In this episode of the Friends Talk Money podcast, the topic is debt and retirement. Co-host Richard Eisenberg — the managing editor of Next Avenue, the public media website for people 50+ — leads the discussion on the rising amount of debt held by retirees compared to the past and which types of debt cause the most stress for retirees.

Eisenberg interviews two experts:

One is Chris Farrell, a journalist and author (Purpose and a Paycheck) who focuses on personal finance and work topics for people 50+ in media outlets including Next Avenue and public radio’s Marketplace. He has recently been studying data about retirees and debt.

The other is Ohio State University professor Stephanie Moulton, co-author of a recent study on the relationship between debt and financial stress for older Americans: Debt Stress and Mortgage Borrowing in Older Age: Implications for Economic Security in Retirement.(https://mrdrc.isr.umich.edu/publications/conference/pdf/2019RDRC%20P5%20Moulton.pdf)

The Next Avenue article, “The Hidden Retirement Crisis: Older Americans’ Debt,” https://www.nextavenue.org/retirement-older-americans-debt/) describes some of Farrell’s and Moulton’s insights.

Key statistics:

• The median total consumer debt of households headed by someone 65 or older in 2016 ($31,300) was 2 ½ times what it was in 2001 and nearly 4 ½ times the level in 1989.
• Some 60% of 65+ households carried debt in 2016, up markedly from about 42% in 1992.
• Stress resulting from a $1 increase in credit card debt, is the equivalent of stress due to a $14 to $20 increase in mortgage debt.

Special Guests:

• Stan Haithcock, aka “Stan the Annuity Man”
• Eric Lai, President, Archvest Wealth Advisors

The reputation of annuities as “guaranteed” income-generators for retirees has been shredded by countless horror stories of hidden fees, sky-high commissions and dishonest sales practices. We hear one such story from Lucian, a 37-year old investor who fell for a salesperson’s promises of “lifetime payments” and “money-doubling potential” and sank $400,000 of his life savings into a high-cost, low-return equity-indexed annuity. Fee-only fiduciary advisor Eric Lau, who is trying to help Lucian cancel his contract, advises that anyone considering purchasing any annuity should have an attorney review any contract and/or consult with an objective investment professional to discuss other retirement-income options.

Resources

• Objective, factual insights on annuities from “Stan the Annuity Man” Haithcock Link
• The Society for Annuity Facts & Education, Inc Link
• Annuity Consumer Alert from the National Association of Insurance Commissioners Link

NextAvenue articles on annuities (and other retirement income options)

• Cautions about Buying Annuities for Retirement (Episode recap) Link
• What Could Help Americans Manage Their Retirement Money Link

Special guests

• Lori Trawinski, Director of Banking and Finance at the AARP Public Policy Institute
• Peter Bell, CEO of the National Reverse Lender Association

Pam and Richard remember the days when reverse mortgages were hawked like Ab Crunchers on late-night infomercials. But tighter regulations have now made them a legitimate source of supplemental tax-free income for seniors who wish to remain in their homes until their deaths. In fact, Terry helped her father get a reverse mortgage in that enabled him to live in his retirement condominium until he passed away at age 96. But it’s not a decision to be taken lightly, and the federal government has established safeguards to ensure that potential applicants and their families fully understand both the benefits and risks of this often misunderstood option.

Resources

• Reverse mortgage resources at the AARP Public Policy Institute: Link
• National Reverse Mortgage Association guides and tools: Link
• Home Equity Conversion Mortgage information at the Consumer Financial Protection Bureau: Link

NextAvenue articles on Reverse Mortgages

• Should You Get One of the New Reverse Mortgages? Link
• Using Your Home Equity for Aging in Place: Link

Resources

• Hazel Heckers, Colorado Bureau of Investigation: Link
• AARP Foundation ElderWatch (to help recognize, prevent and report elder fraud): Link Phone: 800-222-4444, option 2

Next Avenue articles on Elder Fraud and Imposter Scams:

• “What to Do If Your Parent Gets Scammed”: Link
• “Danger: Don’t Fall for the Phony ‘AppleCare’ Scam”: Link
• “How I Fell for a Computer Virus Scam”: Link
• “Curbing Elder Abuse: What’s Been Helping, What’s Needed”: Link
• “Elder Financial Abuse: Why Banks and Advisers Are Stepping Up”: Link
• “Flood of Romance Scams Defrauds Older Victims”: Link

Meet one feisty 75-year old woman who is redefining retirement. Her empowering message may change people’s lives and how they think about retirement. Pam interviewed retirement research expert, Warren Cormier explains the different phases of retirement. Working past 70 is now the ‘new normal’.

