At a recent lecture which Fiscal director and CFP Kate Brown presented at UCT on health, wealth and attitude related to ageing in the context of integrated financial planning, she highlighted: “Courage and Kindness are two of the most important ingredients in the recipe for living longer and living well.”
“Most people avoid thinking about ageing and the financial, health, social and emotional implications of living to be very old, but by planning well for later life, you have a greater likelihood of a better quality of life.”
“By helping people make a coherent connection between the way they seek to live and their resources, not just their financial resources, we are often able to make a very positive contribution to people’s lives. Our advice is not just about financial clarity and security, it is also about helping our clients to navigate the journey and to help them ensure the best possible quality of life.
“People need to face their futures and be as clear as they can about what really matters to them, have the conversations they need to have with themselves and those who matter most to them and then they will be in a better position to plan and make choices.”
Brown emphasises that planning exercises and regular reviews, enables people to take responsibility for their financial well-being, to make informed choices and to deal with the consequences of difficult life transitions better.
“The choices you make on a daily basis have long term consequences for your health, your emotional and financial well-being,” says Brown.
“We use the term ‘integrated financial planning’ not just ‘financial planning’. to convey the important idea that the purpose of financial planning is to help make a coherent connection between the way you seek to live and your resources, not just your financial resources.”
“This is not just about crunching numbers, selling you an investment and redrafting your will to bring it up to date with legal developments. It is about helping you be clear about the consequences of your lifestyle choices. It includes, helping you review and possibly modify some of these, to make informed decisions about how to allocate your resources, both how you spend and invest them and consider carefully the consequences for not only you, but those around you as well.
Often families are caught in a situation where they have to care for their parents while they are still raising a family or helping young adult children to launch.
Have you considered the financial, emotional and physical space implications of a parent coming to live with you and of having to care for an elderly, frail person?
Brown highlighted that sometimes the questions we have to ask ourselves about our future are difficult, such as, who would you depend on if you fell ill or ran out of money? And are these people aware that this responsibility may fall on their shoulders? Is there someone you can depend on who has sufficient resources to help you and do it with a good grace?
Particularly for those without children or close family who can help or whose family relationships are fractured, this can be a very serious issue.
Planning for your or family’s possible health issues financially and knowing what resources you can depend on will mitigate the challenges associated with these issues.
Fiscal has extensive expertise in this area and can help you work through your concerns.
Confronting the almost inevitable health issues of ageing
Living longer does come with inevitable challenges and health issues. Kate Brown gives us an overview of some of the common issues which older people:
- Avoiding Falls
Falls among the elderly are a major public health issue. In the US alone, the cost of fall related injuries among people over the age of 65 is expected to reach more than $54 billion (yes billion, not million) a year by 2020.
As we get older we are increasingly at risk of falling. In addition to the cost of medical treatment perhaps the greater cost is the potentially serious erosion of quality of life. A fall can very painful but perhaps more seriously it can shatter a person’s confidence, and can often result in a person moving into frail care.
What can you do to reduce the risk of falling? There is a lot you can do. One of the best things I am told is to practice Tai Chi – the gentle form of the ancient Chinese martial art. It is performed with grace and balance and brings both physical and psychological benefits.
Stanford University’s ‘Farewell to Falls’ programme dwells on a number of key areas where you can take action. I should add that each area may have monetary costs attached to it. The aim is to help you keep your balance and it may be cheaper and less painful to pay for preventative action than to end up in the emergency room and possibly in hospital or frail care.
Medical management is key to avoiding falls – This includes a medication review, checking your vision and improving posture and gait.
As people age they are often prescribed more and more drugs. It is sensible to review how these different medications may be interacting with each other. Medicines have potential side effects. If medication one may cause drowsiness, and medication two the same and you are taking a sleeping pill at night….well you might expect not to be quite so alert during the day!
Having cataracts increases the risk of suffering a fall. In a research project in the USA, where half of a group of people waiting for cataract operations were operated on immediately, the incidence of falls was substantially less than among those still awaiting surgery. I am not giving you medical advice, but I encourage you not to delay in seeking it if you have cataracts which can safely be removed.
If you are not convinced of the importance of the role your vision plays in helping you keep your balance, try standing on one foot. Don’t hold onto anything, but do be near a firm structure which you can reach for to support you if necessary. Once you standing on one foot, try closing your eyes.
As a younger person, if you trip, you are much less likely to fall. Younger people will generally be fitter and stronger and can pull themselves up before they fall.
