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Jul 15, 2021 | Family Wealth Advising, Q&A

What steps should you take if you’re concerned about cognitive impairment for yourself or a loved one?

Tags: Wealth Protection
Cognitive impairment is a growing reality as we age. It can be challenging to either experience firsthand or watch a loved one suffer from, even if it is mild. Unfortunately, according to the Alzheimer’s Association website, approximately 12-18% of people age 60+ are living with mild cognitive impairment. In addition, more than 6 million Americans are affected by Alzheimer’s. Any form of cognitive impairment can put you or your loved one at risk for a financial mishap or scam. This could undo years of careful saving, investments, and planning.

Health issues involving cognitive impairment can be scary and difficult to face or discuss. Those who have dementia will often try to mask the symptoms for fear of possibly losing some of their independence or due to a perceived stigma. With this said, it is critically important to identify any cognitive issues as soon as possible. Once identified, you can develop a game plan to address both financial and nonfinancial considerations. Getting an official diagnosis from a neurologist, neuropsychologist, or geriatrician can aid in the process. As a part of the diagnosis, a doctor may administor tests such as the Min-Mental State Examination (MMSE), Short Test of Mental Status, or the Montreal Cognitive Assessment.

WHAT STEPS CAN I TAKE?

Even if everything checks out with a specialist, there are still steps you can take to prevent potential mishaps..

ASSIGN A TRUSTED CONTACT

Since 2018, brokerage firms have been required to ask clients if they would like to provide the name of a trusted contact person. Pleae note, you are not required to provide a name. A trusted contact is someone you authorize your brokerage firm to contact in limited circumstances (i.e. if they cannot reach you). They can also help the brokerage firm respond to possible financial exploitation or fraud in your account(s). Naming someone does not give that person any authority to act on your behalf, execute transactions, or engage in activity in your account; but having having a trusted contact can provide a helpful safeguard.

CREATE AN OMEGA FILE

An Omega file can help organize information surrounding your affairs and desires in one place. This can help your family should you become ill or pass away. The Omega file is not a legal document itself, but it identifies where important papers are located. This information may include health care directives, information about business affairs, passwords, and anything else your loved ones should be aware of in the event they need to step in. Once you create an Omega file, ensure you leave it in an accessible place known to your executor and/or trusted family member(s). We would recommend against a safe deposit box. These are sealed at death, and therefore difficult to immediately access.

ADDITIONAL INFORMATION / QUESTIONS

If you are concerned about your financial situation or that of a loved one, there are additional steps you can take. These include adding an individual to all financial accounts and bills to monitor finances. You can also assign a Power of Attorney to allow a trusted individual the right to make financial decisions. Our Advisors are able to provide tips on approaching this sensitive topic and applicable steps to take. If you have additional questions, please reach out to one of our advisors.

Author: Peter Braden, CFP® | Wealth Management Advisor
Written: July 15, 2021

How Retirement Accounts and Taxes Affect How Much You Need

A retirement nest egg of $1,000,000 in a traditional 401 k is not the same as $1,000,000 in a Roth account or taxable brokerage account. Taxes can significantly change how much retirement income you actually get to spend.

Account types and taxation:

  • Pre-tax accounts (traditional 401(k), traditional IRA): Withdrawals from 401(k)s and traditional IRAs are typically taxable as ordinary income
  • Tax-free accounts (Roth IRA, Roth 401(k)): Qualified withdrawals are generally tax-free
  • Taxable accounts (joint brokerage, trusts): Subject to capital gains taxes

Retirement income may still be taxable, including traditional 401(k)/IRA withdrawals and Social Security taxation. Required minimum distributions from an individual retirement account or employer sponsored retirement plan start at age 73 under current law, potentially forcing higher taxable income and affecting Medicare premiums.

State income taxes differ significantly. Virginia and South Carolina tax retirement income (though SC offers some exemptions), while Florida and Arizona have no state income tax. Relocating in retirement may affect your gross income needs after tax.

