Money, Memory, and Longevity: Navigating Retirement Challenges

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The Hosts:

Kevin Kroskey, CFP®, MBA – About – Contact

Tyler Emrick, CFA®, CFP® – About – Contact

Episode Transcript:

Tyler Emrick:

Does money really buy a longer life? Today we’re exploring how wealth impacts health, longevity, and cognitive decline. And how smart planning can protect your financial future. All coming up on Retire Smarter.

Walter Storholt:

Another edition of Retire Smarter has arrived. Walter Storholt here, alongside Tyler Emrick, and we’ve got a great show on the way today. In case you’re new to the show, a quick reminder that Tyler is a CERTIFIED FINANCIAL PLANNER at True Wealth Design, serving you throughout Northeast Ohio, Southwest Florida, the greater Pittsburgh area and beyond.

Tyler is also a Chartered Financial Analyst as well, and always brings great expertise here to the show and great discussion as well. And a good one today, Tyler, as we dive into the health and wealth conversation, which you got to participate in a little bit of this health-wealth connection, at least maybe on the health side with your recent vacation. And I understand despite being in sunny and warm Arizona, you had a bit of a cold experience.

Tyler Emrick:

I did, I did. Yeah, we had a trip. We have some really good friends that live out in Arizona and literally just got back last night actually as we record this. So if I’m not completely up and my mind is wandering a little bit here, don’t judge me too harshly.

But yeah, it was a great trip, about a week or so and really enjoyed going out and spending time with friends out there for sure. It was actually my first flight with our two little toddlers, which was good. We got a five and a three-year-old, of course. When we were flying out of Cleveland, I was like, “Uh-oh, anxiety a little bit up. Are we going to be able to do this? Is it good?”

And as soon as the plane was taking off, believe it or not, my two little girls literally started clapping and screaming going, “Yay, the flight’s going. We’re flying. We’re flying.”

Walter Storholt:

Oh, that’s so cute.

Tyler Emrick:

And my head kind of went down, I was like, “Uh-oh.” But the plane was pretty receptive. There was a ton of laughs and quite a bit of clapping as well. So it was a pretty good experience and they had big, big smiles on their face. So they enjoyed it and made it through, and the flight back wasn’t too bad either. So yeah, it all ended up working out all right.

Walter Storholt:

Great to have a positive experience for their first time around.

Tyler Emrick:

Yeah, no, because you never know. I was like, “Uh.”

Walter Storholt:

Sure.

Tyler Emrick:

And I had no expectation. I mean, we’d been talking up the flight, right? Looking up seeing planes. Hey, your first plane ride. Getting them all excited. But yeah, seeing their face there.

Walter Storholt:

Yeah, I’ve been on a lot of plane rides and I’m still clapping internally whenever it lifts off and lands safely.

Tyler Emrick:

Right, right.

Walter Storholt:

I think I’m still amazed by it. I’m in this tube flying through the air. Pretty cool. I’m not going to get cold to that. I hope I never get cold to that in life. I hope that still stays a special cool thing.

Tyler Emrick:

Yeah. Nope. But yeah, a great trip, great trip.

Walter Storholt:

And the cold part. Can you share that with us?

Tyler Emrick:

First and maybe last cold plunge, I don’t know. We don’t have too many spas here in Cleveland, so we had our-

Walter Storholt:

Not ones that are doing the cold plunge, at least.

Tyler Emrick:

The cold plunge. Or at least not someplace that I frequent.

Walter Storholt:

It was just prepping you for the Cleveland weather for your return.

Tyler Emrick:

It was, it was, it was. So I don’t know if I can muster up the courage again down the road. I don’t know. We’ll see. But yeah, the cold plunge was quite an experience for sure.

Walter Storholt:

That’s cool. Well, good stuff. Glad you had a great trip and that it went well with the toddlers and their enjoyment and all good stuff. Thanks for the updates there.

Well, let’s talk about that health wealth connection here, Tyler, on today’s episode. And you’ve got that catchy headline and little teaser there. Can money really buy not happiness, but can money buy a longer, healthier life?

