NAIFA’s “Hidden Threats to A Secure Retirement” Panel—the panel discussed the three hidden threats to retirement that advisors must take into consideration when undertaking any kind of comprehensive planning. Emphasis was put on how each individual threat—college planning, family member with special needs, LTC needs—can wipe out a retirement without proper planning. The case was made that there is no excuse for someone in our business not knowing a specialist in LTC, special needs, college planning, or advanced tax/life insurance strategies. NAIFA provides access to these specialists to members so they can plug into any of them and now have the tools needed to profoundly change the way we plan for retirement in this country.
Suzanne Carawan, VP Of Marketing & Communications, NAIFA—moderator, Suzanne discussed briefly the mission of the National Association of Insurance and Financial Advisors (NAIFA) to advocate for a positive legislative and regulatory environment, enhance business and professional skills, represent a full spectrum of financial services practice specialties, and promote the ethical conduct of members. They work with families & businesses to help Americans improve financial literacy & achieve financial security.
Carawan: “We hear a lot from the boomer population with retirement at their doorstep and we as an industry tend to focus there, but we have to look at other generations around them and see how all these pieces fit together. Most Americans are in a sandwich generation between their children and elder parents. We need to not just talk about how to fund the client’s retirement but explore what might blindside the client. It is vital to work with clients to get a spread of understanding, not just the individual and their partner but understand the entire family structure. What else may need to be taken into account in a truly comprehensive financial plan. Just like in addressing major diseases in life, you get a team of specialist doctors working with you to get on a path to health. This should be no different for your financial wellness, that you need a team of experts in key niche areas. We promote at NAIFA that you are part of a larger network so you can make sure that you have those trusted resources and specialized knowledge at the ready for whatever life scenario your clients may be in.”
Chris Barnthouse, NAIFA (Long Term Care)—has become a recognized expert on Long Term Care solutions of all types and is often asked to speak on the topic at public, industry, and government forums. NAIFA created the Limited and Extended Care Planning Center to shed light on this topic area not brought up enough by advisors and they help them with having these conversations. Chris feels LTC is a retirement issue that is hidden in plain sight. People do not want to talk about it like they do not want to speak about disability insurance. Yet 2/3rds of all Americans who reach 65 will need care: 19% only need it for a year, 14% for 5 or more, everyone else is in between. According to the state of Indiana Dept of Health and Human Services, the average family is indigent, for Medicare purposes, within a year entering a LTC situation.
Also, there are the myths to deal with. Worse of all is that many people think that Medicare will pay for their LTC? A great conversation starter on the topic would be to go over your client’s social security statement and review the warnings on page 4 upper left-hand corner which states that Medicare does not pay for LTC and they should consider private insurance. That is more than a hint. Also, many are not aware in talking about Medicaid; there is a bias there towards facilities—the most dangerous place during Covid. LTC works to keeps you out of nursing homes. 80-90% claims most companies report are for home and community care services, not nursing homes. You have options that give you the care you want, where you want to receive it, and stay home longer. Key message is to do not expect and wait for the government to take care of your LTC needs.
Barnthouse: “I believe it is the innate right for every American to be able to retire and live with dignity. The only way to that is to offset the risks of long-term care. I consider myself a “financial gerontologist” coordinating everything going on in their financial life as they age—first priority is to offset the risk of LTC. A lot of advisors talk to their clients about LTC when they are close to retirement. My average client is 52—kids out of college, peak earnings years, financial wherewithal to pay for LTC and underwriting is better. Before 55 is optimal.
It is important to note that the day you need care, your life will not end, you will get care, but someone else’s life very well may. Beyond what it does to the retiree, often LTC will blow up the next generation’s retirement—the sandwich generation - and possibly grandkids not being able to go to college due to taking care of mom. MetLife did a study determining the average cost of lost promotions, lost income, time taken off, lost contributions to 401ks, totaled in the 100’s of thousands of dollars of adult children taking care of elderly family members. Medicare even has a diagnostic code now called care giver stress.”
Cheryl Canzanella, Brokerage Director, Coastal Life Strategies (Special Needs Children)—Cheryl, as a Chartered Special Needs Consultant, outlined the nature and scale of the problem with special care needs in American families. There are 20 million families facing these struggles of raising children with special needs. There are over 1 million Americans over the age of 60 that are still providing for care for their special needs children. The exorbitant costs involved can really put a dent on your income planning and it is even difficult for any parent to think about their retirement when you are constantly faced with all the costs and overwhelming pressures of raising a child with special needs. The American College Special Needs Designation teaches that a child with autism is expected to need $3million till adulthood to raise that individual. Many parents do not realize that by not securing their own financial future, they cannot possibly secure the needs of their child’s future.
Canzanella: “In my own experience, helping my husband fight a deadly disease, we saw our savings, earnings, investments, everything we worked hard for, depleting. All our financial decisions became very cloudy as we put everything on the back burner. Even if had some plans, we found out the hard way, at the wrong time, how much we missed the mark.
It is hard to know how to balance all this. The key is taking advantage of all the options out there, making sure you are getting all the help that is available. But you must be aware of lots of potential mistakes that can be made and be careful that you do not disqualify yourself from government benefits. For example, inheritance from grandparents without planning gift effects.
That is why it is important to talk with specialists educated in this area, partner with them, they can not only navigate you through the benefits but connect you with local professionals in community, government agencies, etc. Life is messy in general, and we are living in challenging times. We need each other more than ever. So, as advisors, it is important to continue our education on these risks and partner with specialists who are focused in these areas.”
Brock Jolly, Capitol Financial Partners (College Planning)—Brock is a financial advisor with Capitol Financial Partners and the founder of The College Funding Coach. When you think of things that can potentially erode wealth, college funding is the #1 most real fear for most American families per Gallup and Fidelity studies—how do you save & pay for your kid’s college education (a lot of times paid out of pocket or retirement funds) and still retire? Most families do not know where to start.
Jolly: “Most advisors answer to this problem is product driven—put money into a 529 plan. While 529 is a wonderful tool with significant tax advantages, a 529 plan, in and of itself, is not a strategy. The solution is not a one trick pony. You need to think about these two problems of college and retirement together, in context. Not as separate pieces. You do not need a 529 plan to pay for college, or a 401k plan to retire, or a mortgage to buy a house. These are tools. Looking at it that way, you can be more creative, more strategic.
It is a missed opportunity for advisors to not discuss this combined threat. Being trained by industry on the knee jerk reaction of 529 plans is missing the forest for the trees. You need a sophisticated plan to be careful to not also make the client ineligible for college benefits. College planning can be the door opener to having much more comprehensive planning with your clients. There are so many misperceptions out there. Many parents just think that there are all kinds of money out there.”
The Fairway Rebuilding American Retirement Summit put together an impressive and diverse group of retirement specialists that offered advisors a non-traditional range of strategies and tools to differentiate an advisor’s positioning as a comprehensive retirement specialist. This value proposition can attract prospects and retain clients with confidence that they are in good hands with a well-thought-out, comprehensive retirement strategy.
I highly recommend you review and investigate further the resources and tools available from the speakers and firms outlined in this Retirement Summit review. Having this level of retirement conversation and family engagement is a differentiator—especially when encompassing all three major hidden retirement risk topics. Fortunately, Fairway assembled some of the best minds in the country to give us advice of what we need to do in order to rebuild American retirement.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique client/community engagement strategies. The institute was launched with the support and foresight of our founding sponsors—Ultimus Fund Solutions, NASDAQ, Pershing, Fidelity, Voya Financial and Charter Financial Publishing (publisher of Financial Advisor magazine).