Baby boomers entering their “second acts” should think about these matters.

Retirement is undeniably a major life and financial transition. Even so, baby boomers can run the risk of growing nonchalant about some of the financial challenges that retirement poses, for not all are immediately obvious. In looking forward to their “second acts,” boomers may overlook a few matters that a thorough retirement strategy needs to address.

Before you enroll, take note of what the insurance does not cover and the changes ahead.

Misconceptions about Medicare coverage abound. Our national health insurance program provides seniors with some great benefits. Even so, traditional Medicare does not pay for dental care, vision care, or any real degree of long-term care. How about medicines? Again, it falls short.1

Original Medicare (Parts A & B) offers no prescription drug coverage. You may not currently take prescription medicines, but you may later, and can you imagine paying out of pocket for them? Since 2013, the prices of the 20 most-prescribed drugs for seniors have risen an average of 12% annually. Will Social Security give you a 12% cost-of-living adjustment next year?1

To address this issue, many seniors sign up for Part D (prescription drug) plans, which may reduce the co-pays for certain generic medicines down to $1 or $0. As private insurers provide Part D plans, the list of medicines each plan covers varies – so, carefully check the list, also called the formulary, before you enroll in one. Keep checking it, as insurers are permitted to change it from one year to the next.1,2

You may want a Medigap policy, considering your Part B co-payments. If you stick with original Medicare, you will routinely pay 20% of the cost of medical services and procedures covered by Part B. If you need a hip replacement or a triple bypass, you could face a five-figure co-pay. Medigap insurance (also called Medicare Supplement insurance) addresses this problem with supplemental Part B coverage. Premiums and services can vary greatly on these plans, which are sold by insurers.1

If you want dental and vision coverage (and much more), you may want a Part C plan. Around a third of Medicare beneficiaries enroll in these plans, also called Medicare Advantage programs. The typical Part C plan includes all the coverage of Medicare Parts A, B, and D, plus the dental and vision insurance that original Medicare cannot provide. Medicare Advantage plans also limit beneficiary out-of-pocket costs for the services they cover.1

Part C plans may soon offer even more benefits. They will be allowed to include services beyond normal medical insurance beginning in 2019. Starting in October, they can reveal what new perks, if any, they have chosen to offer. Some of the new benefits you might see: coverage for the cost of home health aides, adult day care, palliative care, the installation of grab bars and mobility ramps in the home, and trips to and from medical appointments. The list of potential benefits could expand further in 2020.3

Few seniors who enroll in Part C plans switch out of them. If you enroll in one, you should realize that these plans are regional rather than national – so, if you move, you may have to find another Part C plan or return to traditional Medicare, with or without Medigap coverage.1,3

For millennials, today is the right time.

If you are under 30, you have likely heard that now is the ideal time to save and invest. You know that the power of compound interest is on your side; you recognize the potential advantages of an early start.

If something sounds too good to be true, it probably is.

If you are in or near retirement, it is a safe bet that you would like more yield from your investments rather than less. That truth sometimes leads liars, scammers, and fraudsters to pitch any number of too-good-to-be-true “investment opportunities” to retirees. Given all that and the classic money scams perpetrated on elders, you have good reason to be financially skeptical as you get older.

Beware of unbelievable returns. Sometimes you hear radio commercials or see online ads that refer to “an investment” or “an investment opportunity” that is supposedly can’t miss. Its return beats the ones achieved by the best Wall Street money managers, only the richest Americans who know the “secrets” of wealth know about it, and so forth.

Claims like these are red flags, the stuff of late-night infomercials. Still, there are retirees who take the bait. Sometimes the return doesn’t match expectations (big surprise); sometimes their money vanishes in a Ponzi scheme or pyramid scheme of sorts. Any monthly or quarterly statements – if they are sent to the investor at all – should be taken with many grains of salt. If they seem to be manually prepared rather than sent from a custodian firm, that’s a hint of danger right there.

