing care retirement communities.

Assisted living promotes maximum independence while giving people the care and services they need to continue their normal daily activities. It includes a combination of housing, healthcare, personal care, and meals based on the individual’s needs.

CCRCs, on the other hand, are communities whereby retirees live in a ‘campus’ setting, with many different levels of care available. These facilities offer a version of assisted living, but it’s solely within a community of other retirees.

If your parents value their independence and aren’t ready to move into a retirement community, assisted living may be the better option. Talk to them about their preferred retirement plan and assure them that a move to assisted living wouldn’t jeopardize their independence.

What help is available for moving parents into assisted living?

We understand that talking to your parents about a move to assisted living can be sensitive and emotional. That’s why we work with you to sort out the transition’s financial side, making the process as simple as possible for you and your loved ones.

Many people find organizing retirement care for their parents challenging, but help is available. We have the tools and expertise to help you plan the transition to assisted living – giving you financial confidence to talk to your parents and assure them that it’s the right step forward.

Need help arranging assisted living for your parents?

We’re here to help! Book a complimentary 15-minute call with a member of our team to discuss your options and start planning for your parents’ future. With help and support available from our specialist advisors, you can make the right call when it comes to your family. Get in touch today to get started.

When it comes to big financial decisions for your future, are you comfortable that your retirement plan considers “The Whole Picture”?

If your retirement goals include significant financial changes, such as paying off your mortgage or buying a second home, you’ll need to know what effect they’ll have on your retirement plan. In this post, we’ll show you how to find out if your real-estate goals are financially affordable and how a retirement income plan can help.

What to consider if you’re nearing retirement and buying a second home

Many people approaching retirement look to buy a second home, but whether their new home is in the mountains or the beach, the questions retirees ask are the same.

Firstly, you’ll need to know if you can afford to buy a second home. Secondly, you might want to find out if a second home is a good or a bad investment. Either way, buying a home will affect your retirement plan.

Often, the reasons for buying a second home are very emotional. A retirement income plan can help you work out if you can afford it so that you can make those happy memories.

If you’ve already found your potential second home and know what your mortgage payments will be, you can add this to your existing expenses. Your retirement plan can then show you the impact that this additional mortgage will have on your term. This way, you’ll be able to see clearly if you can reasonably afford to buy this home.

What if you want to buy – and then sell – a second home?

While many people enjoy the thought of owning a second home, many only want to own it for a short period. We often speak to people who want to buy a second home to use for 10 to 15 years and then plan on selling it in the future.

This can raise many questions, especially if you’re unsure if it’s a good investment. In terms of your retirement plan, it can feel unsettling to spend a lot of money on a second home, leaving you with fewer cash reserves than you’re comfortable with.

But if you’re planning to sell that home, a retirement income plan can anticipate the cash returning to your account. If you keep that home for some time, whether that’s 10, 15, or 20 years, we can assume some appreciation of the real estate’s value. So, when you eventually sell that property, you may end up with more cash reserves than you started with!

Your retirement income plan should help you decide if buying a second home is possible for you and your family. If it is, then you can move forward with the process with financial confidence.

When paying off your mortgage should be a priority

Paying off your mortgage can feel like a very important emotional goal. If you’ve got the cash in savings, or if you’re getting close to retirement, you might not want to be making those payments anymore.

But does it make financial sense to pay off your mortgage before you retire?

If you’re not yet retired, you should consider paying off your mortgage in terms of your current cash flow. If your cash account has a lower interest rate than your mortgage, it could be more financially beneficial to pay off your mortgage first. Find out the percentage you’re paying of the remaining mortgage amount and consider if your cash savings are bringing in that same (or higher) amount to your account every month. If not, then it’s a no-brainer to pay off your mortgage.

For retirees, cash flow is king. Mortgage can be a high percentage of your monthly expenses, so it’s crucial to find out if paying it off will financially benefit you in the long term. A retirement income plan can help you find out what your total asset value will be at the end of your retirement term, both with and without your mortgage payments.

If your asset value is higher with the mortgage payments, it could make more financial sense to continue making your payments. But if there isn’t a great difference in cash flow, it comes down to your emotional decision.

While we always encourage people to make the decision that they’re happiest with, we also want to make sure that you’re in the best financial position possible. So, we strongly suggest discussing whether paying off your mortgage is financially suitable for you with a retirement planning advisor.