Shortened and weak muscles and poor posture affect your ability to balance or save yourself if you are in danger of falling. You can imagine an elderly person will have slower reactions and be less able to save themselves.
Imagine how much more difficult if that person is dizzy from the side effects of medication, half blinded by cataracts…they are much more likely to hit the floor, possibly breaking one or more limbs in the process….possibly having struck their head on the corner of the table on the way! It is too horrible to contemplate….but it does happen.
This means that being physically active is important AT ANY AGE. If you have not taken exercise as a younger person, I am told it is never too late to start. If you hate taking exercise, try and find an activity that you can tolerate on a regular basis.
The next area which bears scrutiny is your home or any environment in which you spend your time. Ensure your home is not full of hazards which can increase the likelihood of you falling.
The amount of clutter needs to be reduced, there should be a clear path from the entrance to the working area of the kitchen and loose rugs should be discarded. Bathrooms need to be carefully planned for easy access and safety. Handrails placed in key areas the elderly need to step into or get up from, and non-slip surfaces must be used.
Why is it that some people refuse to learn how to use a hearing aid? Please notice I did not say refuse to use, I said refuse to learn how to use a hearing aid.
As a local ENT specialist put it to me ‘You must understand, a hearing aid is not a radio’. It does not broadcast just what you want to hear. It is an amplifier. Why do some people who wear aids take them out when they are eating? It amplifies all the sounds including your chewing! So you have to learn how to use an aid and learn again how to discriminate. It is not easy. You have to practice and you have to practice every day.
As a person with normal hearing you discriminate all the time. For example, when you go to a concert, you can concentrate on certain instruments and they will come to the fore. If you live by the sea, you can learn to cut out the sound of the ocean so that you can listen to music on your hi fi completely unaware of the crashing waves.
The ability to discriminate tends to decrease with age and hearing impairment hence the general recommendation to learn how to use an aid sooner rather than later.
A word on avoiding damaging your hearing: When I asked the ENT surgeon what could or should one do to cherish ones hearing, his first answer surprised me. He said you need good information. What did he mean? He meant that the medication or courses of treatment for certain illnesses, have side effects which can damage your hearing. Other things he mentioned included avoiding loud noises. These can be inflicted in the workplace, or by certain leisure activities. Listening to very loud music is an example. I have been (very briefly) at a disco where the music was so loud that it was physically painful to be in the room. Needless to say when I asked the young disc jockey to turn the music down, he couldn’t hear what I was saying. He was in his twenties and his hearing was shot already. Many will suffer from Tinitus in their later years as a result of the damage to their hearing.
Deafness can become extremely socially isolating. So here is another example of opportunity cost: choosing not to learn how to use a hearing aid can make you more difficult, even exasperating to live with.
Please bear in mind that choosing not to hear as well as you could does not only affect you, it affects those around you.
When you can’t hear me, I tend to raise my voice and my body language is likely to convey some aggression. Of course the aggression will not be missed and hurt feelings and tension can result.
I asked a urologist what could or should a person be doing today to ward off incontinence? His response was that there are four main causes. I will not go into the first three, we’ll put those down to bad luck. The fourth you can do something about. You can regularly practice kegel exercises or controlling your urine flow as you urinate. You have a choice; every day to clench or wink and in doing so, tone and strengthen the relevant muscles.
So what is the connection between incontinence and financial planning? Quite simply if you need four pads a day to manage your encroaching incontinence and you need these from the age of 85 and you live another 10 years you could spend R75 000 in today’s money on pads alone. If you can think of better things to do with R75 000, start clenching today. You might save yourself a lot of money.
I mentioned earlier about the usefulness of making a coherent connection between the way you seek to live and your resources. This is where an integrated financial plan comes into its own.
Financial planning for old age
Please note that financial planning is not the same as investment management.
Only once you have worked out a plan and know what level of return you require on your assets and the level of risk that you are willing and able to tolerate, can you decide how your capital should be invested, managed and by whom.
Given that people are living longer and healthcare costs tend to rise faster than inflation, you may be wondering whether you will be able to afford to maintain your current or desired lifestyle in years to come. If you are not sure, preparing an integrated financial plan can bring a number of important benefits. I will mention seven here. Developing a well thought out, documented plan which is regularly reviewed should give you:
- Clear understanding of your precise situation rather than what you think, hope or fear it might be. Knowledge is power.
- Enabling you to make informed choices and decisions given your resources and priorities.
- Ensuring your affairs are in order if you were to become seriously ill or die suddenly.
