“Off the Wall” Podcast

Top 3 Challenges High Net Worth Individuals Face in Planning for Retirement with Michael Conrath

Jun 10, 2024 Planning for Retirement

Planning for retirement comes with many considerations and challenges, especially for those with a high net worth.

In this episode of Off the Wall, Monument Private Wealth Advisors, Emily Harper, CFP® and Heaven Goodwin, CFP® chat with Michael Conrath, the Chief Retirement Strategist and Head of the Retirement Insights Strategy Team for J.P. Morgan Asset Management.

The trio shares the most common challenges high-net-worth individuals face as they plan for retirement, how to plan for them, and what to consider throughout the retirement planning process.

They discuss the emotional aspects of retirement and how to plan to ensure well-being, the challenges that longevity brings to the equation, and the varied ways taxes may affect your desired retirement. They also dive into the key considerations around Roth conversions, social security, Medicare, long-term care, and more.

Retirement planning is often a detailed and complex process for high-net-worth individuals, but with the insights from these three experts, you’ll be better equipped to plan the retirement of your dreams!

“There’s this big disconnect because we spend decades planning and working to reach that retirement point, but we sometimes spend very little time planning for how we’re actually going to spend the rest of our time, the next chapter, which could be easily 35+ years in retirement… It’s important to know what you’re retiring to rather than just what you’re retiring from.”

– Michael Conrath

Are you looking for clarity, conviction and unfiltered advice about your wealth?

You’ve come to the right place.

Episode Timeline/Key Highlights:

[00:23] Introducing Michael Conrath & the topic of today’s episode.

[01:45] What is The Retirement Equation?

[05:17] 1st retirement challenge for high earners: Not preparing emotionally for the reality of retirement.

[09:55] The Retirement PUSH: Purpose, Use, Socialization, Health

[14:20] 2nd retirement challenge for high earners: The ever-changing tax landscape.

[18:11] Roth Conversions: Is there a sweet spot between current marginal rates and post-2025 marginal rates?

[20:22] How taxable income amounts impact aspects of retirement, like social security benefits and cost of Medicare.

[24:44] What is a “backdoor Roth”, and should I make one?

[29:45] 3rd retirement challenge: With longevity, comes the need for assistance.

[35:44] What to consider when self-insuring/self-funding long-term care in retirement.

[41:31] What Mike is optimistic and excited about in planning for retirement.

[43:15] Mike’s #1 recommended resource for gaining inspiration for your retirement.

Please see important podcast disclosure information at https://monumentwealthmanagement.com/disclosures.  

Resources Mentioned:

Subscribe to our Private Wealth Newsletter, Monument #Unfiltered: https://bit.ly/monumentunfiltered

Check out J.P. Morgan’s 2024 Guide to Retirement: https://bit.ly/4dMU0F8

Visit www.jpmorganfunds.com/mi for more information on the Retirement Insights program.

Watch “Live to 100: Secrets of the Blue Zones”: https://www.netflix.com/title/81214929

About Michael Conrath:

Michael Conrath, CFP, CPRC, is the Chief Retirement Strategist and Head of the Retirement Insights Strategy Team for J.P. Morgan Asset Management. In this role, Michael is responsible for researching and delivering timely retirement-related insights to clients and financial professionals. Michael has over 25 years of investment and wealth management experience and focuses on identifying themes to improve retirement savings and deliver better retirement income outcomes for individuals across the wealth spectrum.

Connect with Michael Conrath on LinkedIn: https://www.linkedin.com/in/michael-conrath-a7205410


Emily M. Harper, CFP® [00:00:33] All right. We’re changing things up on Off the Wall for our 60th episode. I’m Emily Harper, and I’m a Partner and Wealth Advisor at Monument. I’m taking the reins today as host with my co-host Heaven Goodwin, also a Wealth Advisor and Certified Financial Planner on the Monument team. Heaven, welcome to the podcast.

Heaven Goodwin, CFP® [00:00:54] Thanks so much, Emily. Excited to be here.

Emily M. Harper, CFP® [00:00:56] We’re excited to record with you today. I’d also like to welcome today’s guest, Mike Conrath, who is a Managing Director and Chief Retirement Strategist for J.P. Morgan Asset Management. He heads up a few different teams at J.P. Morgan, and is responsible for researching and delivering timely, retirement related insights to clients and financial professionals to improve retirement outcomes for individuals across the wealth spectrum. He’s been in the financial industry for over 25 years and has also had roles focused on education savings, including head of education savings for J.P. Morgan Asset Management.

Heaven Goodwin, CFP® [00:01:32] Mike also has an interesting, fun fact. He’s a semiprofessional musician and plays with several bands as both a lead guitar player and singer. Mike, welcome to Off the Wall and thanks so much for joining us today.