How to financially plan for moving into a retirement community

Retirement communities are a popular choice for many retirees, and you should factor these costs into your retirement plan as early as possible. Retirement communities can have long waiting lists of two years or more. In that time, they require a down payment to guarantee your place and a later, additional charge, which can amount to a large percentage of the total community buy-in cost.

Typically, retirees considering this will own a home that they’re planning to sell once they relocate to the retirement community. However, you won’t have access to that cash until later, so the down payment needs to come from elsewhere.

You might decide to take these payments out of your existing asset base. You can then replenish your savings after the sale of your house. But it’s worth remembering that retirement communities often come with a monthly cost, like rent, that will reduce your assets over a longer period.

If you’re anticipating long term healthcare needs, you should factor these costs into your retirement income plan. This will help you decide if a retirement community is a financially viable choice for your future.

How a bespoke retirement income plan can cater to your individual needs

There are so many unique situations as each individual moves into retirement, and real-estate planning can feel like an additional complication. That’s why we create customized retirement income plans for every individual and their situation.

We design a plan that can give you financial confidence in your property decisions by taking into consideration all of your income sources, including:

• Social security
• Pensions
• Rental income
• Assets – and any withdrawn expenses

We then run simulations to show you how your retirement plan will work. We can show you multiple scenarios, including high outgoing costs, like purchasing a home, to the return that these might bring in if you decide to sell. We can also include any other types of return you may be expecting and alter the age you choose for your plan to end to help find the financial future that suits you.

If you have a question about how your property plans will affect your retirement, don’t hesitate to get in touch. Book a complimentary 15-minute call with a member of our team to discuss your retirement goals today.

You weren’t planning to retire yet, and you certainly didn’t see it coming, but it’s here, and you may not have a say in the matter. Whether you were laid off or you received an offer with a severance package, facing sudden retirement can be a confusing and stressful time.

If this is happening to you, you’re probably wondering what you should do next. In this post, we’re going to help you cope with sudden retirement by taking a closer look at ways to handle the situation and plan for the next phase of your life.

The first steps when faced with sudden retirement

Unplanned retirement is more common than you might think. Even before CVOID-19 swept across the world, people faced sudden retirement. Fortunately, sudden retirement is something that you can get through with the right planning.

One of the first steps to make this process go as smoothly as possible is to understand your current situation. Where do you stand financially? It’s time to get clear on your expenses and familiarize yourself with your options. You may discover that you do not necessarily need to retire after all. You could find another job or transition to a part-time job if you prefer.

Having someone to talk to is the best way forward because from there, you can come up with a game plan. It’s a fluid process that you can work through to find the right option, whether you want to continue working elsewhere or retire earlier than expected.

Two stories about sudden retirement

If you receive a severance package, you need to plan how you will use it wisely. When clients come to us with concerns about sudden retirement, we give them peace of mind by helping them work through their options. We use software that runs various “what if” scenarios that allow us to walk through potential situations and outcomes.

We have a 60-year-old client who recently approached us after learning that the corporation she worked for had offered her early retirement. She had a one-year severance package, and she could either take it as a lump sum or split it over a few years. Thankfully, she also had some savings and a 401(k).

However, she was still unsure about how to press forward. After all, she wasn’t planning on retiring early. So, we started to go through some ‘what if’ situations with her. We asked her whether she wanted to continue working elsewhere or not. She said that she wasn’t sure, but she could potentially do some consulting. She also considered pursuing a new job with a different organization. As you can see, she had some excellent options available.

We also had a client who had been laid off and received a short severance package. He didn’t see any possibility of getting hired elsewhere because of his age. He noticed that younger people were getting hired, and they were getting paid less than him, so why would someone want to hire him instead?

So, finding another job in the same industry wasn’t an option for him. However, he always loved fishing and boating. He talked about wanting to work for a bait and tackle store, and he pursued that pathway despite the fact it meant taking a massive pay cut. He didn’t care, though, because he was finally doing something that he loved. It kept him busy, and he enjoyed it.

These examples of two people facing sudden retirement show that you can either panic about the situation or treat it as an opportunity—an opportunity to pursue a new career path and to do something that you’ve always wanted to.

What should you do with your severance package?

Many companies offer severance packages. But they tend not to pay it out weekly or monthly like they usually would with your paycheck. Instead, they give it to you as a lump sum. Other companies may give you the option to take the severance package as a lump sum or to take some of it now and the rest later in the year.

So, what should you do with your severance package?

