Frailty Risk: The Retirement Reality Your Clients Don't Want to Talk About

What You Need to Know

An estimated 7% to 12% of Americans age 65 and older are considered frail, and the risk rises dramatically with age.
Advisors are in a key position to bring discussions about frailty risk and lifestyle planning to the fore.
Arranging power of attorney documents and estate plans in advance, while emotionally difficult, can offer crucial peace of mind to aging clients.

As a senior advisor at Retirement Planners of America, Ken Moraif spends a great deal of time collaborating with clients approaching or navigating retirement.

As Moraif told ThinkAdvisor during a recent interview, RPA is a somewhat unique firm in that it is highly selective when choosing clients. Not only does the firm zero in on near-retirees and retirees, it also works with clients who can appreciate the firm’s highly defensive investment philosophy, which Moraif refers to as an “invest and protect” strategy.

Beyond its investment philosophy, Moraif says, RPA also stands out for its honest confrontation of other risks not directly related to the equity and bond markets. For example, Moraif says, the firm has been doing a lot of work to help clients understand and mitigate the basic biological risks that come along with aging, which can be collectively summarized as “frailty risk.”

In addition to addressing the topic during his interview with ThinkAdvisor, Moraif expanded at length on the theme of confronting frailty risk during the latest episode of his podcast, Money Matters. According to Moraif, advisors are in a powerful position to help their clients face this uncomfortable but inevitable part of the investment and financial planning process.

Facing Frailty Risk

Frailty risk, Moraif says, “is the set of risks that fall under the category of things our clients don’t like to think or talk about, but which they should think and talk about.

“Confronting frailty risk is about facing some of the scary realities of retirement and getting some tough things taken care of — if only so that the client doesn’t have to keep dwelling on them,” he adds.

Naturally, the main elements of frailty risk derive from a client’s deteriorating mental or physical health. According to data from John Hopkins, an estimated 7% to 12% of Americans age 65 and older are considered frail, and the risk rises with age — from one in 25 people between ages 65 and 74 to one in four of those older than age 84.

While each client’s future health outlook is unique, Moraif says, there are some common threads and planning steps that are likely to be helpful to all. Importantly, planning for these risks is not just about confronting the prospect of sudden and total debilitation, which is what a lot of people think about when they first hear the term “frailty risk.”

“In reality, this is a lot more complicated,” Moraif says. “Imagine there is a client who owns a big home, for example, and over time they find they can’t continue to take care of the yard — or they can’t find someone to help with the household chores without having to pay them an exorbitant amount. How can we plan for that?”

Perhaps it’s nothing to do with the house. Maybe the individual has a manageable home, but they live in an area where they have to drive long distances to do anything, and they have lost the ability to drive safely due to an otherwise manageable health issue. In such cases, Moraif says, it may be worth considering whether downsizing or relocating is a good idea. Ideally, a client will be able to make adjustments early that minimize lifestyle disruptions for themselves or their future caretakers.

Moraif emphasizes that advisors aren’t going to have simple answers to these challenges. However, an advisor can play a critical role by helping clients and their families start care-oriented discussions well in advance, in preparation for any crises that arise.

Estate Planning, POA & Other Considerations

“What are some solutions that bring peace of mind? First of all, making sure a client knows who they want to have step in and help them in advance is crucial,” Moraif says. “The advisor can help to prompt these discussions about who the client is going to trust to have control.”

In terms of specific steps and documentation, Moraif says, getting power of attorney documents in place is a great place to start. While they are not going to replace a proper estate planning attorney, the advisor can come to the table with at least a base level of expertise about the different power of attorney documents and how each can be used to its best effect.

“For example, there are important differences between normal power of attorney documents and durable power of attorney documents,” Moraif says. “In my experience, getting all of this arranged in advance is critical and it can avoid a lot of hardship and suffering. If you wait, and you don’t figure this out in advance, it can be so challenging to do so when a person becomes disabled or debilitated.”