Michael Conrath, CFP®, CPRC® [00:01:46] Yeah, thank you for having to. Thank you, Emily. Excited to be here.

Emily M. Harper, CFP® [00:01:48] Yeah. Our listeners are really lucky. Mike is just such an expert in this area, and we’re excited for all of the insights that he’ll share today. But today’s topic is retirement and the common challenges we see facing high net worth individuals today as they plan for it. We’ll focus on three challenges we see often, both financial and non-financial.

Heaven Goodwin, CFP® [00:02:11] But before we dive into talking about the challenges that high net worth individuals are facing as they plan for retirement today. Could you just quickly talk us through the idea of the retirement equation and the idea of control?

Michael Conrath, CFP®, CPRC® [00:02:25] Sure. So the retirement equation, I would say the best thing about it is that there is zero math involved with it. You know, I say that half jokingly, but, you know, as financial professionals, we tend to focus a lot on the numbers, especially as it relates to retirement. And and make no mistake about it, the numbers are certainly important. But when we’re talking about the retirement equation, it’s designed to put things in perspective outside of the numbers. And what I mean by that is think of basically three levels of control. So there’s three components to that equation. Things that you have no control over, things that you have somewhat limited control over, and then things you have total complete control over. And so just to take a quick minute to talk through those, what do we have no control. Well we can’t control the financial markets. We can’t control geopolitics. We can’t control elections, unfortunate events such as war. So basically all the things that are primarily like right in front of us on our newsfeeds or right in front of our faces when we turn on the TV and the media, ironically, we have no control over this thing. So it’s important to keep that in perspective, because I could tell you, just for me personally, sometimes when I see some bad news that sets off my emotional hot button. So it’s important to just again have that framework. So what do we have some control over? Well, we can control to some extent our longevity. And now I’m not here to tell you that I have the secrets to living past 100.

Emily M. Harper, CFP® [00:03:57] Darn, who would want to?

Michael Conrath, CFP®, CPRC® [00:04:00] Yeah. So, but we can influence that somewhat with, you know, our decision that we make around diet, exercise, health, wellness, both physical and mental, so we can influence longevity to some extent. Also, we have some limited control over how long we work. Okay. Sometimes we make that decision at the times that decisions made for us due to a number of circumstances. So let’s just pivot to what do we have full and complete control. Quite simply, it comes down to two things one, our savings and two, our spending. And my savings, I’m not just talking about a savings account. I’m talking about investing. You know, how we choose to invest, what we choose to invest in, and importantly, how that connects to our goals. And part of that, as it relates to our goals in the retirement context is how we spend. How much we spend, but also what we choose to spend on and what that looks like. So yeah, just the ports of frame in terms of the levels of control, the equation outside of just the numbers itself.

Emily M. Harper, CFP® [00:05:04] Yeah. Great. Thank you. Mike. We’re we’re big proponents of focusing on the things that you can control. You know, there’s no doubt a ton of information on our newsfeeds every day on social media that’s completely anxiety inducing. But, if we can get people to really focus on what’s in their control and, you know, make the most of the things that are in control, but also be aware of those things, but you know, not let the things they can’t control completely, you know, guide their decision making. So, thank you for laying that all out. I would actually like to start with something that you didn’t explicitly talk about, in terms of being in your control. But one challenge I see a lot when I’m working with high net worth people, whether they’re prospective clients and we’re having our first conversation or clients we’ve had decades long relationships with, you know, really fleshed out the answer to the question, what’s the money for for them? But one challenge that I really see is not emotionally preparing for just the reality of retirement and envisioning what retirement actually means for them. You know, when you’re thinking about people who have started businesses or work in really high powered fields, they find a lot of purpose and identity and what they do. And when they’re no longer working, that can be a really big emotional shock. I was just reading the Harvard Business Review yesterday, and I found a recent study that found the prevalence of depression among retirees to be 28%, along with, decline in mental health over an average post retirement period of six years, which, you know, when you think about retirement, a lot of people are excited for the things that retirement could mean. But there’s also that aspect of it represents a really different phase in life. So, Mike, maybe you could speak to some of the emotional aspects of retirement and what people can do as they plan to have better well-being in retirement.