What you do with your severance is entirely your decision. However, we often recommend that you spread it out over a couple of years. The number one reason for spreading it out is because of taxes. If you have made a lot of your income for the year, throwing another year’s worth of income on top can increase your taxes. Spreading the severance package will help to spread the tax burden.

We use software to analyze this situation so that you can see whether it’s worth spreading your severance package over a couple of years. In the end, the decision lies with you. However, it is worth taking the time to think about what you want to do before deciding.

Plan your finances

Putting together a retirement income plan is so important because it shows you what you have to spend. Of course, planning your finances can be difficult when you feel rushed and under pressure due to sudden retirement. So, we’re going to take another look at our client’s story to help you see how this type of situation can play out.

Our client was a 60-year-old executive who has worked all of her life. She contributed to her 401(k), which came to around $1.5 million, a comfortable number to work with. We knew she had money, so it was a case of going through options with her. She had some company stock and investments that came to $450,000, which meant she had almost $2 million in working capital.

Once we knew how much she would have in retirement, we had to consider her spending habits and financial obligations. This is essential because your spending tells you how much you will have to live off once the severance runs out. After doing the calculations, we discovered she was spending around $8,000 per month.

When you calculate your spending, you do not need to know where every dollar is going. We like to break spending down into different categories to help make progress easier for the client to understand. So, we work out the bulk number, and we also consider any fixed expenses that may be obsolete at a certain point in time. For example, will your mortgage be paid off in the next few years? It would help if you thought about these types of expenses when planning your finances for retirement.

As we mentioned, our client was considering doing some consulting to generate an extra income stream for herself. We needed to know how much she estimated to make and how long she thought she could do it. She estimated that she could potentially generate around $100,000 a year and that she would keep it up for a few years. When we were going through the scenario and planning, we reduced the $100,000 to about 75%. We prefer to be conservative in case she couldn’t reach the estimated $100,000.

Consider social security and health insurance

Since our client is 60, the next big question for her was around social security. Should she live off her own money until retirement, or should she start considering social security? Although her forecast for her consulting services looks good, there’s always the chance that things don’t work out.

This is where our software can help clarify the situation. The software shows the real value of taking social security early or waiting. If you focus solely on the numbers and think about how you can get the most money from social security, sources will always advise you to wait until you are 70. However, like with most things in life, there are situations where taking social security early is a good thing, and there are also times when you should wait.

Another concern our client had was health insurance. She was facing sudden retirement at the age of 60, and if she continues to consult, she needs to cover her health insurance until she is 65. Health insurance will likely cost her over $1,000 per month, which is a considerable expense and something she needs to plan for. Since she owns two homes, she understands that she may need to sell one of the homes should the consulting not work out as planned. Selling one of the houses will help to increase her equity and keep her expenses down overall.

Seek help from a financial advisor

If people face sudden retirement, they usually don’t think about what they will do next straight away. In the beginning, they’re busy thinking about how this could even happen to them in the first place. Many people work for the same company for years when they’re blindsided with sudden retirement, and they have to recover from that initial shock before they can get the ball rolling and start planning accordingly.

When clients come to us who have been laid off or forced into early retirement, we always show them the numbers and the possibilities. We help them see the light at the end of the tunnel. Yes, they are suddenly retired, and that brings about a lot of stress and confusion. However, there are options, and we help our clients see those options for themselves, which helps to ease their minds.

You do not have to handle sudden retirement alone. Talk to someone such as a financial advisor, who can help walk you through things objectively and plan for your retirement.

Not sure how to plan for sudden retirement?

We can help! You can book a complimentary 15-minute call with a member of our team to help you cope and plan for sudden retirement! Book your call today to get started!

Income planning is one of the most important things you can do for your retirement. Planning not only gives you peace of mind, but it lets you see exactly how much you have and how to plan your finances accordingly.

Understanding your income options and what you’ll need in terms of day-to-day living is a good place to start. However, there are many more things to consider when building an income plan for retirement.

We want to help make sure that you create an income plan that you’re happy with to retire with peace of mind and confidence. So, here’s our guide on how to build an income plan for retirement:

Break your income plan into three categories

Income planning is a crucial element when it comes to retirement planning. When we help our clients build an income plan for retirement, we break their income down into three different categories:

1. Essential needs – this covers everything from your bills to rent or mortgage payments, food, living costs, and so on.

2. Wants – these are things that you want, but don’t necessarily need to survive, such as a nice summer vacation or a new car.

