tall image
AARP Article

How To Write A Last Letter To Your Loved Ones

Complete your estate plan with this one last bit of paperwork

Let’s assume you’re well-organized. All your personal papers are in order, your will and living will are up to date, and you’ve named a health care proxy. You’ve readied final instructions and listed which of your heirs get which personal mementos. Are you done?

No. As helpful as all your preparations are going to be, nowhere have you mentioned love.

VJ Periyakoil, a specialist in geriatrics and palliative care at the Stanford University Medical Center, has had countless conversations with people near the end of their lives. The most common thing they talk about, she says, is regret — regret that they hadn’t spoken enough loving words to their spouse, or told their children how much they cared, or apologized for doing something hurtful, or thanked a special friend.

It’s not too late, as long as you still can put pen to paper (or hand to keyboard). Think about writing your family or best friend a “last letter,” showing what’s in your heart. Your words will make their lives a little better.

It’s often tough to get started on such a letter, especially when you’re still healthy and don’t feel an immediate need. But there’s help. The Stanford Letter Project, founded by Periyakoil, offers a friends-and-family letter template for your thoughts, as well as suggestions on what to include. You’ll find the template and sample letters at med.stanford.edu/letter.

Good letters start the way you might expect — acknowledging the important people in your life, telling them that you love them and expressing pride in their achievements. Maybe you think you don’t have to write these things down because you’ve said them already. But spoken words sometimes get lost in the family scrum. Written, they can be held in the hand, and cherished, for life. You might also mention treasured moments you spent with your child, family or friend.

Next comes a harder part — the apology section. Many patients, looking back, find themselves pained by specific actions or behaviors that hurt one of the people they love, Periyakoil says. She urges you to say you’re sorry. One letter won’t fix, say, a distant relationship with a sister. But it might make her (and you) feel a little better. If you write this letter while still healthy, it might even impel you to try healing that relationship. In this respect, these letters become what Periyakoil calls a CT scan of your soul. They can open new paths while you’re still alive.

You might also forgive anyone you love who has hurt you in the past, if you can. It’s solace for those you love, and cathartic for you. If you can’t forgive, keep mum. A last letter from you should be one of love and reconciliation, not spite. Death does not end your responsibility to those you leave behind.

Finally, remember to thank people for the love and care that you have received, and say goodbye.

Once you’re finished, put the letter (or letters) with your will or in a drawer where you store precious things. When you’re ready, consider delivering the letter yourself. For your family, it will be an abiding gift. 

 (Originally published in The AARP Monthly Bulletin.)

AARP Article

Retirement Planning and the Younger Spouse

Adjust savings and withdrawals with the age gap in mind

Retirement planning advice for married couples tends to assume two things: You’re pretty close to each other in age (with the husband perhaps a year or two older), and the husband has always been the primary breadwinner. But in this age of late marriages, divorce and second marriages, what if there’s a much younger spouse? Large age gaps between spouses require planning.

I asked several personal-finance advisers what their advice would be. Here are their thoughts.

Expect to work longer

You may have to stay employed past the typical retirement age in order to build up a larger pot of savings. If, for example, your spouse is 55 and you die, your nest egg may have to fund your spouse for 40 years. For investment growth, allocate a higher percentage of your financial assets to stocks. If that makes you nervous, you’ll have to plan on a lower level of spending — which is the hardest thing for clients to understand, says Alex Feick of Paragon Capital Management in Denver.

Plan to spend less

If you are a typical retired couple, you can afford to spend 4 percent of your savings in the first year and give yourself a raise for inflation in each subsequent year. But with a much younger spouse, you should drop your withdrawal rate to perhaps 3 percent, says Aaron Parrish of Triad Financial Advisors in Greensboro, N.C.

Reduce withdrawals

At 70½, you have to start taking money out of an individual retirement account. If your spouse is more than 10 years younger, you can reduce the required withdrawals — and stretch your savings — by using the IRS’s joint life expectancy table to calculate the amounts.

Mind the insurance gap

If the older spouse carries the couple’s health insurance and switches to Medicare at 65, the younger spouse will need to buy an individual health policy. Currently, it’s an uncertain market, with premiums going up.