Michael Conrath, CFP®, CPRC® [00:07:09] Yeah, that’s actually a great, great topic. And I think it’s one that’s probably not talked about enough as it relates to retirement, Emily. And I think importantly, it’s just kind of taking a step back and realizing, well, what does retirement mean? And it sounds like that’s a question you, you ask of your, your clients and prospective clients, which is super important. I think it’s recognizing that retirement does mean different things to different people. And for some people, retirement could mean having, you know, sustainable income, making sure that their needs are fully covered as well as what’s on their bucket list, their wants for other people. It’s spending time with friends, family, could be their community, charity or any combination of these things. Again, it’s in the eye of the beholder. So I think retirement is not this generic thing. It’s highly individualized. And importantly, I think there’s a few mindsets around it. One is there are some folks that say, I just want to completely unplug when I’m when I enter retirement. And I could think of a former colleague of mine here at JPMorgan who retired a few years ago, and on his last day, it was a Friday afternoon. And in fairness, he left after the big lunch we had for him. But like, we saw the empty office and there was a single business card on his keyboard computer and he left it there without saying anything. And when you looked at it, it said something to the effect of instead of his name, it said retired. And underneath the title it said like, don’t bother. And then whereas before me it said don’t call, don’t email. And it said hours that I’m off. It said, Sunday through Monday, 24/7. So so you get the idea. That was his idea. Just I’m going to unplug completely. But retirement is actually not a binary decision for a lot of families. And what we’ve found in research we’ve done looking at Chase households is that 53% of households between the age of 60 and 69 to retire, they they’re actually just partially retired. That means one member of a couple could be working fully or partially, or an individual can be just working part time. And that’s an important thing because it gets back to what you were getting at, Emily, is that, I think there’s this big disconnect out there. And what I mean by that is there’s this big disconnect because we think about we we spent decades planning and working to reach that retirement point. But, we sometimes spend very little time planning for how we’re actually going to spend the rest of our time. The next chapter, which could. Be easily 35 plus years in retirement. So there’s this disconnect there. And it’s important to know what you’re retiring to rather than just what you’re retiring from. Like my former colleague here. And we have an acronym that we use here at JP Morgan.

Emily M. Harper, CFP® [00:10:24] We love acronyms.

Michael Conrath, CFP®, CPRC® [00:10:26] Okay. So we call this PUSH. And what push represents is the P is purpose. So creating some reason to get up in the morning like having it’s a fine goal. And that could be a simple thing. It could be hey I’m going to have my coffee. Then I’m going to do a walking exercise for the next hour after that. And then from this time I’m going to do this. It’s just having some type of schedule or purpose, a reason to get up in the mornings. And that relates to the second thing the U in push use. So how are you going to use your time now that you have time? And while we’re working, we think, oh, if I only had more time at do these things. We have that time but might want to be structured around how you use it. But it’s important to gauge with friends family. And that’s actually leading to the S, the socialization. And there’s a lot of studies on this. But people who tend to socialize more often than not have a general better sense of mental and physical wellness, better outlook on things. They’re able to enjoy themselves that much more. And that ultimately leads to the H that the health because your health is it’s basically what’s going to make or break your retirement. And unfortunately, I know of people personally who experience health care issues early on in retirement and that change the game entirely. They weren’t prepared for that. So it’s talking through these things. What does that look like? And I can tell you that someone very close to me, on a positive note, is partially retired and happily, this is someone in my extended family who, it happens to be my mother, but she decided that she was going to get a job working four hours a week at the local school. She loves kids, and if she can’t be with her grandkids all the time, she wants to be around other kids, bring her positive energy. And long story short, is she works four days a week at a school and she works with some friends as well. So it has all these elements of the push. It has the purpose. She’s using her time to do something that she enjoys. She has the socialization and ultimately, you know, it’s keeping her active and healthy.

Emily M. Harper, CFP® [00:12:44] That’s fantastic. That’s a great story. And I think, you know, that’s something we commonly see, too, is philanthropy is something that is important to a lot of our clients. And the way they start to think about that, and that purpose shifts a little bit when they actually have the time to, dedicate to organizations. We see a lot of people, you know, start to prioritize giving their time and their energy to these organizations that they care about. And, you know, there may still be some financial, commitment there, but it becomes a lot more purposeful for them. So I love hearing how people choose to spend their time when they’re quote unquote retired. And I love that framework that you shared. Mike, I’m a big fan of, you know, frameworks and, you know, tools that help us kind of wrap our head around some of these intangible ideas and concepts. You know, we have a, an assessment that we like to use with clients to just kind of uncover their perspective on retirement and retirement related wellness and or satisfaction. You know, some people see retirement as an opportunity to keep working, but in a reduced capacity. Explore new hobbies, adventures, or relax like your former colleague with without a set schedule every day. And I think the really important thing there is, you have to understand that to then know what direction to move in with your wealth planning. You know, if there are things that you’re going to be funding in retirement that you maybe you didn’t spend your time doing, you know, you have to know that in advance and have these things really come together, and plan for these things. So love all these tools and tips. Let’s turn to some of the challenges that come from things that are outside of our control, because they are the things that tend to give us a lot of anxiety. You know, your background in, in tax, Mike, and I’m a big fan of tax planning. And just the importance of tax planning over, a lifetime and not just year to year, but taxes and the tax landscape over your lifetime will have a major impact on the amount of your wealth that’s actually available to you to fund your goals like retirement or creating a lasting legacy for your family. We know taxes are a certainty. But we also know that change is inevitable. So, Mike, what are some of the challenges you see when it comes to planning for a changing tax landscape, and how can high net worth investors navigate this?