3. Legacy – the legacy income is basically what you want to leave to your children or charity, etc.

Create a written retirement income plan

Everyone needs a written retirement income plan. You need to know your expenses so that you can work out how much money you have and how much you will spend in retirement. With this information, building a retirement income plan becomes much more manageable. However, it’s not always easy to figure these things out.

You might not know how much you’re spending or how much you will need to spend in retirement. You may count a mortgage that will be paid off before retirement, therefore creating an inaccurate representation of how much you will have to spend.

When creating a retirement income plan, we build the expenses into it and assume some inflation. Our goal is to clarify what costs will be present throughout retirement and which fees will expire. This information is essential because inflation can impact those dollars, and we do not want to inflate things that will not be present.

Understand what is for retirement and what isn’t

Planning your income plan for retirement means understanding what is for retirement and what is not for retirement.

Sometimes we sit down with a client, and they’ll give us a number such as $10,000. Perhaps they are accustomed to making $10,000 a month. However, they fail to consider whether that amount is before or after they have paid taxes. They look at the $10k as a gross number when we need to know the net number of what they spend.

Taxes and retirement are different than when you’re actively working. So, we ask our clients for their “bring home” amount, which is how much money they bring home after they’ve paid taxes and put money in their 401(k), etc. Although they make $10,000 a month, they might only take home $5,000 a month. Once we have that figure, we discuss how much they save per month and then calculate how much they’re spending.

While building your retirement income plan, make sure you work out how much you actually bring home. That figure is your actual income need.

What to do if you think you’re short

If you think you are short, you may discover that you need to work a little longer than you initially thought. However, if you don’t want to delay retirement, you need to reconsider your budget. If you’re going to retire at age 60, you need to adjust your budget accordingly. You can only work with what you have saved. So, write down your expenses, understand what is possible, and then seek help in putting the right steps in place.

Many people assume they are short because they are unsure how much money their savings in their 401(k) or IRA (Individual retirement account) can generate. However, there are often additional options to help you get more income from your IRA or 401(k) than you realize.

Often, thinking you’re short isn’t because you’re short. It’s simply because you lack understanding of the numbers. So, we highly recommend that you take time to really understand your numbers so that you don’t jump to conclusions and assume you’re short when you’re not.

How to start the planning process

An excellent place to start planning your retirement income is with your basic numbers. Figure out what your essential needs are and how much they will cost you per month. You will also need to clarify your house payments if there are any. When calculating how much you spend on food each month, we encourage you to break it down into two categories:

– How much you spend at the grocery store

– How much you spend eating out

Your essential needs should also include car insurance, utility bills, and things you cannot live without.

A monthly budget plan is a great way to help track your income. You can create one on paper or with a spreadsheet on your computer. If you’re a tech whizz, you might enjoy using a software, called an aggregation software, such as Mint.

Mint is a free online budget tracker and planner that makes creating a monthly budget plan very easy. It helps you to keep on top of your money and manage finances in one place.

If you want help creating your retirement income plan, we can help! You can book a complimentary 15-minute call where we can give you some guidance and help you break this process down.

Are you planning to invest during retirement? If so, you’re probably debating whether you should choose the buy and hold investment strategy or active management. There are pros and cons to both, and in this post, we’ll take you through active management vs. passive management to help you make the best decision for your circumstances and your retirement plan.

We’ll also discuss investing for retirement in volatile markets, which is extremely important for anyone getting closer to retirement or already retired.

It’s vital to consider how you invest for retirement in volatile markets because of risk tolerance. As you edge closer to retirement, you’ll likely have less risk tolerance. You’ve probably heard that you should increase the bonds in your portfolio risk to produce above-average returns or decrease the stocks in your portfolio. Terms like “60/40” tend to arise and advice to ensure you are as diversified as possible. You might be in what’s called a “conservative portfolio,” and all of these things could potentially give you a false sense of security.

We want to help clear up the confusion around buy and hold and active management so that you can invest confidently during retirement.

What is the buy and hold investment strategy?

In terms of investing, buy and hold is a relatively simple way to invest. Buy and hold is a long-term passive investment strategy that involves an investor buying stocks and holding them for a prolonged period despite market fluctuations.

When you first meet with an advisor, whether in-person or online, one of the first things they do is gauge your risk tolerance. From there, the advisor sets up a portfolio mainly based on your risk tolerance score. In buy and hold asset allocation, the primary purpose is to construct a diversified portfolio that aligns with your risk tolerance score. You may be put in a 60/40 portfolio, something like 60% exposure to equity and 40% exposure to the fixed income or the bond arena.