Tyler Emrick:

Right. No, I’m a sucker for these catchy headlines for sure.

Walter Storholt:

You click baiter, you.

Tyler Emrick:

Right, I am. Totally, totally. So I came across, actually as I was on the plane ride coming back, I was looking around and these three headlines really kind of caught my eye. And really started to look at the intersection of wealth and health. And I thought they had some really interesting points and I just thought we would share and just kind of go down it.

So as I kind of think about the outline today for the podcast is really just tackling these three articles, picking out what I thought really jumped out at me and what might be applicable to our listeners here. So I think you hit the nail on the head on the first one as we kind of dive in here. That first headline was Money Can Buy Retired Clients a Longer Life to a Point. That was the headline, Money Can Buy Retired Clients a Longer Life to a Point.

Now after I read that headline and my brain kind of wondered to that old, isn’t there like a Beatles’ song there that kind is like Can’t Buy Me love? And going down that route as I was kind of trailing off there. And I got back to, all right, hey, what’s going on here? What do you mean we can buy a longer life?

But the point of the article was really starting to look at how wealth can unlock many benefits for retired clients. And they listed off some thinking about, well, they can choose where to live, how to travel, how to potentially reduce the stress that comes with having limited financial means.

And the research that they were pointing to were really suggesting the fact that how wealth is associated with a longer lifespan. And they referenced a particular study that was done last year in 2024. That suggested that the wealthiest 10% of individuals live to a median age of around 86 years old.

Now, again, that’s median. So the midpoint, not necessarily the average. So a median age of 86, which is almost 15 years longer than the least wealthy 10% in their study. A fairly sizable difference from a life expectancy standpoint, from how we would consider wealth.

Now in a reference, an even separate study, and kind of got down into the weeds a little bit around like, okay, well, how does that transition happen? And how can we kind of quantify that a little bit? So it actually started looking at household incomes. And on the bottom end of the scale, it started looking at household income from $14,000 a year of income up to 20,000, so a $6,000 range here. And that range added about 10 months to that life expectancy. And they seen this gradual even going up at the spectrum, the income spectrum here.

So all the way up to looking at a family household income between 160,000 to 225,000. So that difference between 160 and 225,000 a year added about another 10 month lifespan. So there were these increments here that continued to add almost a year to your life expectancy until we got up to right around that 225K of income, household income a year, and then the returns started diminishing there.

So then their next bracket, you had to make almost $2 million above 225 to add another 10 month lifespan, another 10 months onto your life expectancy there. So really got pretty granular down into, all right, what’s your household income look like? And how does that equate to your life expectancy?

And they attribute it to quite a few things as you can imagine. They started looking into, well, hey, you’re able to afford healthier food, more healthcare. Homes and safer neighborhoods, less polluted communities. And all sorts of intricate details as to try to explain this discrepancy of, hey, higher income, household income, longer life expectancy.

But my mind really went to the impact of how do we start to plan for this? And how should this kind of show through to your financial plans? And really this idea that, hey, should we be projecting a longer than average life expectancy when we’re building out these financial plans?

Because many, many times in the past with the families and clients that I’ve worked with, we always talk about life expectancy and longevity and the impact that has on the planning. And there are a lot of families think of themselves. I get the old adage like, “Oh, no, I’m not going to make it that long. There’s no way I’m going to last until early 90s. Why do we really need to plan for that?”

But I think it goes back to that whole concept of how you see yourself. And really thinking through and understanding that most of the families that we work with, or most of the families in general, it’s really hard to take averages. You’re not the average a lot of times when you look at this data.

So really looking at the data and saying, “Okay, where do you fall from a household standpoint? And how can you use the data to see where you fit on it?” And this study here is saying that, “Well, hey, if your income’s between up to about 225K a year coming in, then hey, your life expectancy needs to potentially reflect that when we’re going through on that planning process.

And this really goes down to a lot of the decisions that we make. I mean, well, we just did two podcasts on social security. You talk about where longevity is going to kind of shine through on, hey, do you take it early? Do you wait or delay? I mean, what you expect from or how you use that life expectancy in your analysis there really determines, well, what do you do with social security?