- Helping you deal with financial matters as they arise. Regular reviews help to make sure you get things done.
- Dealing with anxieties constructively. Facing and dealing with your fears can reduce your worries considerably.
- Helping you invest appropriately to achieve the returns you require.
- Giving you peace of mind so you can enjoy yourself and know how you are going to manage financially in your later years.
Qualities to seek in a financial planner
It can be very helpful to get professional assistance. I have a long list of things you should be aware of and qualities you should seek in a financial planner.
- Ask what experience and qualifications the advisor or planner has. While qualifications are not a guarantee of competence they are usually a good start. The CERTIFIED FINANCIAL PLANNER®, CFP®, qualification is a good indicator of professional training.
- Ask what the advisor is licensed to advise you on. In terms of the legislation (FAIS) which governs the work advisors do with you, an advisor may only recommend or sell you investments which fall within the ambit of his or her licence.
- Who employs them?
- How are they remunerated? Do they earn a salary, charge fees or do they earn commissions on investment or other insurance products which they sell you?
- Understand that the method of remuneration may colour the advice and recommendations you are given. A planner who charges fees for services as opposed to commissions for sales may be in a better position to advise you wholeheartedly in your interests.
- Is the person listening to you carefully?
- Do they show that they have understood your objectives and concerns? It may be that they can help you clarify your objectives by alerting you to issues which you had not previously considered but which will be important for your decision making.
- Are they telling you what you want to hear or what you need to know?
- Do you think they are putting your interests before their own, in other words, acting professionally?
- Is the written material the advisor or planner gives you in clear language which you can understand?
- If you do not understand something (there are a lot of technical terms to get to grips with) can the advisor explain things clearly to you?
- Ensure that you receive a written record of advice which is clearly reasoned and is a coherent response to your needs, circumstances and objectives.
- Never suspend your critical faculties as to the character of the person advising you. Are you confident that they are advising you wholeheartedly and intelligently in your interests, placing your needs above their own desire to earn fees or commissions?
- Remember that investments which can be volatile (eg those with a substantial holdings in shares) are not necessarily better or worse than those that are less volatile. Horses for courses.
If nothing else check, if you are the client, or if your money is the client.
Many people find financial matters extremely difficult to deal with. My colleagues and I are very conscious that there is the financial equivalent of the person who becomes aware of a lump or growth on their body, but won’t go to the doctor ‘in case it is cancer’! So many people fear finding out if they have sufficient resources to fund the lifestyle they desire and many more live in fear of running out of money before they die.
It is our experience that some of the most important work we do is to help people ascertain whether they should be anxious, or whether things may in fact be manageable.
There is nearly always something you can do to improve your situation. You could order your affairs better, invest more appropriately, or modify your attitude and in doing so enhance your quality of life.
It is very important that you be honest as you can be about how you think feel and behave in relation to money and financial matters. Those of you who have read Hamlet may remember Polonius’ advice to his son….’this above all, to thine own self be true…..’
I am now going to give you a framework for a financial plan. How do you start the process?
The best way to start the process is by telling your story. For someone to guide you, you need to describe your family circumstances and share what is really important to you. It is our experience that telling your story is a powerful first step to clarifying your financial and emotional needs.
Articulating your feelings can be a crucial guide to what is really important to you. Your story helps explain who you are and what matters most to you, creating a clearer understanding of
The transitions you face now and anticipate in the future
What the likely implications of these are from an emotional and financial point of view.
Remember we are trying to make a coherent connection between the way you seek to live and your resources. In the end, the financial side is all about cash flow, how much you need and when.
One of the advantages of telling your story to a third party is that in doing so you will become clearer about your priorities.
Having become clearer about these it is important to write the following down:
What you have
- Assets (all of them)
- Debts (ditto)
What you require in order to meet your objectives
- Monthly and annual cash flow now
- Estimate of how this may change (possibly increase) as you get older.
- Additional expenses ie Capital expenditure (Capex) such as replacing cars, travel, medical costs, spousal death costs (funeral, taxes, Execs fees)
Aspirations, aims and intentions
Let us look at some examples of the aspirations that many people have in common, all of which have financial or cash flow implications:
- To be able to live financially independently of your children or other family members for the rest of your days.
- To be able to live physically independently of your children. Not to be a burden to them. (I am concerned that these people may have underestimated what they as older people can offer their children.)
- To be able to see or visit the people who matter most to you if they do not live in Cape Town. What if you cannot travel to see them? (ill health). Can you help fund their visits to you?