Michael Conrath, CFP®, CPRC® [00:15:12] Yeah, so I think it’s an important topic for sure, because it’s not just what you’re earning on your investments, what you actually get to keep, because what you get to keep is what you actually get to spend. I know that’s pretty simplistic, but it’s an important concept and you certainly want to be thinking about that. And this also goes back to like the equation. Like we cannot control the tax landscape. Things are going to happen or they’re not or they’re going to evolve, but we can control how we plan for different what if scenarios. So I think that’s that’s super important. You know, one thing that is coming to a head after 2025 is the current tax rates that are in fact, right now are scheduled to sunset. So there’s something called TCJA, the Tax Cuts and Jobs Act, which effectively lowered the marginal tax rates pretty much across the board. And there are some other provisions there around estate and gift taxes as well. So a lot in there. But the current tax rules that are in effect right now, again, are scheduled to sunset or change or revert to the way they were prior to this after 2025. So it’s important to be thinking about these things now. And just like thinking of it just from an individual tax rate perspective. I mean, for many clients, they could be looking at a 3 to 9 point increase in their marginal tax rate, assuming their income just stays exactly the same. So that that’s a that’s a big deal. I mean, put some specific numbers around that. Let’s say someone makes $300,000 today that they are looking at a nine point increase in their federal marginal tax rate. So that is real money. That certainly can impact your spending or your, your future spending. So you have to keep that in perspective. I mean, the good news is there’s a number of things you can do from an investment perspective. But even just from a planning perspective, they look considering like Roth conversions, you know, thinking where your tax rate is now versus where it might be in the future. And the other thing about Roth, Roth conversions, one of the downsides pushbacks that clients typically have is there’s a potential tax sting and doing that. So you’ve got to look at it holistically, but it’s not an all or nothing scenario. You could do partial conversion. So, I’m not sure how much you want to get into some of those nuances, but, you do have options around the stuff that you can control.

Emily M. Harper, CFP® [00:17:45] Yeah, I think that’s a great point, that the increase in taxes is not only going to impact your retirement savings today in terms of maybe you have less dollars to allocate to retirement savings because your taxes are going up and that’s taking more of the income. But then also in the future there are uncertain tax rates, uncertain, you know, tax policy that you’re going to be subject to in the future and focusing on the things that are within your control are, great actions to take. We talk about Roth conversions a lot. Mike, do you I’m going to put you a little bit on the spot here, but do you feel like there’s a sweet spot in terms of, current marginal rates and where marginal rates will be post 2025 for thinking about, you know, where a Roth conversion might make sense.

Michael Conrath, CFP®, CPRC® [00:18:36] Yeah, there could be. And, you know, one of the, you know, rules of thumb is that many people think about is, okay, I might be in a lower tax rate in the future. So maybe it doesn’t make sense to do full or partial conversion. And that may be well and true, but it it might not be true as well. I mean, another thing to think about, Emily, is, for many individuals with, the passage of the Secure Act or Version 2.0 of the Secure Act, RMDs Required Minimum Distributions. So basically, the IRS is forcing you to take distributions out of your qualified retirement plans. And big reason they do that is they want to start collecting taxes on those dollars. But the age has been pushed out for many individuals from 73 to age 75. So for those individuals that don’t necessarily need to take those dollars, they can push out their RMDs further. And maybe that’s one way to think about, okay, I could maybe do a partial conversion now because the other pushback you would get is, well, I’m taking RMDs, so I’m getting taxed on that, and then I’m going to do a conversion. So I’m getting taxed over here. So there might be a sweet spot to think about pushing out your RMDs where as far as you can and prior to taking those RMDs doing some type of Roth conversion. But again, it a lot of this depends on individual circumstances. And, there is a bit of math for sure involved. Yes, but you do have optionality here.

Emily M. Harper, CFP® [00:20:12] That’s a great point. And Mike, thinking about the RMD age getting pushed out to 75, that definitely gives people more runway, to, you know, do those conversions and realize that taxable income, over a longer period of time. Could you maybe speak to the implications of taxable income amounts on things in retirement, like Social Security benefits or, you know, the cost of Medicare?

