Dan McGrath believes that financial advisers are putting wives in harm's way.
He says the current realities of health care, taxes and the new reality of “means-tested” Medicare for retirees will significantly hurt the surviving spouse in the long run. And that is typically the wife.
"The rules for retirement have changed and advisers have been slow to adapt to these new rules and thus we see many seniors, particularly women, get hurt financially as they need to adjust to the new costs that no one helped them to plan for,” McGrath says.
Widows Not Getting the Best Advice
In a recent article I wrote about women and financial planning, McGrath painted a scenario that a widow may encounter after the loss of her husband. In that situation, the widow was now faced with lowered income and increased health care costs, due to her age and health and lack of long-term care coverage. But the adviser held to the age-old approach of spending cash and non-qualified assets [those that weren't in tax-deferred retirement plans] first.
He says this is a scenario that is occurring every day in this country. "The last part about having all of her non-qualified assets spent first, including her Roth IRA, is particularly troublesome given the means-tested nature of Medicare. It's very similar to what happened to my mom," he says.
A Better Path to Financial Security
In his book, McGrath discusses a conversation he had with his mother, who felt that her son was able to address her financial planning needs and that she would be in good hands. What McGrath discovered is that the new rules of retirement require an approach that many advisers have avoided and one that he feels they need to utilize to help investors going forward.
This new approach would have addressed McGrath's scenario with a different strategy.
"While the couple was alive and implementing a retirement financial plan, I'd include products such as life insurance with long-term care (LTC) riders for each of them along with a LTC product such as Lincoln's MoneyGuard or Pacific Life's PremierCare. I'd also start using those precious tax-deferred assets once they reach the qualifying age, while allowing the cash, the non-qualified assets and the Roth accounts to grow, ” McGrath says.
He goes on to recommend what he feels are two things that most advisers avoid for clients butyshould be considered given the new rules of retirement: opening a home equity line or reverse mortgage to allow access to potential income, and use some of their non-qualified assets to purchase a Single Premium Immediate Annuity (SPIA) the year they retire.
Next Avenue Editors Also Recommend:
- 5 Ideas to Help Women Retire With Fewer Worries
- 5 Giant Myths of Retirement Planning
- 4 Mistakes to Avoid When Enrolling in Medicare
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