Planning To Live to 100

Summary:

So you eat your Wheaties and take your multi-vite and plan to live to 100+. Just like you re-tooled your vitamin arsenal, you need to evaluate your financial and estate planning to be consistent with your aspirations for being a supercentenarian. 100 is the new 80!

Change Your Investment Plan.

You have to take a long term, practically perpetual, time horizon. It will be vital to maintain a broad allocation of investment resources and not shift to the allocation favoring fixed investments many seniors choose. Those cute pie charts adorning consumer financial magazines showing a decided shift toward fixed income investments as retirement age approaches may miss your optimally allocation by a couple of decades. Shifting your portfolio to predominantly bonds 20 years too soon could mean the difference between or postage stamp Mickey D's and Morton's Steak House.

Constrain Your Spending.

If you will have to live on  your resources that long you really need to limit spending to probably not more than 3-4% per year of the investment base. Most folks way over estimate the portion of their investment assets they can spend each year. Bear in mind you need to inflation protect your spending power for lots of decades to come so the principal balance must grow in absolute dollar terms so that your future cash withdrawals will grow to keep abreast of inflation.

Redefine Disability Planning.

Disability insurance becomes irrelevant at some age and stage of your work life. But disability planning means much more than mere insurance. Reliance on the simple powers of attorney most people sign will be insufficient. For the long term, consider the following modifications to a typical power of attorney: eliminate the gift provisions, or restrict them, you'll need your money. Provide compensation for the agent. If someone has to manage your legal and financial affairs for years, perhaps decades, compensation becomes critical to obtain the help you'll need. Name a succession of individuals younger then you to avoid your outliving all of your agents.

Use a Revocable Living Trust.

If you'll be living to 100 you'll need the best structure to protect you, assure your resources will be used for your benefit and to minimize the problems that could arise. A revocable trust is a much more sophisticated and broad based document that becomes increasingly important as you age. For someone living to 100 the advantages of a well thought out, detailed, and funded revocable trust increases. You can be a trustee of  your trust along with a bank, professional trustee or other trusted person. They can help relieve many of the tasks you would have to perform and thereby protect you and keep you in control over your affairs longer.

Rethink Estate Planning.

You have to be cautious about giving away gifts and engaging in aggressive planning as you may need your assets to live on. Different techniques might make more sense to use. For example, instead of giving assets to intended heirs, transfer assets to a trust formed in one of the states that permits you to be a beneficiary of your own trust, yet remove the assets from your estate. Examples include Delaware, Alaska and Nevada. This way, you can engage in planning to reduce estate taxes but still retain the ability to benefit from your assets should you need them.

Modify the Terms of Estate Planning Techniques.

It might be advantageous to modify the way many standard estate planning tools are used if you anticipate considerable longevity. For example, qualified personal residence trusts (QPRTs) should be evaluated as potentially longer term strategies rather than the shorter durations typically used for them. A charitable remainder trust (CRT) which pays an annuity for life should be re-evaluated as a charitable remainder unitrust (CRUT) for which the annuity amount is recalculated each year to provide an inflation hedge for your annual payments. Use rolling GRATs so you can regularly monitor your need for removing assets from your estate and put the brakes on each year if you need to. Favor simple annual gifts over larger transactions.

Take Precautions When Planning at an Advanced Age.

Issues of competency become more common when planning at an advanced age. Even if you're competent you should take steps to corroborate that competency at the time of executing any trusts or other documents.