A legacy is “something transmitted by or received from an ancestor or predecessor or from the past.” While it usually represents a monetary value, a legacy is much more than that. Material possessions are just one of the things you can pass down. A legacy represents who you are and the people you have impacted in your life. In other words, how can you assist your clients in creating a lasting legacy for their family?
Two Types of Legacies
There are two legacies – health and wealth related. The easier of the two that can be discussed is the wealth legacy. This is monetary value one leaves to loved ones or to charities. While this is the most common type of legacy, health legacies are also following their lead.
Health legacies are the importance you place on health. It is a healthy habit that you teach your loved ones in order to improve their health. For example, Sarah does not control her high blood pressure. She continues to consume fast food produces,refuses to exercise, and teaches these habits to her children. When she passes, these children are most likely to continue the same habits.
If Sarah understands how to take control of her high blood pressure and continues to eat healthy and exercise, her children are most likely to be taught the same. This results in a health legacy – and a wealth legacy. A health and wealth legacy are more intertwined that your clients imagine.
Plan to Leave Two Legacies
If your clients begin to understand the importance that health management has on their legacy, you can begin to relate this to a wealth legacy. In other words, a health legacy can also allow an increase in their wealth. By maintaining a healthy lifestyle, your clients will experience a decrease in the cost of health care.
The same rule applies to their heirs. By leaving their heirs with healthy habits, their heirs will maintain a healthier life, which decreases the cost associated with various health conditions. Even in cases where heirs have chronic conditions such as high blood pressure or high cholesterol, a healthy lifestyle can control them. Your clients will leave more than just a monetary legacy – they will leave a lasting impact in the lives of their loved ones.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health and behavioral factors to provide personalized reporting. Genivity can assist you in determining how your health decisions impact your life. Using Genvity, you can determine what type of health legacies you want to leave behind. If you wish for your family to understand how crucial your health is, ask your financial advisor for an assessment with Genivity’s HALO.
In the next three to four decades, approximately $30 trillion is expected to transfer from the Baby Boomer generation to their heirs in the United States. However, only 70 percent of wealth transfers are expected to be successful. A successful wealth transfer is when the benefactor’s wishes are kept. In other words, the wealth they leave behind to their loved ones are true to their will. The main cause of failure in wealth transfer are familial issues. On top of this, only 35 percent of heirs are prepared to inherit this wealth. It is crucial that inheritors are prepared for the transfer of this wealth. As a financial advisor, it is also crucial that you begin this conversation with your clients and their friends and family early.
How to Prepare Your Client’s Inheritors for the Transfer of Wealth
Taxes. Most heirs are not aware of the taxes that come along with wealth transferring. They should be aware that most wealth transfers are taxed. With individual recipients, the taxes are typically higher. Wealth transfers to charities, however, tend to not be taxed. It is crucial that heirs are made aware of these tax implications.
Educate your client’s family on their finances (with permission). Although your clients may be uncomfortable sharing their personal finances, it will help their heirs determine how to handle your client’s estates or assets once they are gone. If they are aware of how your clients want to run their estates, it avoids confusion down the line.
Incorporate heirs in the planning process. Incorporate your client’s heirs on the division of your estate. This will prevent conflict within the family. It also allows every individual’s voice to be heard. Use this time to plan your client’s family mission statement, as well.
Organize their financial documents. No one wants their family to be running to find your financial documents once you are gone. It is crucial that you advise your clients to have these documents kept in a secure location. Remind them to notify their heirs of this location, as well.
Create a relationship between yourself and your client’s family. Forming this relationship early on can provide family members a resource. If the transfer of wealth becomes too complicated, as a financial advisor you can assist with the process. You can also establish the responsibilities family members will assume once the wealth has been transferred.
Hire a family advisor. This is different from your role as a financial advisor. Rather, family advisors will assist heirs in organizing their wealth. Rather than allow heirs to spend extravagantly, they will advise inheritors to use their money wisely. They will encourage the use of the money to eliminate debt, add to their emergency funds, for higher education, or for home repairs. In other words, the family advisor will advise families to maintain their normal lifestyle. This can provide reassurance to your clients once you are gone.