Beware of equity investments with “guaranteed” returns. On Wall Street, nothing is guaranteed.

Beware of unlicensed financial “professionals.” Yes, there are people operating as securities professionals and tax professionals without a valid license. If you or your friends or relatives have doubts about whether an individual is licensed or in good standing, you can go to finra.org, the website of the Financial Industry Regulatory Authority (formerly the National Association of Securities Dealers) and use their BrokerCheck feature.1

Beware of the “pump and dump.” This is the one where someone sends you an email – maybe it goes straight to your spam folder, maybe not – telling you about this hot new microcap company about to burst. The shares are a penny each right now, but they will be worth a thousand times more in the next 30 days. The offer may be entirely fraudulent; it may even promise a guaranteed return. Chances are, you will simply say goodbye to whatever money you “invest” if you pursue it. Brokers pushing these stocks may not even be licensed.2

Watch out for elder scams. In addition to phony financial services professionals and exaggerated investment opportunities, we have fraudsters specifically trying to trick septuagenarians, octogenarians, and even folks aged 90 and above. They succeed too often. To varying degrees, all these ploys aim to exploit declining faculties or dementia. That makes them even uglier.

You still see stories about elders succumbing to the “grandparent scam,” a modern-day riff on the old “Spanish prisoner” tale. Someone claiming to be a grandson or granddaughter calls and says that they are in desperate financial straits – stranded without a car or return ticket in some remote or hazardous location, in jail, in an emergency room without health insurance, could you wire or transfer me some money, etc. A disguised voice and a touch of personal information gleaned from everyday Internet searches still make this one work.3

Now is the time to explore the possibilities.

Grandparents Day provides a reminder of the bond between grandparents and grandchildren and the importance of family legacies.

Save and invest, year after year, to put the full power of compounding on your side.

Have you been saving for retirement for a decade or more? In the foreseeable future, something terrific is likely to happen with your IRA or your workplace retirement plan account. At some point, its yearly earnings should begin to exceed your yearly contributions.

Does your credit history partly determine the cost of your life insurance? It may. The potential for such a relationship may surprise you – and the relationship is not without controversy.

Insurers think a good credit history implies several things. It signals a consumer who routinely lives up to financial responsibilities. It telegraphs maturity in a young adult. It may also be characteristic of good health and a long life.1

That last sentence may have you scratching your head. Weird as it may seem, some life insurance providers see an excellent borrowing history as a predictor of continuing healthiness and longevity. Following this train of thought a little further, a poor credit history may be judged to reflect either inattention to, or ignorance of, personal financial responsibility. The root causes of that inattention or ignorance might cause those consumers to die earlier than others.1

Last year, LIMRA (a noted life insurance industry research firm) examined what kind of data insurance companies were reviewing as they considered life insurance applications. Twenty-eight percent stated that they used a predictive model encompassing consumer credit histories – one created by LexisNexis Risk Solutions, an analytics firm. Eighteen percent simply looked at consumer credit records directly. Eight percent relied on a TransUnion score for life insurance applicants.1

In some states, credit history also influences auto and homeowners insurance rates. The better the behavior, the thinking goes, the less inclined that consumer will be to file a claim. (It is illegal to use credit history as a factor in setting auto insurance premiums in California, Hawaii, and Massachusetts.)1

Other types of data may also be evaluated. In addition to credit history, insurance companies may also look at a consumer’s driving record, criminal history, use of prescription medicines, and applications for life insurance coverage submitted in past years. All this may affect life insurance coverage and premiums.1

Why are life insurance providers interested in all this information? They want to make their business models more efficient.

Life insurance underwriting usually takes weeks or months and includes a medical exam. In this digital age, the whole process looks very analog. By streamlining it around predictive models and abandoning or softening the exam requirement, insurers remove a psychological hurdle that stands in the way of some policy sales. Data-based underwriting can take as little as 48 hours.2

Someday, you or your parents could be at risk.

