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More Money is Not The Answer

November, 2018



We Are All Living Longer

The opportunity to live to age 100 has increased substantially in the last decade. 

However, this enhanced life span is creating new concerns on how we are going to pay for it.


Steve Vernon, a best-selling financial author and CBS MoneyWatch contributor recently spoke to the Financial Planning Association in Chicago, “I can state with confidence that the vast majority of older workers today in America are not going to be able to retire at age 65 at their preretirement standard of living. They don’t have enough savings to retire full time.”


How Are Women Impacted?

Women have already faced significant challenges in saving enough for retirement. While longevity compounds the financial hurdles for both men and women, unspoken in that sentence is that:


The majority of people who live to age 100 are women. 

And they often are alone.


Women face an unrelenting gauntlet to achieve and maintain financial independence that can last their entire lives. WIFE.Org has asaying that goes, “A man is not a financial plan.” Today, one can have an enduring marriage or partnership, but nonetheless, there may come a point where a woman will face daunting financial decisions on her own. 


Arm-and-arm with longevity, other deep societal factors are now in play that can radically alter a woman’s financial picture. 


Grey Bankruptcy

The most disturbing financial trend is the surge in bankruptcy filings for individuals age 65 and older. The rate has nearly tripled since 1991 and it is even more incredulous for Americans aged 75+. 


The Great Recession of 2008 brought high unemployment rates, plunging housing prices, volatile equity prices and low interest rates on fixed income investments.(1) Simultaneously, employers were continuing to shift retirement accumulation from guaranteed pension plans to 401k, 403b and other self-directed investments, putting the responsibility on their employees. Elder financial fraud has escalated in recent years.


Along the way, many Americans have found themselves involuntarily retired by their employers through workforce reductions. Despite their experience, laid-off workers in their 50's are 20% less likely to find new jobs than workers aged 25-34. Additionally, this unexpected change in income often comes during a time of heightened family expenses: private schools, undergraduate and advanced degree college tuition, weddings, grandchildren and their largest home mortgage. 


Americans simply have not saved enough. The US Census Bureau indicates that the average married couple at age 65 have 68% of their assets in their home equity and 32% in non-equity assets, with a total of just $284,790 in overall assets.(2) If the couple intends to live in their home, they will be hard-pressed to live securely if these assets are needed to cover them for 20, 25 and even 30+ years.


Grey Divorce

Since 1990, Pew Research shows that the rate of divorce for couples age 50+ has doubled.(3)


Some of this increase has come from the enhanced economic clout of women and their ability to support themselves. For others, the stigma of divorce has been relieved. Longevity has played a role, too, in that many do not want to face a couple more decades with someone that is no longer fulfilling to them. 


When divorce occurs in retirement, what is already often an insufficient income now is expected to support two households and perhaps even new families. 


Lawyers cost money and quite a bit of it if the divorce is contentious. Relationships may be left behind in various states of disharmony, including prior relationships, children and business associates. 


The IRS has to be considered when dividing retirement plans and selling homes. Spouses sometimes learn about hidden financial issues and unpaid taxes during divorce proceedings. 


Homes may be more difficult to sell at certain times of the year or the overall housing market may be depressed, resulting in a less-than-ideal sales price. Credit scores may not be sufficient to replace the standard-of-living on favorable terms.


Divorce is especially hard on women if they have been homemakers or have not held a job with a substantive salary and benefits as their skills are out-of-date.  If small children are still in the home, childcare needs can be daunting. Even routine home maintenance comes with a cost if a woman has to rely on someone else to clean the gutters or make repairs.


Rebound marriages have a poor track record, further compounding the issues. 


Personal Healthcare

Many Americans have no idea how detrimental their lifestyle is upon their health. The obvious issues involve habits such as smoking, excess eating and/or drinking and lack of exercise. 


Lack of quality sleep is a very under-appreciated drain on women’s resources. Research shows that women need a minimum of 30 minutes additional sleep than men, but most often get only 6 hours and 41 minutes during the workweek, even less if their normal hormonal function has been disrupted in some way, including regular biological function.(4)


Too little sleep or poor quality sleep results in daytime sleepiness, increased accidents, problems concentrating, depression, poor performance on the job and in school, and often, increased sickness and weight gain. Modern physicians rarely give quality attention to women voicing valid concerns; the patient often walking out of the doctor’s office with a prescription for anti-depressants with all their relevant side-effects.


Each of these outcomes have a sizable impact on the amount of money one will earn in their lifetime, not to mention the out-of-pocket expenses associated with chronic health issues.