Adjust your Social Security

Spouses with big age differences should generally approach Social Security as if they were single, says Bill Reichenstein of SocialSecuritySolutions.com, a website that helps you maximize your benefits. If you have health issues and don’t expect a long life, take Social Security at 62. Otherwise, wait until 70.

Consider life insurance

If you haven’t saved enough, look into a 20-year term life insurance to cover your spouse’s future needs. You can get it even at 65, if your health is good. Check the rates at term4sale.com.

Plan your pension

If you’ll get a company pension, don’t take the lump sum payment when you retire unless your spouse is already well provided for. Instead, take the maximum joint and survivor option. It will pay your surviving spouse 100 percent of your pension for life.

The younger spouse might find his or her career interrupted and savings slashed due to the needs of an aging spouse for medical and personal care, warns Susan Pack of Pomeroy Financial Planning in Cincinnati. It’s something to account for in your financial planning — and all the more reason to manage your spending and save the max.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

How to Maximize Social Security Survivor Benefits

Thousands of widows and widowers leave money on the table each year

Here’s news: More than 11,000 widows and widowers who are now on Social Security could have had higher benefits if someone had bothered to tell them about their claiming options. That unhappy fact comes from the Social Security Administration’s Office of the Inspector General. It highlights how little people know about survivor benefits and what the choices are. Here are some tips:

Who gets survivor benefits?

They’re paid to the spouse of a worker who dies. You have to have been married for at least nine months, although there are exceptions — for example, if your spouse died in an accident. Qualified children get benefits, too, as do ex-spouses if the marriage lasted at least 10 years.

What does the benefit pay? 

You get 100 percent of what your late spouse was receiving, provided that you file at your own full retirement age — 66 or 67. (Note that the survivor’s retirement age can be up to four months earlier than the age required for full retirement benefits.) Payments can start at age 60 (50 if you’re disabled), but filing before your full retirement age reduces your check. If your spouse dies before claiming benefits, your payments are calculated as if he or she had reached full retirement age, plus any deferred retirement credits. 

If you have a retirement benefit based on your own work, can you take a survivors benefit, too?

Here’s where many people miss out. You can’t take both benefits at the same time. But you can raise your lifetime income by taking them serially — something that your Social Security rep might not explain. If your future retirement benefit at 70 will be greater than your full survivor benefit, and you expect to have a normal life span, take the survivors benefit right away, says Bill Reichenstein of SocialSecuritySolutions.com. Switch to your own retirement benefit at age 70, when it will have had years to grow. Conversely, if your retirement benefit at 70 is the smaller one, take that benefit right away; switch to survivors benefits once you reach full retirement age. (Unlike retirement benefits, survivors benefits do not grow after you reach that milestone.) Very important: To use either switching strategy, you must restrict your initial application to the one benefit you want to start with. Otherwise, you may be considered as having applied for both retirement and survivor benefits at once and won’t be able to switch. 

What if you’ve been married twice? 

You generally collect on the account of your second spouse. If you remarried after you turned 60, you can collect on the account of the spouse with the higher benefit.

How do you collect? 

Notify Social Security as soon as your spouse dies. Benefits generally start from the time you apply, not the time your spouse died. If you’re currently collecting spousal benefits on a retired worker’s account and they’re low, you’ll probably be switched to the higher benefit automatically. But if you have a retirement benefit of your own, visit a Social Security office to sort out your options. 

Why is timing so important? 

Imagine Martha, turning 62, widow of George, who died at 63 without ever claiming Social Security benefits. Assume their benefits due at full retirement age (67) would be:

• Martha: $1,800/month
• George: $2,000/month 

Scenario 1: 

Martha files for retirement and survivors benefits at age 62.

Total benefits over 20 years:

$382,100

Scenario 2:

Martha files for survivors benefits at 62, then retirement benefits at 70.

Total benefits over 20 years:

$474,200

Difference: 

$92,100

Source: SocialSecuritySolutions.com

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Don’t Split Heirs With Your Estate

Consider your options carefully if you have a stepfamily

When you say “I do,” you’re entering a financial partnership as well as an emotional one. If you say “I do” a second time and have children, your partnership acquires new stakeholders — not necessarily willing ones. Adult children have expectations about how much they’ll inherit and how soon. A new spouse scrambles that calculus. “Stepparents and stepchildren are natural competitors,” says estate-planning attorney Mark Accettura, author of Blood & Money: Why Families Fight Over Inheritance and What to Do About It. “It’s the number one source of conflict in my practice.”