For individuals that have pension plans and maybe have a decision on, hey, do I take a lump sum? Do I take a monthly pension? Which is going to be better for me? I mean, at the crux of how we do that analysis and help individuals wrap their arms around that, is life expectancy.

And even still just more generally speaking, when we create a financial plan and we’re start extrapolating out over the next 20, 30 years, that extra 10 years of assumed life expectancy or whatever the case is, really can impact these financial plans as you start looking way down the road.

What I thought was fascinating in the article, or the last point I’ll speak on with this one, is just the idea that they reference is saying, Well, as you’re starting to think through this a little bit, well, that’s going to impact really how you’re spending your money and putting it to the best use case for you and your family.”

So you think about just this idea of buying time, they bring up a buying time to reduce stress. And we all know how stress impacts longevity and your health and so on and so forth. So really getting down to, and they mentioned engaging in healthy activities, enriching social activities, they brought up ballroom dancing and some other things.

But I think it really goes back to this idea of like, well, how are you using your money? Not only from a planning standpoint, we talked about the longevity and how it sees itself from a planning standpoint, but also how are you using your money? And how is it potentially buying time as you start thinking about the social and health piece of the pie, which I thought was pretty fascinating.

Walter Storholt:

Yeah, you might be, where previous generations were spending their 90s spending all of their money on medical stuff, you might be in your 90s here before too long, spending that still on travel and trips and flights and all those kinds of things. Probably good news for the economy in general, if the higher earners and people with the largest sums of money, those who have saved their whole lives, can spend that money longer, that’s a good economic driver I would think.

Tyler Emrick:

Yeah, certainly. Yeah. I mean, consumer spending certainly drives GDP and economic performance, there’s no doubt about it.

Walter Storholt:

Well, once you saw that article and clicked on it, you were in the algorithms. And it sounds like you got served a few other angles of this conversation.

Tyler Emrick:

I did. Yeah. So the next article I think is a nice segue from that. The title read, Navigating the Decline of a Client’s Mental Capacity. And this was done at Morningstar.

Walter Storholt:

That’s not a very rosy title.

Tyler Emrick:

It’s not.

Walter Storholt:

Is it?

Tyler Emrick:

It’s not. But I think it’s extremely important as we start thinking about the intersection again of health and wealth, this is sort of that negative side of it and how it can be a deterrent and how it can certainly hurt the best laid out financial plan.

On the flip side, when we talked about that first article, I think that was some of looking at it from the positive. And the enjoyment and living and making that best use case of your money. Here, I think of it more of protecting that wealth that you’ve created for you or your heirs or whatever the case may be.

The article kind of goes down and suggests that clients really should start coming up with that contingency plan. Or start thinking about, well, what could a loss of mental capacity do to your financial situation? And they frame it in this idea of having what the author called an aging plan, which I thought was a great way to think about it.

Their suggestion was that in your 50s and early 60s, focusing on what she considered to be four key components of handling this potential issue of mental capacity and how it could derail your financial plan. So I wanted to share those components because I thought it was a wonderful way to look at it.

And the first component of her aging plan was living arrangements. And starting to think through your preferences and what would happen and where you would be living if you had some mental decline and you needed some assisted living facility or whatever the case may be. I’m sure there’s many listeners out there have had to go through this with a family member or a parent or whatever the case may be. And it’s not an easy process. And there’s a lot of emotion that can be involved transitioning from your home that you’ve lived in for a number of years into an assisted living facility.

I also kind of think about the living arrangements, not only from a, hey, do you need to go into an assisted living facility? But also just kind of aging in place and what your home would look like as you continue to age into retirement.

I’ve mentioned before on the podcast, my mother passed away from cancer a number of years ago. And we grew up in this farmhouse with, if anybody lives in a traditional farmhouse, everything was on the second floor. The bedrooms were on the second floor, the bathroom was on the second floor.

And I seen firsthand how the challenges of taking care of my mother from a family standpoint and what we had to do to kind of navigate that situation. And it certainly wasn’t the one-story ranch with everything on one floor. I mean, I see it a lot of times with just basements and having your washer and dryer in the basement and having to go down and upstairs all the time from there.

