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a. Planning Point: Planners should be aware that elder financial abuse often comesfrom family members. Be careful who has power of attorney!b. Example: James, under the guise of taking care of his elderly father, abuses hispower of attorney to acquire assets for his drinking and gambling problem.c. Carefully screening caregivers and financial advisors (is the planner credentialedor properly licensed?) can help to avoid disaster.d. Planning Point: Remind clients that if it seems too good to be true, it probably is!e. Planning Point: Beware of people pressuring the client.13. Financial elder abuse risk can be minimized in the following ways:a. Clients must screen caregivers and planners carefully to ensure they are worthyof their trust.b. Having family members involved can lead to an open environment, which makes itharder for the client to be manipulated.14. The ethical side of elder abuse. (Video: What are the important ethical considerationswhen working with an older client? Tacchino, Moody, Duska)a. Elder abuse could be physical, psychological, or financial harm to a vulnerableelderly person.b. Statistics indicate that more financial elder abuse takes place because of familymembers than because of financial planners.c. A profile of a typical victim is someone who is in her 80’s, female, living alone,and cognitively impaired.d. The abuse may be brought about because the person is too polite to push backwhen necessary or because the person is lonely.e. Elder financial abuse goes unreported because people are embarrassed, they donot want to send a family member to jail, or they may lose caregiving.f. From an ethical standpoint the financial planner has three duties: 1) do not doharm, 2) prevent harm, and 3) do good.g. In order to meet his or her ethical duty the planner must have 1) the capability toprevent the action, 2) the proximity to the situation to act, and 3) the recognitionthat harm is possible.h. Professionalism requires intervention even if it means losing the client or havingyour advice ignored.i. Other solutions include 1) involving other people, 2) shedding light on the situation,3) communicating with the client and others, and 4) using prudence.SECTION 5: THE RISKS AND SOLUTIONS FOR BEING ILLPREPARED FOR RETIREMENTLO 5-5-1: Analyze unrealistic expectation risk and the other risks thatmake a client ill prepared to retire1. Unrealistic expectation risk is the false belief that adequate resources have been acquiredto fund retirement. Clients make poor choices because they were not properly educatedabout the consequences of insufficient retirement income planning. Your clients shouldbe concerned about the “leaping before they look” approach for a variety of reasons:a. One of the greatest threats to retirement security is the failure of clients torecognize that they should have been concerned about their financial ability to5.30
etire. This grave oversight could be eliminated if only the client had sought outplanning advice before retirement.b. Too many people “self-medicate” despite the fact that retirement income planningis a complicated endeavor that should be placed in the hands of a professional.According to a recent ING Retirement Research Institute study 71 percent ofAmericans still lack a formal investment plan to help them reach their goals.c. Planning Point: The planner may find himself planning for clients who retired 10years ago at age 63 and are only now realizing that they are overmatched withregard to their financial future. Sadly, retirement security can be doomed evenbefore retirement begins for the following reasons:(1) Clients may have retired with significant mortgage, student loan, and/orconsumer debt that may erode the resources needed for retirementspending (high debt service risk).(2) Clients may have started saving for retirement too late (procrastinationrisk).(3) Clients may have experienced a setback with their employer plan such asoverinvestment in employer stock (speak to any former Enron employee)(asset allocation risk), consuming assets when switching jobs (oops, Iforgot to rollover plan funds and bought a boat instead!) (rollover risk).(4) Clients may have worked for an employer who did not provide a retirementplan (retirement-saving opportunity risk).(5) Clients might otherwise find themselves having a savings shortfall eventhough retirement age is beckoning (inadequate resource risk).2. Should your client present with this situation, your job is to either recommend a delayedretirement to garner more assets, or to provide cash flow management which will probablymean reducing the client’s budget and standard of living.SECTION 6: REVIEWLO 5-6-1: Solutions review1. There are many macroeconomic risks clients face in retirement. (Video: Whatmacroeconomic risks do clients face in retirement? Tacchino, Woerheide, Rappaport)a. Stock market or investment riskb. Inflation risk(1) Probably the number one issuec. Government change risk(1) For example, we are talking about changes to Medicare.d. Interest rate risk2. What is market risk?a. The risk from events that cause all stock prices to fall.b. With market risk, the most fundamental piece of investment advice, diversification,does not work.c. The only defense is to put some of the client’s assets into truly safe, fixed-returnholdings, such as CDs.(1) In other words, build a floor income.5.31
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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carve out the nondeductible contrib