All should be well if you and your spouse are each financially independent and leave your own assets to your natural heirs. But if one spouse depends on the other for support, assets will have to be tied up for that spouse’s lifetime. In cases of May-December marriages, children of the older spouse might have to wait an extra 15 years or more before any money comes their way. No smiles there.

Nevertheless, your first responsibility is to your spouse. When you write a prenuptial or postnuptial agreement or update your wills, you’ll each want to be sure that the other will have enough to live on if left alone. A surviving spouse does have the right to claim certain amounts of the late spouse’s assets, in the absence of a will or proper prenup. The award can be large or a trifle, depending on state law — be sure you know which.

At the death of the first spouse, distribute at least a little cash to all the adult children, equally. It’s not so much the amount as the signal that you cared.

In families with good (or good enough) relationships, children and stepchildren should be treated the same in wills. If there’s a reason not to, the results should still seem fair. For example, take a man with a young second family. He might set aside enough for their education and divide the rest of the children’s money equally.

A persistent source of conflict is the division of personal property, says John Scroggin, an attorney with Scroggin & Co. in Atlanta. First-family heirlooms might be claimed by second-family children — in the worst case leading to lawsuits. You and your spouse can help by signing and dating a list of where important items should go and attaching it to your will.

If you leave everything to your spouse, you can’t be sure that your natural children will ever inherit any money. That’s because, after your death, the ties between stepparent and stepchildren might fray. Your spouse’s children will murmur, “You haven’t seen Freddie for 10 years — why leave him 30 percent of the estate?”

To preserve inheritances, it helps to leave money for children in trust, with income to the spouse for life. Still, the spouse can effect changes. “In real life, the survivor wins,” says Martin Kurtz, a financial planner at the Planning Center in Moline, Ill.

Memo to self: Discuss options with a lawyer. Memo to children and stepchildren: Keep in touch.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

What Happens to Your Debt When You Die

Know what you owe and what you don’t

Almost everyone dies owing at least some debt. Sometimes it’s only last month’s ordinary bills plus final medical expenses. But there can be shocking surprises for survivors — debts unknown to the children and even to the spouse of the deceased. Heirs might discover large credit card balances, undisclosed home equity loans or gambling debts.

Creditors are entitled to payment, from the money and property (the “estate”) that your loved one left behind. But what if he or she didn’t leave enough to get everyone repaid? Can the creditors come after you?

Sometimes yes, sometimes no. With loans secured by property, such as mortgages, an heir has to keep up the monthly payments or else sell the property to cover the debt. Unsecured loans, such as credit card debt and student loans, are another matter. Your liability depends very much on the nature of the bill, the type of property and your state’s laws. But here’s what I can say, generally.

  • Some money is protected. At death, unsecured creditors cannot collect from life insurance payments, pay-on-death bank or brokerage accounts, jointly held property that passes directly to the surviving owner, or retirement plans such as 401(k)s and IRAs that have named beneficiaries, says IRA expert Ed Slott of IRAhelp.com. They’re safe — but only if they were handled right. By “right,” I mean that the deceased filled out a beneficiary form for each account, naming the people who were to inherit. If this step was skipped, the funds will be paid into the estate, where they can be used to satisfy the creditors.
  • Your signature matters. If you signed a joint application for a credit card, you owe the balance even if you didn’t know how high it had grown. If you were merely an “authorized user,” however, most states don’t require you to pay. (Note that authorized users shouldn’t use the card after the owner dies if the estate is broke. Such spending could be considered fraud.) Spouses are generally not liable for any separate debts their mate incurred before the wedding or, in most cases, after. Rules in community property states, such as Texas and California, are different. Your community property can generally be tapped to pay a spouse’s debts. But creditors can’t take your separate property, says Cathy Moran, an attorney in Mountain View, Calif. In any state, you’ll still owe any private debt you cosigned with the deceased, such as a student loan. Some private student lenders will forgive the loan, but most won’t.
  • You have to pay the doctor. Final medical bills are usually considered a spouse’s responsibility. If your mate entered a hospital, the admission papers you signed probably included a payment agreement. When there’s no money, however, and the survivor has very little income, health providers might write off the account.
  • Get tough. Don’t be talked into making a few payments on bills you do not owe. Creditors might claim that you willingly assumed the debt. Tell them, “No, no, never.” You know your rights. 

