Las Vegas

Advisors should do annual financial checkups with their senior clients, said Beanna Whitlock, principal of Whitlock Tax Service, LLC, a tax and financial services business in San Antonio, Texas.

But looking at the financial details is only one part of the assessment, she indicated during a presentation here at the CSA Summit 2005, which is the annual meeting of the Society of Certified Senior Advisors, Denver, Colo.

The checkup also should include an evaluation of health status, Medicare and other health coverages and changes to those coverages, long term care insurance, and changes in life status (marriage, death, etc.), Whitlock said.

“You want to see if the plan is performing as your senior wanted it to perform,” explained the tax expert, who is a national authority on Internal Revenue Service issues.

The best time to evaluate is during tax season, according to Whitlock. That’s because the tax return determines how the plan is performing in key areas like income, interest and dividends, expenditures, etc.

But since aging usually means additional health care costs, the advisor also needs to inquire into what is going on with the senior’s health.

This discussion should include talking about Medicare, especially the cost for Part B (and soon also for Part D prescription drugs), the deductibles, and the cost of private insurance policies. “Explore ways your senior can reduce medical costs,” she added, citing use of Medical Savings Accounts, Health Savings Accounts (up to age 65), Medigap insurance (age 65 and up) and LTC insurance.

All seniors want quality long term care, she pointed out. “Every citizen in this county deserves this. Wealthy people will fund it themselves; the poor will get Medicaid; but Middle America needs LTC insurance.”

Concerning Medicare Part D, the new prescription drug benefit that’s set to start in 2006, she said seniors are being solicited to sign up for this now. “That means you, the senior advisor, need to know what you think about this benefit and its cost.” The way Part D payments and deductibles work may be confusing, Whitlock cautioned. “If the senior doesn’t understand it, the advisor needs to explain it–so you will have an informed senior.”

Seniors should know that, if they don’t elect the benefit in the first 6 months, the premium cost for the benefit will start going up by 1% a month, she noted.

The facts and circumstances of each client will determine if Part D is something the person should elect, she stressed.

Other areas she said should be in the senior financial review include:

o Major life changes: These include death or health decline of a spouse or partner, beneficiaries, the executor, and the power of attorney. Others include marriage, divorce and birth in the family. Any major life change can affect the estate plan including key documents such as the will, power or attorney, living will, etc., Whitlock said.

o Investments: “Making money last through retirement is a challenge,” said Whitlock. Advisors need to consider many factors, such as the senior’s health, number of years of retirement, expenses to maintain the desired lifestyle, sources of retirement income, possible need for future LTC, future economic variables, and investment risks. The advisor and client need to pay attention to the investments and be willing to adjust as needed, she said. “This needs to be customized to the senior.”

o Make the money last: “Diversify the assets, and strike a balance between making the assets last and making them grow,” Whitlock said. Other suggestions include: set a withdrawal rate, initially no more than 4%; build a cash buffer of 3-5 years of living expenses; consider annuities as a safety valve; and consider having the senior continue working as a way to increase cash flow.

o Monitor: For seniors having 401(k)s, for instance, do monthly reviews of the asset mix, investment choices and withdrawals, she said. “Twice a year, compare the asset allocation to the investment strategy and the retirement plan. One time a year, review the plan to see if goals and investments are in sync with the plan. Is it working?”

o Inflation: Remember that seniors on a fixed income are most vulnerable to inflation, she said, alluding to how gas prices have risen to $2.60 a gallon in many markets. So, look at how inflation impacts the senior’s life. Seniors do start to “get rid of stuff,” they stop accumulating and their voluntary spending may go down, she said, so that softens the impact. However, health care expenses often go up.

In closing, Whitlock said, “failure is not an option.” The advisor’s mission, in doing the annual financial review, should be: “Review, revise and respect.”

For Senior Clients

üFinancial status

üHealth status

üMedicare trends

üPrivate health insurance

üLong term care insurance

üMajor life changes

üInvestments

üMaking the money last

üInflation