- To be able to afford the medical and other care of your choice.
Now those all have obvious financial implications.
But you can have other aspirations which may or may not have financial consequences. We know one couple who have one adult child. The husband says he (and his wife) want to remain interesting to their son. In other words, they would like him to want to visit and spend time with them, not just do it out of a sense of duty. I think that is a brilliant aspiration. —– a different, more positive way of expressing a desire not to become a burden to him?
Having become clear about all this, you need now to calculate the return you require on your capital if you are to have a good prospect of being able to fund all the activities and expenses listed in your plan.
Again, you may require professional assistance to do this.
Your plan should not only note the lovely things you want to be able to afford, but also for the regular and the mundane AND should allow some flexibility so that you can cope with unexpected emergencies or changes in your plans. Changes born of opportunities or unpleasant one thrust upon you.
The point of reviewing a plan on a regular basis is to check the assumptions which you have made and see if they remain valid or need to be changed.
Please note, your plan should not be predicated on simply trying to get the highest return in the shortest space of time. That can be the route to misery and disaster. We recommend you ensure you have a clear sense of how much risk you need to take, and only take more than that as a conscious, informed decision.
Let me dwell briefly on the issue of expenditure. Because expenditure figures form a vital part of the calculation regarding the return you require.
I spoke earlier about deafness. Let us assume that by the age of 80 you are getting deaf. Holding a conversation is becoming difficult and frustrating. I am told that hearing aids generally last between 5 and 7 years and then need to be replaced.
You may be fortunate and find that an aid costing up to R15 000 works well for you. So one hearing aid costing R15 000 which has to be replaced every 5 years may mean in your lifetime you buy 3 aids costing a total of R45 000 in today’s money. Double that (R90 000) if you need aids in both ears.
But what if you love music? If you want hi-fi quality aids you may pay as much as R60 000 to R65 000 per aid. Such aids will allow you to adjust the area of amplification. So in the concert hall you will set it to concentrate in the direction of the orchestra. It will not concentrate on the person in the row behind you who is coughing! An inexpensive aid would not discriminate between the two.
So having realised this I have incorporated in my own plan an amount of R130 000 (I have assumed I will need help in both ears) every five years starting from the age of 80. All being well, this will allow me to enjoy my daily dose of Mozart for the rest of my days.
As I am in danger of living to be 100, I may need four sets and that gives me a total for hearing aids of R520 000 over my life time. And how will that affect my choices today —
Back to our friend opportunity cost. Personally, I would rather be able to afford the best hearing aids than drive a newer more expensive car. I am happy to eat out less often if doing so would help me provide the hearing aids. And I may decide to work for longer in order to build more capital for my later years.
These are conscious choices which I am taking now and I am in my 60s.
Living long in an age of technology
We have touched on the technology of hearing aids and of course the likelihood is that this will continue to improve.
There are other technologies which we encourage you to embrace if you have not already done so.
May I ask if any of you do not use a computer?
Do any of you have elderly relatives or friends who do not use a computer?
Refusing to learn how to use a touch screen device such as this (a tablet), cuts you off from the internet which is a vast library, an immense electronic resource. No longer is the lack of typing skills a serious impediment.
Ordering your affairs
Having worked out your plan and the investment return you require, it remains for you to order your affairs.
This means ensuring that your will is up to date and the beneficiary nominations on any Retirement Funds or Annuities, Life policies and Endowments are as they should be and dovetail appropriately with the terms of your will.
It is sensible to ensure that your wishes can actually be put into effect. An Estate planning exercise can establish if there will be sufficient cash (or liquidity) in your estate when you die and whether you have provided appropriately for those who remain behind.
There needs to be sufficient liquidity to pay funeral and other death related expenses, settle your debts, pay all taxes due and executors fees.
Some people really dislike the business of making a will. For them it takes courage to do this, but remember your integrated plan is not just about you.
If you need to reconsider the terms of your will or to check that your wishes can actually be put into effect, a qualified financial planner working in conjunction with an attorney who specialises in this area of law should be able to guide you.
I have one, perhaps slightly controversial guideline here: I mentioned that we recommend using a lawyer who specialises in this area of the law:
As a rough rule of thumb I would err on the side of consulting someone who not only drafts wills but also winds up estates, in other words, someone who bears the consequences of their own drafting.
A lawyer who does not practice in this area of law may be out of date on certain matters. And I beg you not to cut and paste from someone else’s will and hope that all will be well. Some people whom we know who did that have visited much unnecessary unhappiness on their heirs all in the name of saving some money.