Michael Conrath, CFP®, CPRC® [00:20:39] Yeah, sure. And that’s actually a great, a great segue because I was hoping we’d get to that. So first of all, Social Security for I think for most of your clients, they they will be taxed on that, meaning there’s there’s an income threshold which is relatively low, at which up to 85% of your Social Security income is taxed. So we’re looking at relatively low income rates there, which. So I’m going to make an assumption which is always tricky, but that your clients will be looking at some level of taxation on the Social Security. So I don’t think that’s as important as the Medicare piece is. And first of all, just points on Medicare quickly is that, for those who have not yet retired. Newsflash, Medicare is is not free. So yes, you’ve been paying into this system for years, if not decades. You do see that come out of your your payroll taxes, your your paycheck or, you know, your business is is, you know, building that into your payroll system for your employees. So it’s not free. And right now, you know, just using some back of the napkin averages for someone who’s 65 years old, they could be looking at roughly $550 a month in Medicare premiums. Again, that’s using some assumptions there. But what where they’re projected to go is somewhat alarming. So in 30 years that $550 could be closer to 1500. Now, I’m sure some people are saying, well, okay, what about inflation? That’s actually netting out inflation. So that’s in today’s dollars. So you’re looking at wow many folks a 3X increase in Medicare premiums as they get older. And by the way that’s not my view. That’s not JPMorgan’s view. That is right out of the Medicare trustees report. So this is actually the government telling us that you should expect to pay and pay more in the future. And if you think about it, your health care needs will naturally go up as you age as well, and your premiums will go up along with that. So you know the things that you have bucket, pocketed as needs, that certainly needs to be part of that need to factor in inflation. You’re basically looking at a 6% inflation rate on Medicare costs. So which is well at above, you know, other expenses that you might put an inflator around. The other thing specific to your question, Emily, is around taxes. And there’s something called Medicare surcharges. So depending on your income, that $550 average rough amount that I threw out a minute ago, you may actually be paying more on that depending on your income. So for for example, if someone is a an individual and they’re making $500,000 or more in modified adjusted gross income, they’re looking at a 500%, excuse me, a $500. Yeah, $500 surcharge. So basically and.

Heaven Goodwin, CFP® [00:23:39] That’s that’s monthly, right?

Michael Conrath, CFP®, CPRC® [00:23:41] Yes, that’s 500. Thank you. That’s a per month. So that is a pretty big number. So an additional $6,000 a year if you will, for any one 500 K or if you’re a single. So so you need to think about that holistically as it relates to your overall situation where you’re pulling income from in your portfolio, how that income’s being taxed or not. So this all ties together the health care, the taxes, the income. It’s all related. So it’s it’s great that you all think about this holistically like that.

Heaven Goodwin, CFP® [00:24:16] Yeah. You’re, making a great case for planning right now, you know for sure.

Emily M. Harper, CFP® [00:24:21] Yeah. I was just going to say, I mean, having something that we really try to stress is just having diversified sources of retirement funding, you know, different asset types that are, you know, taxed in different ways, whether that’s, you know, Roth money that’s hopefully withdrawn tax free if, you know, for qualified reasons, or, you know, assets that are generating capital gains, which may be taxed at a lower rate. One thing I see on social media all the time Mike, and Heaven I’m sure you do too. You know, this concept of the quote unquote mega back door Roth and it’s sold as like, well, this is a no brainer. Everyone should be, you know, putting away as much money as they possibly can in a Roth 401 K, and I think there’s a lot of, practical limitations when it comes to whether or not that’s a viable strategy for some people. But Mike could you, maybe just explain the mega backdoor Roth, Roth concept in, you know, some of the considerations around that?

Michael Conrath, CFP®, CPRC® [00:25:22] Yeah. And I think you’re right in that, it may not be applicable to everyone or not everyone may be able to, to leverage that this concept to, I mean, just a level set. The idea of doing a backdoor Roth is for individuals who otherwise cannot invest in a Roth due to the income limits. So, don’t quote me. I believe for 2024 as a couple, if you make what’s he had $240,000, you’re in income, you’re excluded for contributing to a Roth. So so many clients won’t necessarily be eligible for that. So that means that the lion’s share of their quote unquote, retirements labeled assets could be in your traditional IRAs, 401Ks, which might be fully taxable when they take money out. So the idea of the backdoor Roth is to contribute into a traditional retirement account and then do almost an immediate conversion since there’s no earnings or no work, presumably very little you’re able to convert because there’s no income limits on doing a Roth conversion where the mega concept or the Mega backdoor comes into play as it relates to your workplace retirement plan. So, for example, if I’m putting money into a 401 K and, under 50 years old, you’re looking at $23,000 contribution limit for the year, but your plan may allow you to do after tax contributions as well, so you can actually fund an additional $46,000 and if my back of the napkin math is okay, that gets you to roughly $69,000. You get another 7500 if you’re 50 or above. Okay, so enough of the numbers. Yeah the idea here is that you can put a decent amount into your traditional 401 K, for example. And the idea is to convert that money either in plan to the Roth or out of plan to an IRA. And there’s, there’s a few considerations. One is first of all, do you have the spare cash on hand to fully fund this account? The other things, which are just an import, which could be a make or break scenario, is does the plan actually allow for after tax contributions. So think of the after tax as back to the numbers as the amounts over and above the your 23,000, which is your general contribution limit for most individuals. So does the plan actually allow for after tax contributions. The additional 46,000 for example, on top of that. And the other thing is does the plan allow for in-service distributions. So in other words, while I’m still working, can I actually convert in plan or can I roll it out of plan to my own IRA account? So, I think roughly less than half of plans will actually even allow for that. So you definitely want to check the plan documents. And that’s obviously where, you know, your team can come into play to kind of dig into that. So it could be an opportunity to transition assets from being tax deferred to tax free again, thinking about future tax rates and trying to keep as much as you’ve earned over the years. But it there are a number of factors that will basically discover whether you can even do it or not.