So starting to think through what that living arrangement might look like as you progress into retirement, I think is a really good conversation to start having.

The other two items that she had brought up was the idea of financial management and healthcare decisions. So those are two and three. Financial management and healthcare decisions. And they really just get at the crux of like, “Well, who’s going to be helping you with those types of situations?”

You think about it from a estate planning standpoint, there are documents, financial power of attorney, healthcare power of attorney, where you can actually clearly outline who you would want to potentially make decisions on your behalf under each of these scenarios, whether it’s a healthcare decision or a financial decision. So those were two and three, financial and healthcare decisions.

And the final one, which took me a minute to understand, she posed it as driving privileges. So driving privileges. And what she meant by that is she said that, “Well, when you start doing this planning early, you are actually involved in the decision making process.” Whereas if down the road you haven’t done that planning ahead of time and you’re starting to decide, well, hey, who’s going to do what and make these decisions, that might not be all in your power.

And you could certainly feel disempowered if you’re making those decisions on the back end and you’re starting to deal with some of these signs of cognitive decline. And you maintain complete control on those decisions when we do it earlier in the planning process, which I thought was a great way to look at it.

Those four items in the aging plan. Looking at your living arrangements, looking at your financial management and who’s going to be helping with decisions on finances. Healthcare decisions, and then of course this final idea of driving privileges.

So you think about how this impacts the planning process. Well, it’s like, “Well, do you have a trusted network that you can rely on to help make these decisions and get proper estate documents in place?” And start to think through, well, how this would potentially play out?

I think about a trusted CPA, a financial advisor, attorneys. And this team of professionals that you and your family can lean on should this issue come up. I think that’s invaluable. And as you start thinking about just in general, creating a financial plan, working with a financial advisor is very personal.

I think having both spouses involved in that, for example, can have tremendous benefits. I think back just to a number of clients that I ask, “Well, hey, what prompted you to start working with a planner?” And it was this idea of like, “Well, hey, I handle all the finances, my spouse doesn’t. So we wanted to make sure that we were all on the same page from a financial standpoint if something were to happen to me.” And making sure that those contingency plans were in place.

And I think another big one, as we think about just the impact on the planning process, not only having a team of professionals that you can lean on and help you through these times of concern, but also is regularly revisiting it and looking at what the author called The Aging Plan. This isn’t necessarily a set it and forget about it issue.

I don’t know how many times I’ve seen where an individual goes through a divorce and they haven’t updated their will. Or they still have in their will who’s going to take care of their kids, and their kids are now in their 30s. Hopefully they’re taking care of themselves by then.

So these documents do need to get updated. Revisiting and thinking through who’s going to help if a situation like this arise, I think is healthy engagement. It doesn’t necessarily have to be each and every year, but it does need to be a regular conversation because things do change. Preferences change. Family members and who you would want to help in a time of need like this, I think can change over time too.

So just making sure that all that is buttoned up and everybody understands what would happen. Yeah, I think there’s some value there, for sure.

Walter Storholt:

Yeah, good communication all the way across I think all parties involved here is really important.

Tyler Emrick:

And that kind of leads me to the final article and the headline. And I think it’s an extension of the last article we just talked about. But the article title here was Aging and the Impact of Cognitive Decline on Investment Decisions.

And really why I separated out the two articles was this one really started to explore, well, what happens and what is the effect of a more modest decline in mental capacity? Because certainly that can be harder to detect. And it can really, as you start thinking about making good financial decisions, it could really derail and impact your wealth as you think about it.

That’s what the research that this article looked into, was it suggested that this more subtle loss of mental capacity can impact an individual’s ability to handle their personal finances, including investment decisions. And there’s been a number of research done on this.

I mean, some of the earlier studies were over 15 years ago that I can think of. That were really starting to look at this idea of are less effective, how does your mental capacity, modest decline affect your investment decisions and your knowledge? Where, hey, you’ve maybe made those decisions on your own for a number of years, and then they can slowly impact some of those financial decisions.

