Recent data from the Centers for Disease Control and Prevention (CDC) has shown that U.S. birthrates are declining, indicating that having children is becoming less of a priority for some. As a result, more Americans are remaining childfree as they wait longer to start a family. This shift in priorities highlights the need for financial advisors to offer more personalized advice to childfree clients, especially when it comes to retirement planning.
“Who is Going to Take Care of You When You’re Old?”
Childfree retirement planning offers unique challenges. Without children to rely on, retirees need to ensure that their finances are properly planned out well in advance. Creating a strategic financial plan is vital for any retiree, regardless of their family situation. It is the foundation of any successful retirement, and a good plan will help project whether a retiree’s resources are sufficient to cover their anticipated costs.
It is important for retirees to understand how risky or volatile their investment accounts are, especially if they maintain the same asset allocation they had when working. A quality financial plan ensures that risk is mitigated where possible. Without a solid plan in place, unexpected expenses and market volatility can greatly impact retirement success.
Reduced Family Support
For some retirees, adult children can provide financial support when needed. However, this is not always the case for those without children. Retirees who do not have financially stable adult children may need to plan for reduced familial support in the event of financial hardship.
Overall, it is essential for childfree clients to have a strategic financial plan in place throughout their retirement. With the right guidance and personalized advice from a financial advisor, retirees can still achieve their retirement goals and enjoy the lifestyle they desire.
Don’t Leave Your Loved Ones Guessing: Importance of Estate Planning
Estate planning is a crucial aspect of financial planning that retirees must comprehend. This is especially true when no children or lineal descendants are involved. In such cases, default rules of inheritance are based on the state’s intestacy statutes. It’s important to note that even when there are children involved, estate planning remains important.
A well-thought-out estate plan should stipulate clearly how properties should be passed down and any desired parameters, as leaving an unexpected fortune to family or friends can be an unwelcome burden for the beneficiaries who are not equipped to manage the funds. For instance, establishing a trust may be preferable to an outright inheritance, especially if the beneficiary has a disability or is too young or immature to handle properties.
If you want to leave your estate to a charity or organization, that’s great. The most critical decision you will have to make is choosing the individual responsible for carrying out the estate plan as the fiduciary (i.e., the executor and/or trustee). If a family member cannot serve in this capacity, it’s often best to opt for a professional fiduciary, such as an attorney or bank with a trust department.
Communicate Your Long-Term Care Plans Openly
It’s common practice for many retirees to believe that their adult children will be willing and able to take care of them when the need arises. Regrettably, this expectation does not always come to fruition. In many instances, the adult children may not be able to provide care due to distance, physical or mental limitations, financial constraints, among others. As a retiree without children, it’s essential to have a care plan for later years with contingencies in place.
Estate Planning and Investment Strategies for Retirement
Estate Planning
Part of the estate planning process involves creating power of attorney documents that appoint another individual to make financial and healthcare decisions in the event of incapacity. It is usually wise to name successor agents on these documents if the first choice is unable to serve. A revocable trust can also be set up with a successor trustee named if the need arises.
In situations where there are no individuals available, a corporate fiduciary such as a bank or an attorney can be named to serve as successor trustee. Finally, advance directives can lay out preferences for end-of-life care and address items like artificial life support and organ donation. It is much better to stipulate these desires ahead of time instead of leaving that burden to loved ones.
Investment Strategies
Retirement planning becomes a crucial component of an individual’s financial plan as they age. An essential element to consider is investment strategy, which varies depending on individual circumstances.
Child-free retirees may have a different investment outlook and risk appetite than retirees who are supporting children and grandchildren. This can pose a material impact on the investment strategy used to meet retirement and legacy goals.
If an investor knows that they have enough to live comfortably during retirement, they may choose to segregate a portion of their assets in more conservative investments, while allocating the remainder to more risky investments that can create larger long term returns. Conversely, a retiree with fewer resources and limited family support may need to focus on expense reduction and a mostly conservative portfolio to avoid excessive market volatility.
There are many rewarding opportunities that can become part of someone’s retirement as well as their legacy. The future retiree must keep an open mind as they explore the possibilities and the potential paths to make their long-term goals a reality.
TD Wealth® Disclosures
General Information
TD Bank and its affiliates do not offer any warranties regarding such information or results obtained through its use. They also disclaim any responsibility for any liability arising as a result of your use of such information or any tax position taken while relying on the material. Please consult with your attorney or tax professional regarding your specific situation.
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