Tax-aware withdrawal strategies—such as blending withdrawals from traditional and Roth accounts, realizing capital gains strategically, or performing Roth conversions before RMD age—may help optimize your financial situation. However, tax laws and brackets can change. Working with a team that integrates investment management with ongoing tax strategy and preparation, like Godsey & Gibb’s in-house CPA team, can help keep your retirement plan and tax advice current. Consult your tax advisor for guidance on your particular investment and account structure.

Pitfalls of Popular On/Off-Track Benchmarks

Widely-referenced age-based retirement savings goals suggest you have: 1x your annual salary saved by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by age 67 to maintain your current lifestyle in retirement if you plan to retire at this traditional retirement age. A common guideline is to save between 10% and 15% of your annual pretax income for retirement, assuming a 40- to 45-year working career.

This framework was developed by Fidelity Investments internal research around 2014 and used in part as a marketing tool. Certain assumptions—such as social security accounting for 35% of one’s retirement income—are inapplicable to many affluent retirees. The framework was validated for incomes between $50,000 and $300,000, another indication it doesn’t apply to everyone.

Common pitfalls that distort how much money someone thinks they need:

  • Underestimating healthcare costs

  • Ignoring inflation’s impact on living expenses over 25+ years

  • Assuming very high future results from investment strategies

  • Not planning for long-term care or surviving spouse needs

A retirement calculator can help gauge whether current retirement savings and asset allocation align roughly with targets, but complex situations—business owners, large concentrated stock positions, potential inheritance—usually benefit from professional modeling. Investing involves risk, and actual investment results will vary.

At Godsey & Gibb, we frequently review progress towards retirement with clients and adjust their savings plan as markets, tax law, and personal financial goals evolve.

A retired couple strolls hand in hand through a serene park, surrounded by lush greenery and blooming flowers, enjoying their time together in nature. Their relaxed demeanor reflects the joys of retirement, a time when they may also be considering aspects of their healthcare, such as Medicare premiums and the impact of modified adjusted gross income on their medical insurance costs.

Why a Personalized Retirement Plan and Ongoing Professional Guidance Matter

How much retirement income you need is not a one-time calculation. It’s a moving target influenced by markets, inflation, health, tax legislation, family needs, and personal goals. To start saving effectively for retirement, you may benefit from a plan that adapts.

A personalized retirement plan typically includes:

  • A detailed retirement budget and spending map

  • Investment strategy aligned with investment objectives

  • Tax strategy coordinated with distributions

  • Estate and legacy planning (wills, trusts)

  • Risk management (insurance, long-term care planning, survivor income planning)

Developing the plan is only half the work. Executing the plan—making investment changes, tax decisions, and distribution adjustments year by year—is equally complex. Many retirees find that working with financial advisors who can delay retirement decisions strategically, coordinate employer match optimization while still working, and manage the transition is valuable.

Godsey & Gibb’s model brings financial planners, portfolio managers, and CPAs under one roof so that tax strategy, investment management, retirement income planning, and estate considerations can be coordinated. We focus on helping clients understand how much retirement savings they may need given their current age and goals, leveraging expertise in all the necessary areas of complexity.

If you’re in the Richmond, Greenville, Jacksonville, or Phoenix areas, consider a conversation with a fiduciary financial planner to refine your own directional retirement number. With thoughtful planning, periodic review, and the right advisory team, we strive to help clients approach their retirement years with greater clarity and confidence about how much income their savings may support.

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Information contained herein is for general educational purposes only and is not intended to be substituted for personalized investment, financial, tax, or legal advice as individual situations can vary. The use of charts, graphs, formulas, and other illustrations are not intended to be used independently to guide investment decisions or to determine which securities to buy or sell, or when to buy or sell them. Information was obtained from sources considered reliable, but no representations or warranties are made to its accuracy, timeliness, suitability, or completeness. Statements expressed are opinions of certain Godsey & Gibb Wealth Management personnel and are subject to change without notice. Forward-looking statements expressed herein are subject to change due to shifts in the market and economic conditions. Full disclosure: https://www.godseyandgibb.com/disclosure/

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