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In modern America, the “traditional” household has undergone a significant transformation. Gone are the days when a single breadwinner was the norm; today, the dual-income household is the engine of the American economy. Families now rely on two paychecks to maintain their lifestyle, balance the mortgage, fund a child’s education, or build a retirement nest egg. Yet a sizeable gap remains in many financial plans: protection against the loss of one or both incomes due to an unexpected illness or injury.

With more than one in four adults in America having some type of disability, the potential for lost income could affect millions of families. So, take a moment to ponder a hard question: “What happens if I suddenly lose my paycheck?” And since adults with disabilities are more likely to experience heart disease, obesity, diabetes, and other health complications, it becomes an even more prudent question to consider as you approach retirement.

As we observe Disability Insurance Awareness Month every May, it is the perfect time to assess whether your family is protected against the loss of income and cover some use cases that might surprise you.

The Dual-Income Paradox: Double the Risk

For two-income households, there is a common misconception that if one partner becomes unable to work, the other’s income will provide a sufficient safety net. In reality, the loss of one income often triggers a “dual-income paradox.” When both partners work, expenses are often scaled to that combined total. A disability can potentially reduce household income and increase expenses through medical bills, specialized care, and the need for domestic help that the disabled partner can no longer provide. And in some cases, the healthy partner may need to take time off work to act as a caregiver, leading to a further reduction in the household’s total earning power.

Even if you’re currently young and healthy, statistics from the Social Security Administration highlight the urgency of a potential need for coverage, showing that one in four of today’s 20-year-olds will experience a disability before reaching age 67.

Pregnancy and Disability: Planning for Life’s Milestones

Another common misconception about disability insurance is that it’s only for the sick or the elderly, but short-term disability insurance can also be used for expectant mothers as part of a comprehensive birth plan. You’re probably already familiar with paid maternity leave—which provides income for mothers after childbirth—but not every employer or state offers that to employees. While federal laws like the Family and Medical Leave Act (FMLA) provide job security, they generally do not provide income, which is where disability insurance becomes relevant. Disability insurance benefits can help replace a portion of your earned income during a medical leave, depending on the specific coverage and eligibility requirements of your policy.

1. Routine Childbirth: Most short-term policies cover a standard six-to-eight week recovery period, depending on the method of delivery, providing critical income replacement while a mother heals and bonds with her new child. This short-term disability coverage is often used concurrently with FMLA leave, providing pay while FMLA provides job protection.
2. Pregnancy Complications: If complications or the need for physician-ordered bedrest arise before delivery, disability insurance can help provide a financial bridge. Because the history of U.S. leave policies has often struggled to balance gender equality and labor protections, disability insurance remains a useful tool for the “medical” side of the leave. While it typically only applies to the person giving birth (due to the medical necessity requirement), it is designed to help protect the household’s income stream during the recovery window.
3. Postpartum Health: Just as important as physical recovery, the mental health angle is also addressed within short-term disability insurance. Serious postpartum conditions, including postpartum depression or anxiety, can qualify an individual for extended disability benefits. These extended benefits are meant to help provide the mother with time and financial assistance during the recovery process.

Important Note: To use disability insurance for pregnancy, you generally must have the policy in place before becoming pregnant, as pregnancy is often considered a “pre-existing condition” if the policy is purchased after conception.

Navigating Your Options: From Government Support to Private Plans

Understanding the types of disability insurance and where your protection comes from can help you determine which type of coverage suits your family’s needs. Here’s an overview of some of the options:

• Short-term disability insurance (STD) is for temporary disabilities and is designed to replace up to 60%-80% of your income for a short period of time, typically three to six months or until you can return to work, whichever is shorter. STD is often provided through your workplace, either as a mandatory or voluntary benefit.<br>
• Employer-Sponsored (Group) Plans: While these are a solid foundation, they often have limits that may not fully replace the income of a high-earner and are generally not portable—meaning if you leave your job, you leave your coverage.

• Long-term disability insurance (LTD) is for more severe and even permanent disabilities. It’s sometimes offered as a workplace benefit, but is more commonly purchased as an individual policy. The benefit is designed to last for many years—through retirement if needed—replacing up to 60%-80% of your income if something were to happen and you could no longer work.

• Individual Disability Insurance (IDI): For those seeking comprehensive protection, an individual policy offers the most flexibility. Unlike employer-sponsored group plans, these policies stay with you regardless of your employer and can be tailored to your specific needs, such as adding riders for retirement protection or cost-of-living adjustments.

• Social Security Disability Insurance (SSDI): Provided through the Social Security Administration, this federal program is intended as an additional layer of protection for those with severe, long-term disabilities. However, the criteria are strict as the disability must be expected to last at least a year or result in death, and the application process can be lengthy.<br>

A waiting period, often a week or two in length, typically applies before benefits start paying. Premiums, benefits, taxability, and other features of disability insurance vary from policy to policy, and because of the wide range of disabilities that many Americans face, there’s no one-size-fits-all solution. Thorough assessments of your health and your family’s income needs can help you determine which type of coverage can provide the most benefit for your situation.