Generational Care

Families often find themselves caring for multiple generations; often 3, sometimes 4. With projected longevity, it is estimated that it may soon be possible for as many as 6 generations to co-exist together.


Caring for one’s own parents is a growing responsibility that has often fallen on daughters and daughters-in-law alike. However, longevity of life does not always mean quality of life. Many current seniors need extensive care in order to maintain their independence and often are resistant to leaving their home. When the home is their primary asset, this can pose both a financial challenge as well as logistical challenges for the caregiver. Professional caregiving is a booming business and fills a critical need … but at substantial cost. 


Many are aware of the high cost of in-home care, assisted living residences and nursing home; fewer are aware of how much it can cost a woman who provides informal caregiving, either in their parent's home or their own. For the typical woman, the lost wages due to dropping out of the labor force because of adult caregiving responsibilities averages nearly $143,000. That figure reflects the wages lost while not working — typically for about five years — as well as lower wages after returning to the workforce with rusty skills. When foregone pension and Social Security benefits are counted, the out-of-pocket losses roughly double.(5)


To compound this issue, many children have not been able to leave the nest. Parents may have co-signed on six-figure educational loans which have historically not been able to be discharged in bankruptcy.(6) Not all graduates have secured a job that pays enough to move them out of the house. Some parents have been reluctant to let their children become independent; being willing to financially support them long after they have become adults. Some children have taken advantage of their parent’s largesse even when they can clearly see that it is not sustainable. 


More Money is Not the Answer

Ironically, the obvious answer is not simply accumulating more money


While increased savings is a huge step in the right direction, more money does not address the fundamentals. Even the wealthiest individual can die with an impressive menagerie of assets brought down by substantial debt. 


It is your relationship with money that will determine success. The right financial advisor is key.


“I would never have thought of calling a 1-800 number for a robo-advisory. 

I wanted someone with a heart and pulse, who would wrap their arms around me

and give me a hug if I need it. Anyone can walk in peddling a product, 

but what people really want is the human touch.” (7)

-Jane Blaufus, Toronto, Canada


There are many in the industry that hold themselves out as financial planners, but the majority are focused on investment management, which is only a very small part of the overall financial picture that people must address in order to live their entire life well. 


The wrong financial advisor may also paint a rosy picture based upon their assertion that they can outperform any of their competition. They follow a “best case scenario” rather than real life. Real life is never perfect; it often throws a curveball to the best-laid plans. Additionally, women and other minorities have historically been poorly served by the financial planning community. By traditionally focusing on investment management, the industry has not addressed the real underlying causes of both the accumulation and loss of wealth. 


Why Evozen and Plan (D)ream? 

The most common question asked by clients is “Will I be okay?” 


At Evozen, we strive to help you be confident and truly empowered in all your financial discussions.


Evozen’s research identified 26 risks that are routinely missed in many financial plans and the bulk of them occur in the retirement years. Any of them can derail what could be the most rewarding chapter in one’s life. We understand the importance of trust because we dive deep into these causal factors through our proprietary questionnaire called Plan (D)ream. We give customized, individual guidance and address your needs proactively so that you have a plan for just about anything that can come your way. We not only plan for your ideal retirement, but strive to help you fulfill your ideal life.


At Evozen, you will not be alone in this journey. We are accountable and transparent in our recommendations and our fee structure, which can also be tailored to meet your specific needs. 


You will sleep well at night knowing that we will be with you each step of the way.



Additional Resources

To read more about financial planning for longevity:  https://www.cnbc.com/2018/01/12/failing-to-plan-for-longevity-can-hurt-your-finances.html


Tips to increase your odds of longevity: https://www.prevention.com/life/g23008201/live-to-100/


References

(1) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3226574

(2) US Census Bureau, Survey of Income & Program Participation, Wealth Tables 2011. (Table 1. Median Value of Assets for Households, 2011).

(3) https://www.marketwatch.com/story/your-failing-marriage-is-about-to-make-the-retirement-crisis-worse-2017-03-13

(4) National Sleep Foundation (NSF) 1998 Women and Sleep Poll 

(5) https://www.npr.org/2012/05/01/151472617/discovering-the-true-cost-of-at-home-caregiving

(6) https://www.forbes.com/sites/zackfriedman/2018/06/18/bankruptcy-student-loans/#551db3ed44f8

(7) https://www.theglobeandmail.com/investing/globe-advisor/advisor-news/article-advisors-with-a-human-touch-make-themselves-stand-out/#comments?fbclid=IwAR38KaiQCDtXN3zG2DMZ_ntfWSlfs3IXrX6P95Zm774pK-6Kof9sepDJFts

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