For san­ity’s sake, write a let­ter to the fu­ture you

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

ack 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

Bfa­ther-in-law’s so­lu­tion was to write him­self a let­ter (see “Memo to me when I'm 75”. 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.

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