Financial Planning when Health Issues and Bad Habits Collide – TheStreet

By Mark Bordelove

Nancy and Marty should be enjoying a comfortable retirement. He’s a retired teacher and she owned a business. They are in their late 70s and for their entire married lives lived within their means and made good decisions. They raised two children in the same house for 30 + years.

When Marty retired 15 years ago, they were ready to enjoy retirement. They traveled and got to spend time with their grandkids. For the first eight or nine years of retirement, things were going well. They traveled and got to spend time with their grandkids.

Then, Marty developed Parkinson’s disease, which is a progressive nervous system disorder that affects movement. Nancy made the decision very early on that she wanted to make sure Marty was able to stay in the house. It would be a logistical headache and financial burden, but she wanted to do this for him.

Their son James is a good friend of mine and a client. At this point, he called and asked if we could talk. He needed some advice for his parents and thought I could help.

The first thing we discussed was current spending. Despite a strong market the last several years, his parents have been depleting their assets faster than would be expected.

We analyzed their personal income statement – what’s coming in and going out. They have a pension generating around $6500/month, Social Security for each is around $2500/month. This $11,000 monthly income should support their monthly expenses along with most of the caregiver expenses. The shortfall, at most, should be $1000 to $1500 a month. Why, then, has the shortfall for the last six or so years averaged about $5000 – $6000 a month? They have had to sell assets of around $30,000 – $40,000 per year, with the result of their asset base going from about $850,000 to $600,000.

James thinks there is spending going on that is not being accounted for. A concern is that during the pandemic, Nancy did, and may be continuing to do a lot of unnecessary shopping. This is the only possible explanation. His parents don’t travel or incur other big expenses. James needs to have a heart to heart with his mom. He plans to do so after the first of the year.

The next action item is to have Nancy and Marty revise their asset allocation. They have an 85% equity/15% bond allocation. That strategy, to this point, has worked because they have benefitted from market appreciation. I believe they should dial back the risk exposure at this point. They cannot rely on the market ascent continuing. They should take the equity exposure down to around 60 percent or even closer to 50 percent, depending on how comfortable they are with the market. This will likely incur a tax obligation but with the right planning, I assume they can minimize the impact.

Nancy needs to think about what happens after Marty passes away. He has had symptoms for seven years or so and given his age, may live three to four more years. Once he passes, she will continue to collect his pension but at 50%. She will get his Social Security benefit and not have the caregiver expense. The early thought is to sell their condo, which is paid for, and move into a senior living complex.

I also advised James to make sure that Marty and Nancy have their estate plan in order. They should review the durable and medical POAs. These documents delegate who manages the finances and medical choices. It looks like things are in order but given the increased expense situation, it might be a good idea to have a fresh set of eyes review things.

If things don’t change and the funds continue to be depleted, James might consider going to court to have a conservator appointed to take charge of the finances. James would have to show why he feels someone should take over, and his parents have the right to contest his action. This can be a time consuming and costly experience but often the parent/child dynamic becomes reversed as the parents age. This can often be a very emotional experience for the children.

It’s not too late to help Marty and Nancy. They have been fortunate to this point with the market performing so well. They need to make some changes sooner rather than later and implement a plan to make sure the money they worked so hard for will last for the rest of their lives. With some planning and discipline, there is no reason this cannot happen.

About the author: Mark Bordelove

Mark Bordelove became a licensed financial advisor in 2000 and co-founded Bordelove Foster Wealth Management in 2009. A devoted husband and father, Mark has also completed two Ironman competitions

Mark Bordelove is a Financial Advisor with, and securities and advisory services offered through LPL Financial, a registered investment adviser, member FINRA/SIPC. This is a hypothetical situation based on real-life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Consult an adviser prior to investing. No strategy assures success or protects against loss. Investing involves risk including loss of principal.