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Planning for the second phase of retirement

Elders should make medical and financial decisions before

Elders should make medical and financial decisions before their health starts to falter in retirement. Credit: Getty Images / kali9

There’s the retirement that looks like the commercials: biking, travel, enjoying the family.

And then there’s the one where you can’t get up the stairs anymore.

Most of us happily plan for the first, when our health is good and energy high. The second can be hard to contemplate, when health falters and medical crises can change lives in an instant.

Yet a focus on just the active part of retirement can shortchange your quality of life once you begin to decline, which is why financial advisers suggest you also look at how you’ll live in that later phase. Here’s what you should consider for that second stage.

Certified financial planner Dana Anspach of Scottsdale, Arizona, doesn’t want her clients to prematurely give up their homes or make other moves that may not suit them.

Anspach also has heard horror stories of elders who stayed too long in unsafe conditions until health crises propelled them into the hospital — and left their families scrambling to deal with the costs, their care and the family home.

The key, planners say, is to start thinking and talking about how you want to cope when your health begins to fail.

“You have so many more options if you plan earlier and set up the trajectory of where you’re wanting to go,” says Danielle Howard, a certified financial planner in Basalt, Colorado.

Howard starts with the somewhat easier decisions, such as whom the clients want to make medical and financial decisions should they become incapacitated. Then the discussion moves to the harder topics — imagining life when they can’t navigate stairs or drive or handle daily activities such as cooking, cleaning, dressing or bathing themselves.

Could they stay in their current home? Would it need to be modified? Who will provide their care and how will they pay for it?

Anspach advises clients who don’t have long-term-care insurance or family members willing to provide care to save their home equity for such expenses, rather than using it to boost their retirement income. (Home equity can be tapped with lines of credit or reverse mortgages or by selling the home.)

If parents do expect children to help, Anspach says, they need to make sure the kids are on board and that those kids’ lives are stable enough to provide care if the parents move closer.

“You don’t want to move across the country and have them get transferred somewhere else,” Anspach says.

Aging parents should consider how they can make things easier for their caregivers, says Ed Vargo, a CFP in Cleveland. Vargo encouraged his in-laws to move from a home that was 20 minutes away to one that was five minutes away. “That 20 minutes can turn into an hour back and forth, and you may be going multiple times a day,” Vargo says.

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