(Originally published in The AARP Monthly Bulletin.)

AARP Article

The Spousal-Benefits Puzzle

Social Security can be as complicated as marriage

What do I get the most mail about? Winner by a mile is the question of when to file for spousal (or divorced spousal) benefits. Lots of you misunderstand the rules, with the result that you’re leaving money on the table.

So here is your guide to spousal benefits. I’m writing from the point of view of a wife filing on her husband’s earnings record, but the same rules apply to either spouse.

First, what is a spousal benefit?

It’s a payment originally designed for women who left the workforce to raise children. You need 10 years of work (40 quarters) to claim a retirement benefit of your own. If you worked less (or not at all), or your earnings were very low, you can get a spousal benefit based on the earnings of your husband.

How much is the spousal benefit?

It depends on your age when you claim it. If you wait until your full retirement age (somewhere between 66 and 67), you’ll get half of what your husband could get at his own full retirement age. If you claim earlier, you’ll receive less.

What if you worked 10-plus years and earned a Social Security retirement benefit of your own?

Here’s where claiming gets tricky. If your husband has not retired, you can file for a benefit based on your personal earnings. When he finally quits work and goes on Social Security, the spousal amount you can receive depends on your personal benefit’s size. If it’s higher than what you’d get as a spouse, you’ll continue to receive that same, higher amount, says Philip Moeller, coauthor of Get What’s Yours: The Secrets to Maxing Out Your Social Security. If your personal benefit is smaller, it will be topped up to the spousal level.

If you file when your husband has already retired, Social Security will normally assume that you’re claiming your personal and your potential spousal benefit at the same time. You will receive the higher of the two.

There’s an exception for people who were born on or before Jan. 1, 1954. If you put off your claim until full retirement age, you can file a “restricted application” for a benefit based on your spouse’s earnings, without also claiming the personal benefit you’re owed. At age 70, you can switch to your personal benefit, which will have grown at 8 percent per year plus the inflation rate.

What if you’re divorced?

You get the same benefits as a current spouse, if your marriage lasted at least 10 years and you are now single. Also, you can claim the spousal benefit even if your ex has not retired, provided that he is eligible for benefits and you have been divorced for at least two years. If you’ve been working, however, you will probably find that sticking with your own benefit is the better deal.

Special rules cover the disabled or retirees with children who are under 18. But for most of you, this road map works.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Make a Plan While You Still Can

Don’t put off critical life decisions until a crisis

Most of us think about retirement as the last big plan we’ll ever have to make. But there’s one more thing that’s perhaps even more important. You need a plan to protect yourself against the risk of making poor decisions in your older age. Like it or not, we aren’t as sharp at 80 as we were at 60, even when we think we’re fine.

For example, Terrance Odean, a University of California, Berkeley finance professor, tells me that his father, weakened from a fall, decided to cancel his long-term care insurance at 85. He never asked his son’s advice. Two years later, he wound up in a nursing home, uninsured. “Dad was no longer thinking clearly, but didn’t know it,” Odean says.

Margaret King, director of the Center for Cultural Studies & Analysis in Philadelphia, wrote to me about an ill and widowed neighbor, age 76. She has no close relatives and zero plans for future health care or financial management. “Her friends can’t devote their lives to her needs,” King says. 

Loss of powers might come on us gradually or suddenly in a crisis. The better prepared we are, the safer we’ll be.

Item one is to simplify your finances, says attorney Martin Shenkman of Fort Lee, N.J., to make it easy for someone to take over. Consolidate any scattered CD accounts and IRAs, set up automatic payments to a credit card for regular bills (card companies provide fraud protection) and create good financial files, including user names and passwords.