What does it cost to make a Will? Let’s say it costs about R1 000. Let’s say your current will was drawn up over 20 years ago and in response to the law at the time, you made certain bequests to a Trust. This may have been optimal at the time, but in many instances, it may not be optimal now. The law has changed and simpler less expensive arrangements may work better, saving your heirs tens of thousands of Rand in the process. Under those circumstances, the R1 000 cost of a new will is clearly a worthwhile investment.
There is one proviso about this: What if the survivor lives to be very old and becomes incapable of managing their own affairs?
This is a major area of difficulty that many South Africans face because unlike the UK, we do not have what is called an enduring power of attorney
If you are unable to manage your affairs, there are two options. The first is to put your capital into a Trust while you are still compos mentis. The other is for your affairs to be managed by a curator. Each has its advantages and disadvantages.
Now in conclusion: we have covered some health issues, avoiding falls, deafness and other indignities. We have talked about some of the ways you can benefit from having a clear understanding of your financial circumstances. It is likely you will not only be better off financially, but you are highly likely to feel better about life in general. Research has shown this.
We have looked at some areas where you can make conscious choices now which will help you to live well as you age. It is up to you to decide what your attitude will be.
Your quality of life may be more governed by how you choose to deal with what happens in your life than what actually happens to you.
Living with an elderly parent
On a very personal note I would like to share something of my own experience of helping to care for my 101 year old mother in law who lives with us.
People are often very kind and tell me how splendid I am for ‘allowing’ my mother in law to live with us.
I want to make it very clear that it is not me who makes this possible. It is my mother in law.
Why do I say this?
There are three things which I have observed about my mother in law which I am very clear I should try and imbibe and in which I should emulate her if I possibly can.
- She obeys the first ten rules of being a mother in law: Thou shalt not interfere. Thou shalt not interfere. Thou shalt not interfere (you get the picture).
- She does not demand things. The consequence of this is that people give gladly and enjoy her company. This is not to say she is not stubborn about some things, that she does not have her own quirks and eccentricities. But she does not demand, and this makes it so much easier to give.
On the subject of giving, generally people find giving easier than receiving. (There are people who are takers but we are not going to deal with them here.) Giving usually gives you a good feeling. Receiving may make you uncomfortable.
As you age and make the transition from fully independent living to needing increasing amounts of help, you have to receive.
3. And so the third lesson from my mother in law and, I think one of her great gifts, is that she receives in uncomplicated ways.
I do not know how she has arrived at this way of being, though I have some ideas. I think it has a lot to do with doing the work you have to do at each stage of life and having done it, be ready to move on without resentment. I think because she has done the work she had to do and come to terms with her life, she is able most of the time to live in the moment and is generally content and happy.
This gift of receiving in uncomplicated ways makes helping her much easier and more manageable. How can we cultivate such an attitude? I do not know but maybe this idea will help you.
If someone feels good about helping and giving, by needing their help, you are giving them an opportunity to feel good about themselves. Will that idea help me if I find myself in her position, needing help with most things? I do not know, but it may be a good place to start.
I had a conversation the other day with a woman who described how her parents now in their mid to late 80s had recently changed. They used to be very active and were available to help the family and keen to do so. They were givers.
Now, in quite a short space of time, they have both become grumpy and difficult and are not even being kind to each other anymore! One is becoming incontinent and the other complains of feeling dizzy.
My sense is that they no longer know themselves. They think of themselves as givers, but they can’t be any more. But they have not yet made the transition, never mind made it with equanimity, to being receivers!
Once they have made that transition, I think it very possible they will become happier….and will probably be less demanding and difficult and may even be kind to each other again!
I began by saying that courage and kindness are important ingredients in the recipe for living well as well as you can as long as you live.
It sometimes takes courage to be generous.
It takes courage to hone yourself as you go through life, so that you are well prepared for and deal with any difficulties in each phase as it unfolds. It is important not only to garner your financial but also your inner resources.
Could you live as well as you do if your financial resources were halved? For many, that could be quite a test. Under those circumstances your inner resources might be your best allies in salvaging quality of life under difficult financial circumstances.
It takes courage to make decisions about how you are going to live and accept the losses and constraints that age inevitably brings. The challenges of youth lead to personal growth. As you age, I encourage you to develop new ways of doing things and develop new interests.
Courage is a useful ingredient………….. but in the end, only kindness matters.