Marilyn Heins: Planning your geriatric finances

Geriatric finances: A complicated matter, especially for a person like me who has no head for it. I always preferred letters to numbers and reading to math.

But finances cannot be ignored because some of the important decisions we must make in our life, both before we retire and after, depend on how much money we have and whether it will last as long as we do.

Before I start I must point out that, sadly, I am not writing this for the many Americans who live paycheck to paycheck. I weep tears of frustration thinking about our unfair and increasing inequality. I write for those fortunate people who have a pension or adequate funds in savings and/or retirement funds.

I am a retired pediatrician who was taught to stress prevention, the art and science of stopping something before it happens or arises. Just as it is too late to discuss birth control with a teen who is pregnant, it is too late to think about one’s financial future the day of the retirement party.

Financial planning for those living in Geriatrica, or approaching its shores, starts with asking and answering the “What if…” questions with the family. What if mom dies first? What if either of you needs assisted living care? What if neither of you can drive anymore? Factors to be considered are geography, facilities available, life cycle issues (a grandchild in college, a child with a chronic illness) as well as resources. These are the most hypothetical questions one can ask but do the best you can. Because any or all of these variables are likely to change, such family meetings may need to be repeated.

Money matters are complicated. Especially for those of you, like me, who do not understand such complexities. I am fortunate to have a financial advisor whose wisdom amazes me. Over the years he has helped me make decisions to preserve my assets so I will not be a burden on my children.

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He shared with me this list of mistakes he observed his senior clients make over the years.

1. One mistake is not appreciating the difference between possibility and probability. “It is possible the world is coming to an end. I am so scared I will do nothing.” But doing nothing when it is probable the world will still be around is not a good decision because you abdicate the decision-making to circumstances. “The world is coming to an end so I will spend all my money now!” is not a cool idea because though it is possible it is not probable. The probability is that you will spend all your money and the world will go on. Now what?
2. Second, do not make financial decisions based on TV news, investment shows, or newspaper opinion pieces. Media profits by attracting people. A lurid show or scary article about stocks invokes your emotional reactions so you watch or read tomorrow. When it comes to financial matters you should be thinking, not reacting emotionally.
3. Beware of online financial advice! I tell parents who email me for advice that I can give only “generic advice” over the internet. If they need “prescription advice” they must take the child to a doctor. Same applies to finance.
4. Do not rely on friends, relatives or children for financial advice. You would not permit anybody but a board-certified orthopedic surgeon to operate on your hip, would you? We must rely on professional advice in medical or financial matters, so ask professionals like doctors or lawyers.
5. Know what your annual expenditures are. Keep accurate accounts of what you spend and where your money goes. “Income can be identified by your advisors; expenditures cannot.” Wise planning for the future starts with knowing what you spend now.
6. Arithmetic counts! Be accurate and sensible. A million dollars in the bank sounds pretty good. But if you have no income coming in and you spend $300,000 a year, you will probably run out of money in four years. When calculating how much spendable money your funds will generate, subtract likely taxes you will have to pay and possible increasing expenses your care may cost.
7. Think about probable increases when planning for your future. It is probable that there will be rent increases in the independent and assisted living facilities you sign up for. If you downsize to a townhouse, not only the mortgage but also homeowners association fees will likely rise. You may still be doing the house work and gardening when you move but will reach an age when you can no longer do these things. Cars and household appliances age just as we do and the costs of fixing or replacing these must be taken into account, as well as our own future medical or assisted living care.
8. Do not give away, gift, or donate money too soon. When we are still employed or retired and comfortable it feels wonderful to lavish money on our children or donate to worthy causes. Things can change quickly, especially our health and ability to take care of ourselves. The best inheritance we can provide for a child is freedom from the financial burden of caring for a parent.

Let me share two personal stories. I ran a one-bed nursing home for over three years when my husband developed dementia and needed care. Because he became much worse after a hospitalization, I wanted to keep him home and was able to do so. Hard on both the pocketbook and me. It was the hardest job I ever had.

My mother exhausted her resources 12 years before she died but could stay at home thanks to the generosity of a wealthy grandchild. The costs of her round-the-clock help in her home was over $250,000 a year. Neither my sister nor I (nor most of us) could come up with $125,000 a year to pay our share of this expense for this length of time.

When I was a child, my father gently admonished me if I was on the road to do something I might regret. He would say “Marilyn, don’t be foolish.” or “Don’t do foolish things.” He also taught me, “If it sounds too good to be true it usually is!” His advice is especially pertinent when it comes to finances.