Then choose an agent who’ll help you with your finances if you become uncertain or unable. Give him or her your durable financial power of attorney after having a heart-to-heart about what you expect. Or consider a revocable trust. Chat with your agent about even small money decisions, in order to get in the habit. Any financial advisers should have someone to contact if you start doing odd things (for example, making big gifts to a hired caretaker).

Another power of attorney should go to the person you’d want to make medical decisions for you in case you can’t make them yourself.

When your medical and financial stand-ins are not the same person, the financial document should order the financial agent to pay for any kind of care that is chosen by the health care agent, Shenkman says. Draw up a living will that covers your wishes for continuing, or final, care.

Decide where to live next. You won’t necessarily be able to stay in your home, especially if you’re married and lose your spouse. Now is a good time to investigate independent or assisted living possibilities instead of leaving it to your worried children after a crisis.

Think about when you’ll give up driving. (Hint: It should be before your kids start demanding the keys.) Does your current neighborhood offer sufficient public transportation for you to get around? 

It’s hard to identify with a future image of ourselves, King says. But that older person is someone you’re responsible for. Save yourself and your children grief by setting up guardrails now.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Who Will Act for You if You Can’t?

Giving someone power of attorney is essential — and tricky

I got an email from a reader that set me thinking about durable powers of attorney. They’re essential to your future financial security but don’t always work the way you and your family hoped.

A durable power of attorney (POA) protects your future self. It names an agent to handle your financial affairs, such as bill paying and investment management, if an accident, illness or simple fatigue leaves you unable (or unwilling) to cope. When the agent needs to take charge, however, walls might go up. 

Take the reader who emailed me. She held her mother’s durable POA. When dementia descended, the mother, in her confusion, refused to allow her daughter to act. Financial institutions won’t always accept a POA if the person who granted the power objects. Result: The daughter had to ask a court to name her “conservator” of her mother’s financial assets. In these proceedings, a judge takes evidence from the disabled person’s doctor and perhaps others, such as a social worker. The agent can act only if the judge concludes that the incapacity is real.

Similarly, you might hold a health care proxy for someone with advanced Alzheimer’s disease who won’t enter a facility.  You’d have to ask a judge to name you guardian, freeing you to make medical decisions that the proxy put into your hands. Setting up a trust won’t help. Even trustees have to go to court if their assistance is refused. As you can imagine, all of this costs big money.

Ideally, the person who grants the POA will give you the reins before total dementia sets in, says attorney Hyman Darling of the law firm Bacon Wilson in Springfield, Mass. If you meet with resistance, you might propose taking over the big things, like investments or large CDs, while the grantor maintains control of a modest checking account.

Another risk is that the bank won’t accept the POA — because it references you by your nickname, for example, instead of your legal name. In this case you would need extra documents to prove your identity. Or maybe the grantor downloaded the POA from the internet and didn’t get proper signatures. POAs that are written by lawyers are most reliable, but internet POAs may work if they are properly filled in. 

Financial institutions have good reason for caution. An estimated 55 percent of elder financial abuse is committed by family members, caregivers and friends, some with POAs. But the bank manager might reject a trustworthy agent, too. If so, push it up the line. Lawyers definitely help. “We sometimes have to threaten banks,” Darling says. 

Those who grant POAs can clear the road for their agents by visiting their banks and having the agent added to their accounts. Also, check with your investment firm to see if it requires special forms.

If you have no POA and become incapacitated, your relatives will have no choice but to go to court. So please get one! In most cases, they work.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

The Relocation Decision

A change of scene can be good for your well-being

To move or not to move, when you retire — that’s a big question. If moving seems sensible, then where? And what will it cost?

The vast majority of new retirees plan to stay in their own homes. But circumstances change. You might be widowed, your spouse might get sick or you simply might get tired of having to find someone to clean the gutters and make repairs. Over 12 years (1992-2004), 30 percent of the home-owning cohort born between 1931 and 1941 pulled up stakes at least once, according to a 2009 study for the Center for Retirement Research at Boston College.

They didn’t go far. The vast majority found a new home within 20 miles of where they lived before. These kinds of moves are a form of aging in place because you don’t leave your community and friends.