Emily M. Harper, CFP® [00:28:54] Yeah. Thank you so much for explaining that, Mike. I will say in practice, I mean, as much as everybody wants to accumulate, as much, you know, in Roth as they can, I’ve it, you know, I’ve seen very, very few opportunities in reality and practice for the mega backdoor Roth just because of how plans are designed. So to your point, it’s going to differ for every plan. It’s something we can absolutely look at. But a lot of times it’s not going to be this, you know, magical thing that you saw on an Instagram reel that that tells you how, you know, to maximize as much rock money as you can. So, awesome. Thank you so much for that. That conversation around taxes, I could go on for hours about taxes and tax planning, but I won’t subject our listeners to that.

Heaven Goodwin, CFP® [00:29:43] Not today anyways. But let’s let’s talk about one more challenge in the realm of things that aren’t fully in your control. And that’s longevity. So with the likelihood that, you know, with longevity is going to come some need for assistance at some point in time. JP Morgan’s Guide to Retirement shows that. If you’re 65 today, there is a 90% probability that at least one person in a couple will live to 85 and a 73% chance that one will live to 90. And then there’s also the stat that, you know, 48% of people age 90 plus need assistance with two or more activities of daily living or have severe cognitive impairment. So, you know, changes in abilities like this may require spending on long term care services, a move possibly to be closer to children, home modifications or, you know, even different housing and type of arrangements entirely. So, Mike, can you speak to the current landscape of long term care and the options out there for funding this potential liability?

Michael Conrath, CFP®, CPRC® [00:30:55] Yeah. So there’s, it’s a great question and there’s a lot to unpack there, Heaven. So let me actually, if I can put each of you on the spot. Yeah. You have no idea where I’m going with this, but we’re going to have fun. So do either of you know anyone who has reached the age of 100?

Emily M. Harper, CFP® [00:31:14] No, I don’t think I do.

Michael Conrath, CFP®, CPRC® [00:31:16] Oh, okay. See, I know two people. One of them is my friend’s grandmother, and she’s 102. Sharp as a towel by the way and doing incredibly well. But, I just bring this up because most people, when I ask them, can think it may not be someone super close to them, but they know somebody. We’ve all heard read stories or whatnot. And right now there are 90,000 centenarians in the US. Wow. 90,000. So that centenarian being reach age 100.

Heaven Goodwin, CFP® [00:31:48] That’s a shocking number.