Why Waiting Carries Risk

The Department of Labor notes that disability insurance is a key component of a comprehensive benefits package, yet many workers remain underinsured. Waiting until a crisis hits is too late—you may be denied coverage for pre-existing conditions and left to find alternative ways of replacing your household income. Whether you are a dual-income couple building your future or an expectant mother preparing to welcome a new family member, the best time to help secure your income is while you are healthy.

Remember, disability insurance can be for anyone, not just those who are older or already ailing. This Disability Insurance Awareness Month, take the time to review your income protection gap. Your ability to earn an income is a valuable asset—it’s time to protect it with the same diligence you built it with. Schedule an appointment so we can discuss protection strategies that help build confidence in your financial independence.

Sources:

https://www.ssa.gov/disability

https://www.schwab.com/learn/story/disability-insurance

https://www.investopedia.com/terms/d/diinsurance.asp

https://www.dol.gov/general/topic/benefits-leave/fmla

https://www.oah.org/tah/november-3/the-history-of-family-leave-policies-in-the-united-states/

https://www.cdc.gov/disability-and-health/articles-documents/disability-impacts-all-of-us-infographic.html

This presentation is not endorsed or approved by the Social Security Office or any other Government Agency. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. This material is designed to provide general information on the subjects covered. It is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney. Disability Insurance is issued as a non-cancelable, guaranteed-renewable, individual disability income insurance policy. It is not a pension or retirement program. Disability Insurance may not be available to anyone who is considered over-insured. Additional underwriting guidelines may apply. SWG 5332039-0326

The golden years of retirement offer an opportunity to resume leisure activities that may have been put on hold during one’s career. Hobbies offer an amazing avenue to replace work routines with enjoyable activities that can blossom into passionate pursuits. This transition is not only fulfilling but can also offer benefits such as supplementing income and promoting physical and psychological health. Read below about how you can focus on turning your hobbies into passions.

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Understanding Medicare and its intricacies often seems daunting. This article will provide an overview of the program, highlighting when to enroll and what the different parts of Medicare encompass.

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This Friday, May 15th, is National Senior Fraud Awareness Day. This day is dedicated to shedding light on pervasive crimes that have cost older adults billions of dollars in recent years. In 2024, scams reported to the FTC recorded losses of $2.4 billion, up from $1.9 billion in 2023.

While wisdom has come with age, we must also recognize that accumulated savings, trusting natures, or the desire for personal connection with others can make older adults prime targets for con artists.

This day is a call to action for seniors to help empower themselves with knowledge, and for families and communities to become vigilant guardians. Being a victim of fraud can feel like a devastating breach of trust, hindering one’s sense of security and independence. That’s why we’ve put together this guide to help you understand the threat, learn how to spot the red flags, and know what to do if you suspect you are being targeted.

The Threat Landscape: Why Seniors are Targeted

Scammers don’t choose their victims randomly. They use sophisticated psychological tactics that prey on specific vulnerabilities often associated with aging:

• Financial Stability: Many seniors have spent a lifetime saving for retirement, making them attractive targets for high-value theft.
• Trust and Politeness: Older generations were often raised in an era where politeness was paramount, and a person’s word was their bond. Scammers exploit this inherent decency.
• Isolation: Seniors who live alone or are socially isolated may have fewer people to consult about suspicious encounters, making it easier for a scammer to exert pressure.
• Technological Gaps: While many seniors are tech-savvy, rapid advancements in digital communication can leave gaps in knowledge that fraudsters ruthlessly exploit.

Know the Enemy: Common Scam Schemes

Recognizing the script scammers use is half the battle. Here are some of the most prevalent schemes targeting older adults:

1. The Government/Business Impersonation Scam

A scammer calls, emails, or texts pretending to be from a trusted agency like the Social Security Administration, the IRS, the Centers for Medicare and Medicaid Services, or even a local utility company.

• Their Pitch: “Your Social Security number has been suspended,” “You owe back taxes and will be arrested,” or “Your electricity will be shut off in one hour unless you pay.”
• Their Goal: To scare you into giving personal details (SSN, bank info) or making an immediate payment.

2. The Tech Support Scam

A pop-up appears on your computer screen warning of a virus, or you receive an unsolicited call from someone claiming to be “Microsoft” or “Apple” support.

• Their Pitch: “We’ve detected a serious security breach on your computer. You must grant us remote access to fix it.”
• Their Goal: Once they have remote access, they install malware to steal passwords, browse your files, or demand payment for “repairing” a problem they created.

3. The Grandparent Scam

This is one of the cruelest schemes, preying directly on family love and panic.

