Dear Liz: I am 72 and still employed with a salary of $80,000. My wife and I have a home with about $1.6 million in equity. We have almost $4 million in real estate investments, $200,000 in stocks, IRAs worth about $250,000, and about $175,000 in cash. Although it may seem like we have a lot, I really have no idea what to do at this point. I worry about the need for long-term care in the future for me or my wife, or what would happen if I stopped working and lost that income. I don’t know how to manage the stocks and cash I have or how to plan for the future. I tried contacting quite a few fee only financial planners and they all told me they wouldn’t work with me unless I had $500,000 to give them to invest. Any suggestions on where I can get some real advice without giving someone complete control over money I don’t have anyway?
Reply: You describe the “assets under management” model, where advisors charge a percentage of the assets they manage for clients and often require clients to have a minimum level of investable assets such as stocks, bonds and cash. This model developed in part because many people avoided paying outright for extensive financial planning, which is time- and labor-intensive.
But this model is often not a good fit for people just starting out, who don’t want asset management, or who, like you, have most of their money in less liquid investments.
Fortunately, there are other ways fee-only planners get paid. Some, including those represented by the Garrett Planning Network, charge per hour. Others, represented by the XY Planning Network and the Alliance of Comprehensive Planners, use the retainer model, where clients pay monthly or quarterly fees. Interview a few planners from these organizations to find a good fit.
Giving a gift with no strings attached
Dear Liz: My brother and his wife live modestly on social security and deliver for a food service. Occasionally I send him some money when I can. I have put some money aside and am able to send him about $5,000 now instead of leaving it to him in my will. (He is six years older.) I am afraid that he and his wife may use it on a trip or frivolity and will not put it aside for home care or care when they need it. Your thoughts?
Reply: Please give the gift and hope they use it on a trip or something else fun.
According to the US Department of Health and Human Services, someone turning 65 today has about a 70% chance of needing long-term care. Women typically need care for 3.7 years on average, while men need 2.2 years of care.
Medicare, the public health program for people age 65 and older, typically does not pay for nursing home and other custodial expenses. Medicaid – the government’s health insurance program for the poor – does, however. If your brother and his wife need custody, chances are they will quickly run through their assets and end up poor enough that Medicaid will pick up the bills.
The amount you can give them wouldn’t make a big dent in the bill if they need potentially expensive custody someday. Your gift of $5,000 would pay for about a month of a home health aide and a few weeks in a typical nursing home.
But $5,000 could go a long way in providing a memorable experience while still having the health and energy to enjoy it.
Liz Weston, Certified Financial Planner, is a personal finance columnist NerdWallet. Questions can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at askliweston.com.