One surprising finding — to me, at least — is that moving tends to improve your psychological well-being. That seems right for people who planned a move to new housing or a new part of the country. But even those who are shocked into moving — say, by widowhood or divorce — do better than people in similar situations who stay put, the study found. There’s something about a change of scene that helps pick up your spirits.

Older people who move do it primarily for family reasons rather than reasons of health or finances, according to U.S. Census data. Downsizing occurs less often than you might think. About the same number of retirees want a larger house as want a smaller one, the Census reports. There’s a slight preference for moving from the Frost Belt to the Sun Belt, but not much.

For services and opportunities, the Frost Belt actually looks like a better choice. I learned this from the Milken Institute, an economic think tank in Santa Monica, Calif. Every other year, it puts out a study called “Best Cities for Successful Aging.” Its researchers rank the 100 largest metro areas and 252 smaller ones based on a wide variety of criteria, such as types of housing available, access to transportation, employment opportunities for older people, opportunities for active lifestyles, and educational and cultural activities. It also considers the abundance of health services, as well as the basics, such as taxes and cost of living. The top big cities in its 2014 report? Madison, Wis., and the Omaha, Neb.-Council Bluffs, Iowa area — not exactly towns for year-round golf. The top smaller metros: Iowa City, Iowa, and Sioux Falls, S.D. You can look up the report and check the relative livability of your own city, at milkeninstitute.org.

If you are weighing a move, make careful comparisons. If you stay put, your current house might need major repairs. You might have to add a first-floor bedroom or widen the halls to allow for a wheelchair. By contrast, if you move there will be fix-up costs on your old house and moving expenses. If the move takes you from a house to an apartment, your rent payments will gradually go up. But remember: Had you kept your old house or bought a new one, taxes, insurance and upkeep costs would have risen, too. Downsizing or renting should leave you more money in the bank. In any town, make housing decisions that you think you can afford for life.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Plan Ahead for Long-Term Care

Policies have become prohibitively expensive for many in recent years

As our age group … well … ages, the chance of needing help with our day-to-day lives goes up. More of us will be seeking home health aides and, yes, even places to live where we can get the care we need. But how will we pay for long-term care?

Median costs run $6,844 a month in nursing homes, $3,628 in assisted living facilities and $3,861 for full-time professional services at home, Genworth Financial reports.

The majority of Americans don’t have anything close to that kind of money. When their savings run out, they rely on their children, Medicaid (the government program for people with limited income) or both.

People with higher incomes appear to be doing the same. Sales of traditional long-term care (LTC) policies fell 60 percent over the past 10 years, the American Association for Long-Term Care Insurance reports, as average premiums rose 44.5 percent. A typical married couple who are now 60 might pay anywhere from $2,600 to $5,600 a year, depending on the insurance company and benefit they choose. The affluent are putting large lump sums into combination LTC insurance and life insurance or annuity products. Those with fewer assets are going without. Here’s a guide to your own decision on traditional LTC insurance.

Who should consider buying LTC insurance?

Primarily, married couples with substantial retirement incomes and significant assets. If one of you enters a nursing home or needs costly home care, the payouts from the insurance will help maintain the healthy spouse’s standard of living. For single people, LTC coverage matters less. All your savings can go toward your personal care. (And by the way, single women are charged about 50 percent more than men for LTC insurance!)

How do you hold down costs?

A policy might be available through a company group plan, if you’re still working. If not, buy leaner benefits—say, by waiting six months before payments kick in instead of three months. If you’re in your 50s or early 60s, however, don’t skip the automatic inflation adjustment, even though it’s pricey.

What if you already have LTC insurance and your premiums are shooting up?

Do everything possible to keep the policy. Reducing benefits is better than giving them up. Of those who used care between 2006 and 2012, 23 percent had let a long-term policy lapse in the previous four years, according to the Center for Retirement Research at Boston College.

What about the new short-term care insurance?

You pay less and get less. Our 60-year-old couple might be charged $1,235 annually for 360 days of coverage at a fixed $150 a day. Policies vary in how they pay—by the day, by the service or by the location (at home or in a nursing facility). So know what you’re buying, and know that you’re not covered for a true medical catastrophe.

Bottom line?

For almost all of us, family and Medicaid remain the safety net.

(Originally published in The AARP Monthly Bulletin.)