Write a letter to the future you

PF 23Nov camcol update IOL PF Illustration: Colin Daniel

Back in 2010 I wrote a column about a memo a 60-year-old had written to himself to be read when he was 75, reminding him of the things that he should do at that age.

Since then I have been asked on numerous occasions about that column and for copies of it.

I also recently decided that when I reached compulsory retirement age to have a look at the column in my own interest and that of my family.

As a consequence, I decided to update the column and publish it again. Here goes.

The original column was written after I had spoken to a respected actuary about the problems associated with things such as deciding when to move into a retirement village and, even more importantly, into frail care.

Most people simply do not want to move into either. And when they do, the move can be fairly traumatic.

One of the problems associated with holding on to the “family” home is that the pensioner occupants are often asset rich (in terms of the property) but cash-flow poor and struggle to make ends meet.

The family home has, in any event, undergone a change of status. When the occupants pass on, it is more than likely that the property will be sold, because their children will, by that stage, have their own homes.

Creaking joints and the shortage of cash often mean that the condition of the property deteriorates and it declines in value.

The other problem is that alterations to accommodate less-mobile inhabitants, such as putting a bedroom or bathroom downstairs in a multi-floor house, can detract further from the value of the property.

There are other important financial issues associated with getting older. The most important of these concerns investment-linked living annuities (illas), where you are responsible for making decisions, at least once a year, on the composition of the underlying investments and on how much money you should withdraw as a pension.

Dealing with these issues can become more and more of a challenge as you age, particularly if you have any form of dementia. Among other things, you can become increasingly stubborn about taking sound advice, may make incorrect decisions and may even be exposed to fraud.

The actuary mentioned in passing that his father-in-law had told him that he was aware of these and other problems associated with ageing. His father-in-law’s solution was to write himself a letter (see “Memo to me when I'm 75”, below. The names have been changed.) I think this is a wonderful idea, and I have decided to do the same thing.

There are a few things I will add to my letter to myself. They include:

* By 75 at the latest, switch a sufficient amount from illa investments to a guaranteed, inflation-linked annuity that will provide the minimum income flow I require. If estate planning is important, then:

– Leave the balance of any capital in the illa and reduce the drawdown rate to the minimum (currently 2.5 percent of the capital value); and

– Consider a guaranteed payment term of at least 10 years and then for life for the guaranteed annuity. The yield will be good, and your money will be safer, because you will no longer need to make investment and drawdown decisions. If I die before the 10 years are up, the guarantee will ensure some income flows to my heirs for the balance of those 10 years.

* Tell my children to tell me if they believe I am suffering from dementia.

* Accept that there will be times of loneliness, so don’t talk endlessly to strangers. They will listen only out of politeness.

* Always give my grandchildren chocolate cake for breakfast.

* Sell my motor vehicle or employ a driver as soon as I need assistance to stand up or if I forget why I was out driving in the first place.

* Don’t scale down my medical scheme option or cancel my membership altogether to save money. And ensure that someone can make the right medical scheme option choices when I can no longer do so.

I am sure there are other things you can think of for your personal memo to yourself. What we need to do is to accept the frailties of older age.

MEMO TO ME WHEN I’M 75

From John to John

Written: age 60

Intended reading date: age 75+

1. Don’t try to organise your children in their own homes; let them organise you.

2. If it doesn’t matter, don’t make an issue out of it.

3. Given your age, you probably will be forgetful. Write things down and don’t repeat yourself.

4. Pursue photography, woodworking, birding and golfing interests to make yourself more socially interactive. Also, try to be reasonably up to date with current affairs.

5. Your children have grown older and wiser as well. Don’t reject their ideas. Respect their ideas, especially those from financially wise children. Their ideas will be more up to date than yours, and possibly more appropriate in the financial environment of the time.

6. Don’t procrastinate when it comes to relocating to smaller, more appropriate accommodation as personal circumstances change. Avoid holding on to the family home when your needs decrease, even though the home may hold precious memories. If your children are urging you to move, comply.

7. Arrange later retirement accommodation around schemes with frail-care facilities, good access to medical attention and other services related to older people. Don’t leave it too late.

8. Don’t follow your children around, but, if they seem reasonably settled in one place, try to live near them. It will make it much easier for them, especially near the end.

9. Migrate your investments towards cash-related investments as time progresses. Continue with independent, objective advice from a financial advice company.

10. Eliminate unnecessary investment clutter. (Consolidate relatively small investments that are disconnected from the main.)

11. Put arrangements in place to make sure Jill (spouse) can become the principal medical scheme member without undue difficulty.

12. Make sure Jill has enough cash to survive for one year after your death to tide her over the winding up of your estate.

13. Update your will regularly, especially the annexures that detail investments and relevant reference and contact numbers.

14. Keep important documents in a central place so that your heirs can easily access such information.

15. Look after yourself and always look presentable. Your children would like to be proud of you.

16. Prioritise appropriate and regular exercise, especially walking and swimming.

17. Prioritise brain stimulation, especially piano playing and crossword puzzles.

18. Maintain annual medical check-ups.

19. At the appropriate time (around age 75), sign a power of attorney in favour of Jill or John junior so that your personal affairs can be managed during times of frailty or illness. Brief them as to where everything can be found, especially your will and living will. Don’t leave this too long.

20. Everything you say should add some value to the conversation. Rather keep quiet than say something for the sake of saying it.

21. If not being spoken to, don’t insist on being part of the conversation.

22. Never embarrass your children or grandchildren. They will avoid you if you do. If they are too fat or too thin, it’s their problem, not yours – don’t comment.

23. Be ruthless about clutter. If you don’t need it, get rid of it.

DEMENTIA AND YOUR FINANCES

Dementia has devastating consequences for physical health; but it can also ravage your financial wellbeing.

Lara Warburton, managing director of Imara Asset Management South Africa, says the challenges of dementia have prompted some leading financial planners to take special measures to assist ageing clients who are becoming forgetful, wasteful and disoriented.

The intention is to ensure that disorientation in financial management does not creep in.

She says prudent older clients often take the initiative and raise the issue of what to do in case Alzheimer’s or other forms of dementia set in.

Imara Asset Management has introduced a system of “red flags” that are raised when an older client diverts radically from an agreed financial strategy or long-established practice. When this happens, the financial planners are empowered to get in touch with a client’s children, grandchildren or trusted friends.

Warburton says this proves the worth of a long-standing relationship with a trusted, highly experienced financial adviser, because such a relationship has has many unquantifiable benefits.

“If a client suddenly becomes extravagant or reckless in financial matters, this is a strong indicator something is wrong. Sometimes we simply request a review and a re-briefing on strategy. A simple face-to-face session usually resolves the issue, but in other cases it is necessary to alert family members.”

Warburton says that recently a long-retired client suddenly needed much more ready cash month after month. Enquiries revealed he had started buying the same high-ticket item over and over again.

She says the implications of increasing longevity deserve careful consideration in many fields, including financial planning.

There is growing recognition that dementia-related diseases will afflict more and more people as the population starts to age.

Warburton says many clients are taking a practical, matter-of-fact approach.

She says a holistic approach is required, which covers things such as investment management, estate planning, discussions around “living wills” and instructions to family members on what to do should you become totally incapacitated.

“Once scenario-planning like this is under way, many clients raise the issue of dementia or Alzheimer’s,” Warburton says. She says a client in his mid-60s recently told her he had spent 35 years building a nest-egg and if he started “losing it” he didn’t want to lose his money as well.

Prudent people should have a trusted family doctor, a trusted family lawyer and a trusted financial adviser, Warburton says.


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