Summer 2008

Putting the Pieces Together for the Third Age
By Elizabeth Jetton, CFP
Aging Well
Vol. 1 No. 3

“Not everything that can be counted counts. And not everything that counts can be counted.”

— Albert Einstein

Financial life planning involves the confluence of money, life events, and dreams. An aging couple, unlike many typical retirees-to-be, actually taught me about the possibilities of a thriving life in the third age. After years of running businesses and living on a small farm, the couple sheepishly asked whether my firm could help them simplify and manage their investments in such a way that they could invest in a touring bus and motorcycles for an unencumbered life on the road. The gentleman suffered from severe back pain that was a limiting factor. Our guidance included mapping out a financial lifestyle—helping with purchases and financing the “magic bus.” We even referred him to a physical therapist for his back problems.

That was six or seven years ago and since then, they’ve been living the life they envisioned for their retirement. They exemplify the reasons a holistic approach to financial life planning is critical to serving clients effectively and why our tired assumptions about life after work, as well as those about aging, need to be revisited.

Defining Financial Life Planning
Imagine sitting down to tackle a jigsaw puzzle. After you dump the pieces onto the table, what do you do next? Most folks would find and lay out the edge pieces or sort the pieces by color. A holistic financial life planner would suggest that the first thing you do is look at the picture on the top of the box. The pieces have little meaning until you get an idea of the complete picture you’re trying to create. That’s precisely the way financial life planning begins.

The first step involves the process of discovery—helping clients paint the picture of both their present life and a future life that is abundant, thriving, and ultimately represents financial and personal freedom. Once that picture has been painted, the pieces hold meaning and lend themselves to analysis, improvement, and contribution to the complete plan.

Those pieces include considerations such as income, savings, investments, tax situation, benefits, health issues, insurance, age, and other assets. Financial planners serve as financial life engineers, building bridges between where clients are and where they aspire to be through application of the art and science of financial planning—technical expertise combined with humanistic skills, communication skills, and the ability to envision, facilitate, inspire, and advise—all within the context of what truly matters to the client.
According to a recent American Demographics poll, 41% of respondents reported difficulty in adjusting to retirement. Planners’ anecdotal evidence bears out this finding. Clients who focused energy on retirement but had no coaching or advice related to what to expect from life following their working years often found themselves rudderless, alone, confused, and suffering physical ailments, such as heart problems, stroke, or accidents. The two primary stresses in retirement are financial and social.

Our focus is to become advocates for clients’ clarity, confidence, security, freedom, and well-being today and in the future. This means focusing more on life planning than retirement planning. It requires consideration of all the resources and assets a client possesses, meeting goals, and creating a richness of life in addition to a focus on financial resources. Today’s financial planning involves significant breadth and depth.

Taking a Holistic Approach
Gene Cohen, MD, PhD, the director of the Center on Aging, Health & Humanities at The George Washington University Medical Center, a professor of healthcare sciences, and a professor of psychiatry and behavioral sciences, was recently interviewed for The Journal of Financial Planning. His critical work on positive aging helps financial planners reframe their assumptions, advice, and process in preparing clients for life in the third age.

A financial life planner’s consideration of clients’ financial well-being must include all the following “puzzle pieces:”

• investments and sources of income;

• liabilities;

• the impact of full- or part-time earnings;

• definition of quality of life and enough;

• actual costs of living;

• location (home, geographic area, neighborhood);

• risk management;

• benevolence and legacy goals;

• health and potential costs of healthcare;

• life expectancy (based on family members, current health status, and mortality tables);

• the impact of economic cycles and terrathreats (recession, deflation, inflation, peak oil, water, possible natural, or man-made disasters); and

• corporate and government benefits (and risks of reductions or loss of benefits).

These pieces, or considerations, form the quantitative aspects of defining financial and future financial well-being. The holistic planner analyzes these pieces and integrates them with a client’s vision, goals, personality, and other resources.

An understanding of the values, beliefs, attitudes, and history surrounding money are essential to understanding clients’ capacity for financial well-being, to facilitating behavioral changes necessary for them to thrive today and in the future, and to promoting their ability to age well. As a financial planning leader, Richard Wagner, JD, CFP, suggests, “Financial planners deal with the most powerful secular force on the planet—money.”

To function effectively, financial planners include not only financial data questionnaires but also personal assessments in order to understand clients and map their journey toward financial freedom and a healthy, abundant life in the third age.

In our practice, we use assessments that help us determine clients’ level of thriving in each area of well-being. We adjust our conversations and questions to include client considerations, such as the following:

• the top things I would like to accomplish or experience in my lifetime;

• what I most look forward to about the future;

• my biggest fears about the future;             

• how I visualize my life in my 60s, 70s, 80s, and later; 

• the ideal age at which I would like to become financially independent; and

• my heart’s core goals—my nonnegotiables in life.

These conversations allow clients to gain insight and awareness into their own behavior and unconscious decision-making processes concerning money. Money is best managed when it is managed consciously, especially as one approaches and reaches the third age and life after work, where income and financial resources may be fixed.

The most effective and successful financial planners consider all the resources clients may have that create value, meaning, and a thriving life. For instance, some clients have an abundance of financial capital but poor health and a lack of clarity about what brings them joy or meaning. Consequently, their ability to thrive and make the most of their financial assets is constrained.

On the other hand, clients may have limited financial resources but enjoy good health, have an abundance of friends and family, carefully select where to live during the third age, have many interests, and possess clarity about what really matters in life. Such clients manage well within their financial constraints because of the richness in the other areas of their life.

As we delve more deeply into what it means to age well, financial planners are called on to address ways to handle long-term illness, sudden illness, and even a peaceful passing. We play a significant role in encouraging clients to consider preventive health measures in view of the financial consequences of poor health and prolonged illness. We engage clients in conversations about ways to prepare for possible long-term illness costs that must be paid for out of pocket, pointing out the possibilities of becoming destitute or of purchasing private long-term care insurance.

Financial planners address questions related to healthcare decisions, such as advanced healthcare planning, living wills, and medical power of attorney. And many planners provide clients with a “family love letter,” or document and questionnaire to help individuals express their wishes when they die and provide clients’ stories, lists of clients’ relationships, favorite prayers, hymns, and other individualized information.

Strategic partners for financial planners have traditionally included tax specialists and estate and trust attorneys. However, as the planner’s role and depth of work expands, so do the important colleagues. Collaborations are now common between financial planners and gerontologists, elder care attorneys, therapists and social workers, life planners, career counselors, healthcare workers, elder care specialists, and even clergy.

At the core of it, financial life planners help clients through life’s transitions: the inevitable (marriage, children, education, retirement, aging); the unexpected (sudden money, career changes, illness, unexpected death or crisis); and the hopeful (children’s marriage, grandchildren, accomplishment, inheritance). To help others enjoy richness, as well as the richness of life, is ultimately the realm and the goal of financial planning.

Finding a Financial Life Planner
To find a financial life planner, look for a certified financial planner (CFP) professional. The Financial Planning Association maintains a listing of CFP licensees in every state through its Web site at www.fpanet.org. Financial life planners are required to abide by a fiduciary standard that demands putting the interests of clients ahead of their own.