Preparing for the Later Years of Retirement

David Ruedi, CFP®

Though everyone likes to pretend it won’t happen to them, we as humans inevitably slow down mentally and physically later in life. Preparing for the cognitive and physical decline that takes place in the later years of retirement is important, but most people spend much less time planning for this phase than they do for the early years of retirement. This failure to plan often creates problems that could have easily been avoided. Fortunately, you can prevent a lot of issues by taking a few simple steps to prepare for this phase of life before you get there.

My first recommendation is to choose a financial caretaker. A financial caretaker will help you manage your finances when you are no longer able to manage them on your own. It is important that you choose someone you trust to make decisions that are in your best interest. This is typically a responsible child, who may also be your power of attorney. Ideally, you should tell the person you’ve chosen, explain your expectations, and review your financial information with them. This will ensure a smooth transition when they eventually take over the management of your finances.

Another important step for retirees in their later years is to create a diminished capacity letter. A diminished capacity letter expresses what you would like someone to do if they notice you are starting to show signs of cognitive decline. This can be given to your financial advisor, trusted friend, or family members. Should they raise the issue with you first? Should they notify your spouse or other family members? Creating this document ensures your wishes are followed and prevents potential conflicts and awkwardness for the people involved.

It is common for one spouse to handle most of the financial decisions for a household. If you fall into this category, it is important to begin including your spouse in the financial decisions and educating him or her regarding your financial plan and investment strategy. This ensures your spouse will be able to manage the finances effectively if something happens to you. Dealing with the death of a spouse is already incredibly difficult; the last thing a widow or widower needs is an additional source of stress.

These are just a few steps retirees can take to make sure the later years of retirement go smoothly. Next week I will cover consolidating accounts, modifying your home, and preparing for full-time care later in life.

David Ruedi is a Certified Financial Planner™ professional with Ruedi Wealth Management in Champaign, Illinois.