Michael Conrath, CFP®, CPRC® [00:31:50] Well, check this out. Just a few years ago or 2010 specifically, there were 53,000, so we’ve nearly doubled that amount. Wow. And, you know, less than a few years. So, if you look ahead to 2060, that number 90,000 today again is schedule is set to climb to 600,000. So wow. Well maybe that’s my kids so I don’t know. But so the good news is we’re living longer but long way of getting to your your question. Heaven is the longer we live, the more likely we won’t need some type of pretty serious health care. Professional health care, including long term care. And this is something that if you don’t plan for it or have that discussion, it could come as a shock and a surprise and it could be, a shock from a financial perspective. But it can also be an emotional shock as well. And I’d say both of those have pretty high weightings overall in terms of level of importance. And when we look at and the research we do around actual households, when we look at their spending, we see spending typically at its highest in the early years, retirement, which makes sense. People who are active, they’re happy traveling and doing things on their bucket list. Then it starts to taper off. But then there’s an inflection point. As they age, it goes back up again. And that’s where we see health care and long term care issues beating up a larger proportion of that household spending budget and their overall net worth. And just to share, like some findings when we talk about this in our guide to retirement is that, first of all, women are more likely to require long term care. So sorry, Emily. Sorry, Heaven. I know the reason is you actually live longer. Women live longer than men generally. So, so that’s the why. So so women generally more likely require it because they do live longer and they will need it for longer if they do, in fact need long term care. And just to throw a couple stats at you, if you look at individuals who need long term care for five years or more, it’s 36% of men and 41% of women. So pretty high stats around that. And as you age, you know, obviously your probabilities get to those higher points. But the the real zinger is the cost around this. So for women, the average lifetime cost is close to about $280,000. And for men it’s about $200,000. Again, men maybe shorter duration of care less likelihood because we don’t live as long. But those are averages. You know, if you look at at an individual level, and I’m sure many of you can think of different clients you’ve worked with. Yeah, there’s a very wide range of costs. So the averages could be somewhat misleading and could in some ways underestimate what potential costs are. I’m not here for Fear Factor, but I by the way, I’m not. But so let’s talk about potential solutions. And you have a few approaches here. You know, one approach is to look at a traditional long term care policy. And, you know, this is designed to cover those costs so that you don’t have that that’s shock to your budget, to your net worth. You do have to qualify for though. So it’s, you know, for anyone who’s applied for life insurance, you’re going through a questionnaire, you’ve gone through underwriting. You have to qualify along those lines. There are also some hybrid approaches which incorporate insurance or life insurance. It could have a long term care rider, that may require a different level or a higher level of premium upfront potentially. But again, there’s underwriting involved with these things. The other way is to self-insure or to, to self fund it. So saying that, you know what, I’ve been accumulating my savings. I have an investment account, I’ve got money budgeted for this what if scenario. I’m going to leverage that and not go the insurance route. And that that could work. It might also not work. You know, just some things to consider as relates to self funding. Long term care is. You might be. I’m saying the general. You hear? Okay. Not you guys, but we found that some people may be actually reluctant to spend for the needed care if they don’t have the insurance, because now they’re at that point, like, gosh, I’ve got to spend how much every year I’m spending six figures every year on nursing. Not that they don’t want to, but what happens is sometimes that burden falls on a family member. They say, you know what sort of paying, I’ll just take care of mom, for example. So you need to think about that. And are you prepared to do that? Put that burden on yourself or your loved ones. And that’s a highly personalized decision, conversation. But there’s also like a tail risk factor here that if you need care for a very long period of time, that will naturally eat up more of your portfolio. So if you’re thinking about your legacy passing on wealth to your children and grandchildren, charity. So that’s a consideration. You know, this these long term care costs can chip away in a pretty meaningful way about your legacy or your philanthropic goals. Along those lines, the other thing, and I’m just throwing out some what if scenarios and considerations that I’ve seen is that if funds maybe if you’re if self-funding funds might be sufficient for the first spouse. But you have to consider what’s left for the survivor and and also who is left to care for that surviving spouse as well. Will it fall on the children, others, what have you? So, you know, there’s combination of family dynamics and finances here. So I think all in it comes down to, again, personal decisions and how you choose, assuming you have the means to pay, either self-fund or go with the insurance route, but it’s thinking about the potential burden on friends and loved ones. Importantly, I think having the conversation with your family so with your your children, with your spouse, loved ones, and making sure that your family understands your specific wishes, like, this is what I want. And, I could tell you, we went through this with my old father, fairly recently. And, you know, he wanted to avoid leaving the house. He wanted to stay home. And, you know, that created some challenges in and of itself. But some people have certain wishes. So it’s important to articulate what those are, you know, as early as possible. And this way you have more control and you have time to plan for these things.

Heaven Goodwin, CFP® [00:38:44] Yeah, I think that’s a great point. We’re probably about to say the exact same thing, Emily, is those emotional aspects of of planning for, you know, where you’re going to be spending most of your time or how you’re going to be getting the help that you need, in those later years of life is something that is it’s an uncomfortable topic to talk about. Families, you know, kind of shy away from it. But it is one of those important things where, you know, the sooner you can talk about it, get on the same page as your spouse, as your children, or, you know, extended loved ones, anyone who will have a role or might have a role, you know, and where you end up and, and how you execute that, you know, definitely important to yeah, just bring it to the table and make sure that everyone is on the same page. And kind of related to that, I will say, you know, you brought up a lot of great points about long term care policies, funding through, you know, hybrid life insurance. I think we see with a lot of our clients that it’s not, you know, A11 and done type of deal. Unfortunately, you know, long term care policies, you know, might have a place in funding your future long term care. But as you were saying, with, you know, the age people are living to is getting higher and higher. People are spending more on costs. The policies aren’t as, robust maybe as they used to be. In terms of paying out all of the required benefits to really, you know, cover your entire long term care stay unless you’re paying, you know, really expensive premiums when you qualify initially, like you were saying. So I do think, you know, figuring out that sweet spot of, of how to self-fund with, with other options in there, especially to take away some of that emotional aspect, like you were saying, of feeling like you’re taking away from, you know, your legacy and what you’re leaving to your family to cover this unexpected cost.