1. Their Pitch: You get a frantic call: “Grandma/Grandparent, it’s me. I’m in trouble.” The voice (sometimes digitally manipulated) claims they’ve been arrested, are in the hospital in a foreign country, or had a car accident, and need money immediately for bail or medical bills.
2. Their Goal: To trick you into wiring money or sending gift cards before you think to verify the story. They will often tell you, “Don’t tell my parents.”

4. The Romance/Sweepstakes Scam

These scams rely on manipulating positive emotions like love or excitement.

• Romance: A scammer builds an online relationship over weeks or months, only to eventually fabricate a crisis (medical emergency, travel cost) and ask for money.
• Sweepstakes: A call or letter arrives announcing you’ve won a massive prize (lottery, luxury car) from a well-known organization. The catch? You must pay “taxes” or “processing fees” upfront to claim it. Legitimate lotteries never ask for money up front.

Your Defense Manual: How to Avoid Them

Knowledge is one of your best defenses. Incorporate these habits into your daily life to help create a robust shield against fraud:

• Resist Pressure: Scammers often demand immediate action to keep you from thinking clearly or consulting others. Always take a breath. Tell them, “I need to think about this,” and hang up. A legitimate urgency will allow you time to verify.
• Verify Independently: Never rely on contact information provided by the person contacting you. If “your bank” calls about fraud, hang up and call the number listed on the back of your actual debit/credit card.
• Protect Personal Info: Never give your Social Security number, Medicare number, bank account details, or passwords to someone who contacts you unexpectedly—regardless of who they claim to be. Government agencies and legitimate companies will not ask for this information over an unsolicited call or text.
• Guard Payment Methods: Be extremely wary if someone demands payment via wire transfer, cryptocurrency, app (like Venmo/Zelle), or by purchasing gift cards. These methods are virtually untraceable and non-refundable. Legitimate businesses do not accept gift cards for payment, and this is a huge red flag that the person requesting this type of payment is a scammer.
• Consult a Trusted Ally: If something feels off, discuss it with a family member, trusted friend, or financial advisor before doing anything. Scammers rely on keeping you isolated and under pressure.
• Don’t Click Links: Treat unsolicited texts and emails as danger zones. Do not click links or download attachments, as they can install spyware on your devices.

Damage Control: What to Do If You’ve Been Targeted

If you suspect you may have already been scammed or you’ve given out some personal information, do not panic and do not feel ashamed. These are sophisticated criminal organizations; it can happen to anyone. Taking swift action can minimize the damage:

• Stop Communication Immediately: Cut off all contact with the scammer. Do not answer their calls, reply to their texts, or engage with them further. If you can block their number, do so.
• Contact Your Financial Institutions: If you provided bank or credit card details, or made a payment, call your bank immediately using the number on your statement or card. Ask to speak to their fraud department. They can cancel cards, stop payments, and monitor your accounts for suspicious activity.
• Secure Your Accounts: Change the passwords for your online banking, email, and social media accounts. Enable multi-factor authentication (MFA) whenever possible for an extra layer of security.
• Report the Scam: This is vital for helping authorities track down these criminals and prevent others from becoming victims.
  • Local Police: File a report with your local police department.
  • Federal Trade Commission (FTC): Report at ReportFraud.ftc.gov.
  • FBI Internet Crime Complaint Center (IC3): Report online crimes at ic3.gov.
  • Department of Justice National Elder Fraud Hotline: Call 1-833-FRAUD-11 (1-833-372-8311) for personalized support and guidance.

Being watchful and aware of these kinds of scams goes beyond just one day. But on this National Senior Fraud Awareness Day, perhaps you can share this blog with someone you think might benefit from the advice.

Remember that if you receive a suspicious call or a “too good to be true” offer, do not act alone. Make verification your default setting. We don’t want the wealth you have worked so hard to build or the financial future you’ve planned for your family to be spoiled by ill intentions. As your financial team, we can be part of your line of defense.

Sources:

https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2025/08/false-alarm-real-scam-how-scammers-are-stealing-older-adults-life-savings

https://www.ncoa.org/article/top-5-financial-scams-targeting-older-adults/

https://www.cnbc.com/2025/12/13/financial-fraud-seniors-ftc.html

The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. This material is intended for educational purposes only and is not intended to serve as the basis for any purchasing decision.

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Legacy planning efficiently transfers a person’s estate and assets after death. This planning is more than just asset distribution. It greatly affects your family, society, and favored causes. Legacy planning uses directives and designations. These legal tools specify how assets should be managed. They also determine who will receive the assets.