Richard raised the issue of age discrimination at work for older people looking for jobs.

Resources

Resources: Warren Cormier study: Link

Age discrimination in the workforce: Link

Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services, whether it’s in-home care or in an assisted living facility or nursing home. Guest Phyllis Shelton, President of Got LTCi, reveals that home health care can cost as much as $5,000 a month, and average nursing home care costs are $7,500 a month.

Richard warns that if you’re thinking about buying long-term care insurance you should do it while you’re still healthy. Many insurers won’t underwrite policies for people with diabetes and other pre-existing conditions such as diabetes, Multiple Sclerosis, Parkinson’s Disease, and dementia.

Pam warns that when shopping for policies it’s important to research the financial stability of the insurance companies, since many companies that used to provide long-term care insurance either left the business or refused to pay benefits because they underestimated the health care costs and longevity of policyholders. People should work with unbiased, fiduciary experts who do not sell insurance in order to evaluate the need.

Resources

• Got LTCi : Link
• LongTermCare.gov: Information from the U.S. Department of Health and Human Services Link
• The American Association for Long-Term Care Insurance Link

Special Guest Expert:

Cindy Hounsell, president of WISER (Women’s Institute for a Secure Retirement)
WISER website: https://www.wiserwomen.org

Resources:

• Nextavenue.org site (for articles about retirement planning, saving and investing) Link
• WISER’s Your Future Paycheck Calculator Link
• Choosetosave.org site’s Ballpark E$timate Calculator Link
• Livingto100.com site (to estimate how long you will live) Link
• y Savage’s new book: The Savage Truth on MoneyLink

Who’s Giving You Financial Advice:

• Most people start thinking about hiring a financial professional when they’re approaching retirement. But the lack of a uniform code of conduct among financial professionals allows many glorified salespeople to legally pose as trusted advisors. This episode explains how different kinds of financial advisors work and earn their living--and why these differences matter.
• Guest pre-retiree Patty starts with the story of a personal finance class she attended with her husband at her local college. The “instructor” was an insurance salesperson who used the class to try to sell them annuities as the solution to their retirement income challenges.
• Guest Lynne Egan, the Deputy Securities Commissioner for the state of Montana, attended a similar class and confirms that these “trolling sessions” are both common and legal. It’s the job of investors to understand the differences between a glorified investment salesperson and a fiduciary financial advisors who is committed to acting in your best interests.
• Guest Phyllis Borzi, former assistant secretary of the Department of Labor during the Obama administration, worked tirelessly to introduce legislation that would have required all advisors to act as fiduciaries. Her efforts were legally thwarted by industry opposition. As a result there are no uniform standards of care among financial advisors.
• Registered representatives, or brokers, earn commissions selling products, and only need to meet the “suitability standard,” which means that as long as a product they recommend generally aligns with an investor’s risk tolerance and investment objective, the broker can recommend the product that pays them the highest commission. Investors who want to work with an advisor who puts their needs first need to to ask many qualifying questions, starting with, “Are you a fiduciary?”
• Legally, investment advisers are required to service as fiduciaries, which they fulfill, in part, by being paid directly by clients and receiving no commissions for managing their investments. But may investment advisers are also brokers, and can still receive commissions for selling certain products, such as insurance. Investors who want to hire “100% fiduciaries” should limit their choices to independent fee-only investment advisers who are not also brokers. Investors should also require the advisor to sign an industry standard fiduciary oath.
• Wealthramp.com helps individuals locate fully vetted, fiduciary fee-only financial advisors

Resources and Research:

• The latest developments in legal attempts to require all advisors to serve as fiduciaries: Link
• View the most widely recognized fiduciary oath and find firms that are committed to abiding by its principles: Link
• Research the background of any financial advisors to find out if they’re a broker, investment adviser or both and if they’ve ever violated securities regulations. Link