Emily M. Harper, CFP® [00:40:42] Yeah, those are great points. Heaven. I can’t believe it, but we’re almost at the end of the episode. You know, Mike, thank you so much for sharing your expertise on the retirement planning challenges facing high net worth individuals. You know, from the emotional impact of this transition to just the uncertainties, whether those are, you know, the future tax landscape or policy or the unknown of your future health needs. Planning for retirement can feel really overwhelming. And we’ve talked a little bit about, you know, the things we see on social media, the headlines we see in the news. You know, there’s a lot of negative headlines out there about retirement preparedness in America, the state of certain programs like Social Security or Medicare. I always like to end on a positive note. You know, Mike, what are you excited about or optimistic about today as it relates to planning for retirement?

Michael Conrath, CFP®, CPRC® [00:41:33] Yeah. Well, as I said before, I am an optimist at heart. And, to your point before Evan as well, it’s like these can be difficult conversations sometimes, but they’re important ones. So what I’m optimistic about is a little bit contrary to what sometimes we see and hear. And even as a financial industry, you we put out there. And the point is that people when they’re doing proper planning, they’re not running out of money. They’re able to spend, they’re able to reach their goals. People are indeed retiring with dignity. Yeah. I think there’s a there’s behavioral element that people, no matter how much wealth they have, still sometimes have that fear. And we’ve even seen, you know, households will underspend and shortchange their lifestyle because of that concern. There’s also the emotional element of seeing your account balance potentially go down if you’re spending down a portion of your principal. There’s just like the mental accounting and seeing that and it’s okay. There’s no shame in spending some of your principal you you’ve earned it. So I am optimistic. The fact that people are able to retire, they’re not running out of money, and they are indeed retiring with dignity. But those people are the ones that are planning, having these conversations, you know, making it a family affair as well around all the things we’re talking about and, you know, seeking out professional advice for folks like you.

Heaven Goodwin, CFP® [00:43:04] Fantastic. Yeah. Great answer. And I have one final question, but other than JP Morgan’s fantastic Guide to Retirement. Can you recommend one book or resource maybe that can help our listeners find inspiration when it comes to retirement planning?

Michael Conrath, CFP®, CPRC® [00:43:22] Oh, wow. Okay. Inspiration. Wow. So inspiration on the spot is not my expertise. So not to.

Heaven Goodwin, CFP® [00:43:30] Change it up.

Michael Conrath, CFP®, CPRC® [00:43:31] Yeah, okay. Not a book, but I can tell you there’s a pretty cool Netflix series. It’s called. I want to say it’s called Live to 100 Secrets of the Blue Zones. And if you’re not familiar, the Blue Zones, there are different pockets, around the world where people have been identified as having outsized longevity. And there’ve been studies done around. Why is that? How is that? And the takeaway is, and they look at some pretty interesting places, some places in Europe. So Sardinia, in Italy, there’s some place in Greece, Costa Rica, Okanawa, there might be 1 or 2 others where there is this high incidence of people living to 100 and I don’t I won’t give it all away. But what they found is it’s actually relates a lot of what we’ve been talking about today is people have a purpose. They have high levels of socialization. They have a reason for getting up every day. And there’s actually this element of partial retirement as well. They’re still doing some level of quote unquote work. And, so there seems to be some common now, of course, there’s diet and exercise and those things, but a lot of it is around just their behaviors and, and what they’re doing and their outlook. And pretty interesting series. So check it out. I think want to say there’s four different episodes in it. Each one’s maybe about 45 minutes. So not not a big commitment.

Emily M. Harper, CFP® [00:45:02] Nice. I’m going to be adding this to my list. And I’m not surprised that people in Sardinia have, high life expectancy. So thank you guys for listening. If you want to keep up with Mike, you can follow him on LinkedIn for more retirement planning insights. He’s often sharing really great content. And reminder, you can keep up with our new episodes of Off the Wall, as well as our other wealth advice for high net worth individuals by signing up for our Monument Unfiltered newsletter. You can also follow Monument Wealth on LinkedIn, Instagram, or Facebook for our teams insights and opinions. Thank you.

Michael Conrath, CFP®, CPRC® [00:45:40] Thank you.

About "Off The Wall"

OFF THE WALL is a podcast for business professionals and high-net-worth investors who want to build wealth with purpose. A little bit Wall Street, a little bit off-the-wall; it’s your go-to for straightforward, unfiltered wealth advice on topics that founders, business owners, and executives care about.

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