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(2) Plus salary deferrals (for an i
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a. Example:(1) Save $10,000 in 25%
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(a) This requires knowing four fact
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. Solution(1) Li and Lin Lin are bo
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(1) The increase in dollar amounts
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9. In some circumstances, an indivi
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2. Reverse mortgage basicsa. Almost
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5. Planning considerations(b) Keep
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(2) Some funds that are promoted as
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(1) Berstresser, Chalmers, and Tufa
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RESOURCES FOR COMPETENCY 3: CHOOSE
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(2) From the previous employer(s) p
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8. IRA funded plans (IRAs, SEPs, SI
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. Does the distribution election fi
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6. Net unrealized appreciation rule
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a. Tax-exempt plans include Roth IR
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8. Calculating required distributio
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(2) Exception: If there are separat
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5. Impactc. Tax rates are low in ea
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(7) Based on ordering rules, identi
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Page 108 and 109: 13. Transfers at deatha. Wills(2) A
Page 110 and 111: (1) The Retirement Equity Act manda
Page 112 and 113: (2) Beneficiary designation of bene
Page 114 and 115: 13. Overview14. Types(2) The donor
Page 116 and 117: (1) Charity needs only to payout in
Page 118 and 119: c. Access should be granted to an a
Page 120 and 121: nightmare of living probate might h
Page 122 and 123: (6) Powers to represent their princ
Page 124 and 125: c. If the policy is term coverage w
Page 126 and 127: e. Factoring personal and family he
Page 128 and 129: problem. On the other hand, we can
Page 130 and 131: d. Adding a cost of living adjustme
Page 132 and 133: g. Planning Point: Sometimes a high
Page 134 and 135: (2) Clients may not be able to “a
Page 136 and 137: c. Ensure that the client is receiv
Page 138 and 139: a. Example: Because of physical and
Page 140 and 141: options about where to get his/her
Page 142 and 143: (2) Facilities, monthly fees, and s
Page 144 and 145: 8. Other strategies that help to co
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Page 150 and 151: a. In a later competency we will di
Page 152 and 153: years of service with the employer)
Page 156 and 157: (2) If you have locked in food, ren
Page 158 and 159: (4) Loss-of-spouse risk—Deferred
Page 160 and 161: (1) Excess withdrawal risk—The us
Page 162 and 163: (5) Frailty risk—Managing assets
Page 164 and 165: 7. Practice good career management:
Page 166 and 167: Assignment 6CHOOSE APPROPRIATE STRA
Page 168 and 169: c. Example: Chuck and Sarah divide
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Page 174 and 175: (1) The time horizon used in the ca
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Page 178 and 179: markets have declined by a specifie
Page 180 and 181: (2) Annuities and long-term care an
Page 182 and 183: anticipates ramping down her activi
Page 184 and 185: c. Each of the three portfolios wil
Page 186 and 187: SECTION 4: THE ESSENTIAL VERSUS DIS
Page 188 and 189: d. Clients give up investment contr
Page 190 and 191: geared toward long-term growth. Thi
Page 192 and 193: . Trade-offs involve:(1) Irrevocabl
Page 194 and 195: (1) Rate at which banks lend to the
Page 196 and 197: . Dollar-denominated liabilities of
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Page 200 and 201: 4. Taxationtheir return generating
Page 202 and 203: . Close ended(1) IPO style launch(2
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(3) Tax control17. Conversations in
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(3) Mutual funds provide lower cost
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way to obtain increasing payments t
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protection from the downside risk w
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6. Today’s annuitization rates ar
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h. Planning Point: Markets are very
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a. The client may not be clear abou
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a. Problems with implementation are
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c. Product solutions work together
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(1) A problem is that if the client
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(b) A traditional fund company(c) A
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d. Evelyn is in great health and he
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RESOURCES FOR COMPETENCY 7: INTEGRA
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