One of them in particular looked at the impact of, well, how does financial literacy scores? They say they kind of decline about 1% each year after the age of 60, but one’s confidence in their financial decision-making abilities doesn’t decline with age. So the ability has shown in these studies to decline, but the confidence that you have in making those decisions doesn’t. So we’re still confident, we still think we can do it, but our ability to make them can decline over time.

Some of the newer research is really getting into and looking at this relationship between an individual’s perception of their cognitive ability and the actual investment performance that they’re showing. So this study found that those who were unaware of a declining memory performance suffered large wealth losses, about 10% on average, in real value of financial wealth, compared to those who were aware of their decline or did not experience a severe decline.

So it was really looking at the impact of those financial decisions and how they kind of showed through in their wealth over time. So the second article that we looked at, looked at, well, what happens if you need to go into assistive living and having a plan in place to kind of cover that? This is really looking at the idea of saying, “Well, how does a slow memory, mental capacity, or modest decline in mental capacity affect your decisions over time? And how long do you potentially let that go?”

And again, I think it goes back to having that team in place. Family members, financial professionals that you’re working with on a year-in, year-out basis that can maybe start to help in those decisions. And maybe would be able to see some of that decline earlier to make sure that we’re still making the best financial decisions for you and your family.

Walter Storholt:

It’s a really tough thing to talk about. If I can center back to one thing with all of these, these are all difficult. Whether it’s an obvious decline or something that’s more subtle, they’re still not fun to talk about, they’re not fun to bring up. They can be frustrating for all parties involved.

And how do you guys navigate that in the office? Who do you involve in those conversations? Do you get the whole family in there for meetings? Or is there a spokesperson for the family that kind of can come in when things are kind of having these shifts and changes? Or I guess that’s your point is these things can be decided in advance when some of these things kick in.

Tyler Emrick:

Yeah, advance is always the best way. But we’ve gone through scenarios just within the past year, year and a half. I’ve had a client come in and we actually did it as a family. So most communications go out to family members or certain family members. Meetings are not just one individual, but the children were involved in most of the financial planning meetings and the estate setup and some of those decisions.

So it absolutely can be a family affair and making sure the collective is kind of making those decisions and helping through the process. Because those financial decisions will not go away as you might experience some of these health issues. So I think having that team in place and having the family members involved, if that’s how your family dynamic works and it works for you, that’s a fine way to do it.

But I kind of harken back to on the, hey, planning is key and there’s no better substitute than kind of doing this beforehand and having the plan in place.

Walter Storholt:

All great points, Tyler. Well, if you have questions about anything we’ve talked about today, if you need assistance putting together a financial plan that goes to this level of detail. Where we’re talking about these long-term planning conversations, talking about an aging plan, a financial plan, a retirement plan, there’s lots of different angles you’ve got to account for as you start getting into this. And make sure you’re working with the team that truly helps you plan for all these different contingencies, moving parts, et cetera.

That’s the True Wealth Design Team. And if you’d like to work with Tyler and Kevin Kroskey and the rest of the team at True Wealth Design, the best first step to take is to go to truewealthdesign.com. Look for the Are We Right For You Button, and you can click that and schedule a 15-minute call with an experienced advisor on the team and see if you’re a good fit to work with one another.

Again, go to truewealthdesign.com and click Are we right for you? If you prefer the phone call method, you can certainly do that. 855-TWD-Plan, 855-893-7526. We’ve got that contact information in the description of today’s show as well.

Tyler, thanks for sharing all your thoughts and some good insight on what is often a tough subject for people to dive into and talk about. But I think you made it very approachable today, and I hope some folks found it useful.

Tyler Emrick:

Oh, yeah, absolutely. Happy to be here. We’ll catch you on the next one.

Walter Storholt:

Yeah, sounds good. Go do another cold plunge. Okay?

Tyler Emrick:

I don’t know about all that. We’ll see.

Walter Storholt:

You can get one of those just from walking outside, like you said.

Tyler Emrick:

I know, right?

Walter Storholt:

Well, good stuff. Hopefully it’s a little warmer next time we tape. Come back and join us next time for the upcoming edition of Retire Smarter. Until then, take care.