They will then break the equities down into different sections within the 60%. These sections may include aggressive growth stocks, mid-cap, small-cap, international, and other pieces of the pie in various sectors. Once the portfolio is set up, it stays there, and you hold it. You rise and fall with the markets. Ultimately, buy and hold is constructing a portfolio, buying into it, and letting it work. It could take five, ten, or 20 years to make money.

The problem with that is not everyone has 20 years to make back any losses that may have occurred. That’s the main downside to the buy and hold investment strategy. It’s passive, and you have to sit back and “roll with the punches.”

What is active management?

With a buy and hold 60/40 portfolio, your money goes up and down with the market. So, if you have one million dollars in a portfolio and you’re down 30%, you’ve lost $300,000. That’s a lot of money, and it wouldn’t be such an issue if you’re still growing. However, if you take continuous withdrawals from that same account, you’ve got a big problem.

So, how can you protect yourself from significant downturns?

We believe that the answer lies with active management. The ability to actively manage your portfolio is so important. The Wall Street industry works from a buy-side bias. If you approach a mutual fund company and ask what the best time is to put your money to work, they will immediately shoot back with “right now is the best time.” Of course, we know that isn’t true. Now isn’t always the best time to buy. There is the right time to buy, and the right time to sell, which is how we navigate the market.

With active management, your investment portfolio’s performance is tracked and monitored by either a professional money manager or a team of professionals. This is what we do for our clients, making strategic and specific investments to outperform the overall market, investment benchmark index, or target return.

How to invest and deal with volatile markets?

Volatile markets could be anything from the President’s election to a pandemic or a breakdown within a bubble (such as the housing bubble breakdown of 2008).

While investing for retirement in a volatile market, you must have a pre-determined discipline. Essentially, the discipline is that whenever the market is in demand, we will participate. But, when the market is not in demand, we will not participate.

You mustn’t confuse this discipline with market timing because they are two different things. Instead, we gauge the entire scope of what the market is doing before making any decisions. We identify who the leaders are in various sectors and sections within the bond, fixed income world, and cash. For example, when the market is booming, we want to be invested in the leaders of the equity world. However, we also consider what is happening in the market during turbulent times. We are not fixed to one leader over another. We move if we believe it is the right decision. We focus on the market’s ultimate direction and track the numbers to take the guesswork out of the equation.

Why you should protect yourself from significant downturns

To put the importance of protecting yourself from significant downturns into perspective, let’s imagine that we are helping you to construct your retirement plan. We run various rates of return, and let’s say you earn 6% or 7%. If you have been a great saver, and we told you, “If you can earn 6%, you’re going to have more money than you can spend in your lifetime.” You would probably be pretty happy to hear that news. But what if you didn’t quite make it to 6%? What if you earned 5.5%?

Fortunately, earning a half percent less is not going to destroy your retirement plan. On the other hand, if you lose 50% of your money, that kind of loss can wreck your retirement plan, especially if you end up taking money out.

We use this analogy all the time. The market is like an elevator when it falls but going back up is like riding an escalator. Making it back to where you were before the fall is a much longer process, which is why you need to have protection in place.

Why active management is the best investment strategy in volatile markets

One of the best things about active management is that when something like an economic crisis or a global pandemic happens, actions are taken. When the market falls, you have two strategies to choose from. You can take a passive approach and ride the markets down and hope that things will turn around, and they’ll come back up again. Or, you can also choose the active strategy that limits how much you are willing to lose in a challenging market.

Volatility can trigger markets to fall. Therefore, leaders who once reigned on top fall too, and new leaders take their place. We make those shifts. For example, 2020 started good. But once the pandemic hit and things escalated in March, the markets fell by 32%. We let our clients know that there was no good place to be, in all honesty. So, we shifted to cash, and in doing so, we avoided a significant amount of that fall.

When the markets improved again, we got back in. This is what active management can do for you during retirement and when unexpected events like a global pandemic happen.

Since we had a pre-determined action plan for when catastrophe hits and communicated with our clients throughout the process, we could navigate accordingly and ensure that our clients were not hit with huge losses.

There are many important factors to consider when retirement planning, so where should you start?

Well, we have created a mini video series on the 4 Steps to Secure Your Retirement to help you better prepare and plan for retirement. You can access this amazing video series for free right here.