You may know victims of financial elder abuse. According to a new Wells Fargo Elder Needs Survey, almost half of Americans do.1

As you read or hear stories about seniors being financially exploited, you may think: not me, I would never fall prey to that in my old age. Your parents? Same thing. They are too smart and too vigilant to be taken for a ride by a con artist or an unprincipled relative or caretaker.

This perception is only natural. When we are young, we never picture ourselves, or our parents, in decline. We are told 60 is the new 40, and 80 is the new 50. Perhaps so, but as some of the Wells Fargo survey data bears out, we may be overconfident in our ability to evade financial scams as we age.

Nearly 800 Americans aged 60 and older were asked if they believed senior citizens were vulnerable to financial abuse. Ninety-eight percent of the respondents said yes, but 81% were confident that it would never happen to them. Just 10% thought they were susceptible to such exploitation, and only 24% even worried about the possibility.1

The surveyors also contacted nearly 800 Americans aged 45-59 with elderly parents, and 75% of these Gen Xers and baby boomers felt their moms and dads would never succumb to such fraud.1

In short: financial elder abuse might happen to other people someday, but not to us.

This assumption may be flawed – after all, half the people Wells Fargo contacted said that they knew elders who had been financially exploited. Any perception that strangers are committing most of these crimes may be equally unfounded. The Jewish Council for the Aging states that 66% of financial elder abuse is carried out by family members, friends, or trusted third parties.1

What actions can be taken to try and shield your parents from such abuse? As a first step, you and your parents can meet with an estate planning attorney to put a signed financial power of attorney in place (if one is absent). Should your mom or dad lose the capacity to make financial decisions on their own, this document can authorize you (or another family member) to make worthy decisions on their behalf.1

There are also software programs, such as EverSafe, that are designed to pinpoint odd financial transactions for a household or business. Such activity is flagged, and a financial advocate for the person or business is then signaled.1

A few realities that must be acknowledged.

Shopping for life insurance means paying attention to detail. In scrutinizing these details, however, some fundamental, big-picture truths may be ignored.

If you want to renew or upgrade coverage later in life, the terms could be less than ideal. You may be healthier than most of your peers, you may have the constitution of someone half your age, but insurers base policy premiums and terms of coverage on actuarial norms, not exceptions. Purchase a term life policy at age 50, and your premiums may be considerably more expensive than if you had bought the same coverage at age 30. This is the way of the insurance business.1

Have you had a serious illness? Have you been diagnosed with a medical condition, such as diabetes, sleep apnea, or high blood pressure? You are looking at higher life insurance premiums, and insurers may limit the amount of life insurance coverage you can buy.2

A guaranteed acceptance life insurance policy may be the answer, but even with one of these policies, you may have to live a certain number of years after buying the coverage for your heirs to receive a death benefit. Many times, if the insured dies within 2-3 years of the policy purchase, the named beneficiaries only receive an amount equivalent to the premiums that have been paid, plus interest.2

Your beneficiaries need to know that you own life insurance. Roughly $1 billion in life insurance payouts sit unclaimed in America. Why? The beneficiaries are unaware of them. Also, sometimes beneficiary designations are hazy; a “husband” is named as a primary beneficiary on a policy, but the insured has married more than once, so an ex-spouse contests the beneficiary form. Such legal challenges may generate court costs offsetting the financial value of the death benefit.3

While it seems obvious to inform heirs about a life insurance policy, some people never do – and this simple oversight continues to obstruct life insurance payouts.

You need to name a beneficiary in the first place. Some consumers fail to, however, and that can create problems. If you do not designate a beneficiary for your life insurance policy, its death benefit could be included in your estate, exposed to probate and creditors.4

You must also recognize that you could live much longer than you expect. Years ago, most life insurance policies were sold with the assumption that the insured party would die by age 100. If the policyholder lived beyond that maturity date, the insurer would simply pay out the cash value of the policy (or something similar) to the insured person at that time.5