Wealth transferring does not have to fail. If you have prepared a will and your heirs are aware of the process, the transfer of wealth will be successful. Remember, a strong family bond can ease this process.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist in determining how health decisions impact one’s future and what to consider when financial planning.
Most individuals look forward to retirement. No more worries regarding your job or education – just relaxation. However, life expectancy can change this time of relaxation. With higher life expectancies, you can also expect a longer retirement, which is not something that is typically planned for. In fact, most Americans will not be able to afford retirement because of the lack of savings, income, and retirement plans. You must consider how life expectancies will impact how you save.
After 1950 when childhood infectious diseases were put under control, life expectancies increased. However, complicated adult conditions started to become more apparent and had to be addressed. Regardless, the life expectancy continued to increase. A National Academy of Science study predicted that by 2015, the American life expectancy will be approximately 82.2 years old. This indicates that Americans will spend a quarter of their lives in retirement. To put this in perspective, in 2010, only 19 percent of Americans spent time in retirement. Although this is a general survey and this will not be the case for every individual, it is important that you consider this information when you plan for retirement. It is always better to be more prepared than not at all!
What You Should Consider
Health Conditions. As mentioned earlier, with longer life expectancies come more adult complications. One condition that is expected to increase 300 percent by 2050 is Alzheimer’s disease. Every individual is unique, so we cannot say this applies to the entire population. However, consider how you would plan if this were to be your situation. Although it may not be a pleasant thought, it is a discussion you must have with your financial advisor.
Lifestyle. The lifestyle you maintain now is crucial for the lifestyle you will live in retirement. Although your family history will play a part in your health during retirement, it is crucial you remember that your risk can be reduced. Mortality rates can be decreased through exercise, a healthy diet, and medication. Take the time to care for your body to make retirement more enjoyable.
Health Care Costs. If you adapt your lifestyle to improve your health, you can prevent future health care costs. Not entirely, of course, but the cost can definitely decrease! However, it is important to assume that your health care costs will be higher. As mentioned before, always be more prepared. Set aside more money toward retirement for you to afford the costs. This includes saving and investing in 401(k)’s or the like. It may also be beneficial to retire later to get a larger Social Security payout. Remember that Medicare, Medicaid, and other private insurance companies may assist with health care costs, as well.
Most Americans believe they will live shorter lives than they expect. With this mindset, many costs can be overlooked. It is crucial you consider these factors when planning for retirement to prevent future headaches.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist you in determining how your current lifestyle will impact your future health during retirement. It determines factors to consider when planning for retirement, including your estimated life expectancy. To determine how your health impacts your retirement plan, talk to your financial advisor about Genivity’s HALO.
Did you know that Americans are five times more concerned with burdening their family with retirement than they are with death? According to a Genworth study, this is a true worry for individuals. Considering the cost of care can range from $1 million to $300,000 in a 10-year period, we can see how this would make individuals uneasy. Furthermore, every institution offers different services and amenities for individuals that may make the cost of retirement rise. This does not even include concerns about inflation. That is why it is important to consider certain factors to make the best choice in your retirement planning.
The Entry Fee
An entry free is an up-front cost to move into a continuing care residential community (CCRC). It often pays for the underlying mortgage and for maintaining the property. In other words, this payment is for maintaining a well-functioning facility. The cost of an entry fee can be as low as $80,000 or as high as $600,000.
However, the average costs is typically around $250,000. This is a considerable amount of money, even in the lower range. You may be asking yourself what makes the entry fee vary so widely? Your location is very important. Those that reside in the Northeast region can expect to pay a higher entry fee, while those that live in the Midwest region can expect lower entry fees. Changing locations can impact how much you will expect to pay for this fee.
You should also consider whether this fee is refundable. Most institutions do not have a refund policy, meaning that if you stay for a year or 10, they will not be returning your money. Other institutes that do offer a refund policy typically ask for a higher entry fee. Although this may not seem desirable, if you wish to leave a legacy to your next-generation family members, this may be an option worth considering.
The Monthly Fees
Monthly fees can cover a wide range of services and amenities such as meal plans, gym access, and social activities. Most fees range from $2,500 to $4,000, depending on the services that the institution provides. It is crucial to consider these services as you plan. If you do not plan to be involved in several services or activities, consider a different institution to avoid paying extra.
Included in your monthly fee and in your entry fee is your healthcare cost. Under this cost of care, there are 3 options to consider.
- The first option is choosing a higher entry fee. This option will cover most of your health care costs and typically offers a fixed monthly fee. If you require nursing care or assisted living, these costs will mostly be covered.
- The second option is paying a lower entry fee along with some health care assistance. This option will cover a set number of days that nursing care or assisted living will be covered. After this time period, you will be required to cover the extra costs.
- The last option is paying a low entry fee and a low monthly fee. In this case, less health care services will be covered and you will be offered a pay-for-service. In other words, if you require assisted living or nursing home care, you will be responsible for paying the rate.
Consider these factors when planning for retirement and cost of care in an assisted living or nursing home facility. The cost of care can be daunting, but it can be done with the appropriate planning.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist you in determining the future costs of your care, and allow you more information needed to plan for your future retirement. If you are interested in understanding your health wealth factors, ask your advisor for an assessment with Genivity’s HALO.
When it comes to investing or saving, clients need to understand the language involved. If they fail to understand the language, it can be difficult to discuss with your clients which plan is beneficial for them. Their future financial stability depends heavily on financial literacy. With the improvement of your client’s financial literacy, it will profoundly impact your clients future. For example, those with higher financial literacy have higher wealth in regard to retirement planning. Those with a lower literacy tend to have higher debts, do not invest, or have little understanding on mortgages or loans.
What is financial literacy?
Financial literacy is the ability to understand the language that involves daily financial activities such as understanding the function of a checking account, how credit cards work, how debt is accumulated, how a credit score is calculated, etc. It can impact the way your clients save for their children’s future education or for their retirement. To make a summative statement, it is the necessary knowledge needed to make the proper financial decisions that impact one’s current and future life.
Shockingly, financial literacy is not only a problem in developing economies but also in advanced economies such as the U.S. In fact, some consumers who think they have adequate financial literacy, tend to lack it. Education and income levels also play a role. Those with less education and lower income tend to be less financially literate, while those with more education and high income are the opposite.
This is why you should care.
- Your clients are living longer. With this longer lifespan, your clients need more financial assistance and planning for their retirement. It is important that your clients are educated on financial literacy so their retirement can be better prepared.
- Your clients will make the bulk of the decisions. While you will assist with providing them options in terms of services, if your client has little understanding of the terms involved, it can be difficult for them to gauge the proper decision for their situation. If your clients have financial literacy, the confusion can be reduced.
- The lack of government aid toward retirement. Retirement planning used to involve Social Security. However, with the current knowledge that Social Security is expected to be depleted by 2033, this avenue is more as a backup plan than a secure method for retirement. Your clients must be financially literate to make preparations sooner and prevent their dependence on Social Security.
Overall, improving the financial literacy of your client can improve your client’s understanding and enhance the discussions made during client meetings. Financial literacy, no matter the age or wealth, is important for preparing future plans. Start educating your clients are an early state. Financial literacy classes are typically available for your clients at adult educational centers, colleges, or through federal government programs and events. However, if your clients are short on time, emphasize online learning such as searching the internet or reading business newspapers and magazines. Websites like MyMoney.gov is also useful as they focus on financial education.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Genivity can assist in helping your clients understand the health factors that should be considered in terms of financial planning. This service lays the information in an easy-to-read manner, allowing your clients to better understand the importance of financial planning and their health.