Directives in Legacy Planning

Directives are also called Advanced Directives. These legal documents outline a person’s wishes. They cover assets, healthcare, and their estate. This applies if the person cannot communicate or make decisions. This could be due to incapacitation or death. Examples of directives used in legacy planning include:

• Living Will – A Living Will states wishes for end-of-life medical care. This is key if you cannot communicate your decisions.
• Durable Power of Attorney – This grants another person authority. They can make decisions about financial or health care matters.
• Health Care Surrogate Designation – This gives someone else the authority to make medical decisions if the individual becomes unable to do so.

Designations in Legacy Planning

Designations, on the other hand, define who receives what after one’s passing. They are an important part of legacy planning and may help to prevent disputes among family members. Examples include:

• Beneficiary designations – These are common for retirement accounts and life insurance. Individuals specify who receives assets upon their death.
• Transfer-On-Death (TOD) designations – Allow an individual’s assets to be transferred directly to the beneficiary without going through probate.
• Payable-On-Death (POD) designations – POD designations are similar to TOD. They allow bank accounts and assets to be paid directly to the beneficiary. This happens upon the account owner’s death.

The Importance of Directives and Designations

Directives and designations are key to legacy planning. They help ensure the individual’s wishes are carried out. Designations support a smooth transfer of assets. They also reduce disputes among heirs or beneficiaries. These tools help preserve and honor one’s legacy.

Update these documents periodically. This is critical after major life events. Examples include marriage, divorce, or a child’s birth. A death in the family also makes updates necessary.

Legacy planning can often be complex. It requires guidance from financial and legal professionals. Insurance and tax experts are also needed. Create a comprehensive legacy plan. Include both directives and designations. This plan is a gift to yourself. It is also a gift to your loved ones.

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This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives. Legal documents and estate planning strategies are subject to state laws and individual circumstances, and outcomes cannot be guaranteed.

Every May, the Administration for Community Living (ACL) celebrates Older Americans Month (OAM) to recognize older Americans’ contributions, examine aging trends, and demonstrate the commitment to serving older adults. In step with that cause, we’re taking this time to honor older Americans by demonstrating our commitment to helping our clients fulfill their vision of retirement.

In 2026, the ACL’s theme for Older Americans Month is “Champion Your Health.” This theme is an invitation to take charge of your physical, mental, and financial well-being—whether that’s getting your daily steps in, spending more time with loved ones, or leaving a legacy. But to truly champion your health as an older American, look beyond physical fitness and consider a strategy that goes a step further and includes thoughtful healthcare preparation as well.

But you can’t champion your overall health if your financial health may be challenged. Let’s look at how planning for healthcare costs in retirement can help empower you to embody OAM’s core message: to live with dignity, independence, and vitality.

Navigating the Landscape of Long-Term Care

One component of championing your health is learning to balance the desire for a comfortable retirement with the need to manage potential healthcare costs and unforeseen expenses. Understanding the actual costs associated with medical care in your later years is an all-too-common challenge, as many retirees underestimate these expenses. However, misunderstanding them can make retirement virtually unaffordable. For instance, an average 65-year-old retiring in 2026 may require approximately $165,000 to cover healthcare expenses throughout their retirement—and this estimate excludes long-term care (LTC) costs, which can vary considerably based on individual needs.

Because LTC costs aren’t covered by standard health insurance or Medicare, they can be considered a significant threat to a retirement nest egg. The truth of LTC is that it’s a “when,” not an “if,” for about 70% of people over 65. Sometimes it involves aging in place with home health aides, other times it involves transitioning to an assisted living facility. No matter the case, long-term care requires meticulous planning—and without proper planning, you could face higher premiums than if you had started early. Remember, premiums are based on your age and health at the time of application, so you may even be denied entirely.

So, how do you avoid that scenario?

Long-Term Care Insurance

Long-term care insurance covers costs for extended in-home care or facility stays (nursing homes, assisted living) for individuals with chronic illnesses, disabilities, or cognitive impairments like Alzheimer’s. It can be beneficial to apply for long-term care coverage while you might still qualify for preferred rates due to the relatively low risk of needing to use the coverage soon. Locking in lower rates while young and healthy can potentially empower you to facilitate a more dignified lifestyle in retirement.

LTC insurance is unique because of how customizable it can be, meaning you can tailor a policy to your specific financial goals and family situation. For example, some LTC policies include inflation protection features that can help your coverage benefits grow by the time you need to use them—another reason to start while you’re young. If you’re in your 20s, 30s, or 40s, you have a meaningful advantage: time. Unlike a 65-year-old who might invest conservatively, a 30-year-old can invest for long-term care decades before they might need to use it.

Self-Funding Your Long-Term Care

Choosing to self-fund healthcare involves implementing a strategy where you manage the financial risk yourself. If you retire before 65, you aren’t yet eligible for Medicare and thus may be looking to bridge the coverage gap until then. For example, if you required LTC later in life and had dedicated a bucket of your savings and/or investments for that expense during your working years, you could reduce the strain those expenses could have on your financial situation. A dedicated long-term care bucket in your portfolio that’s invested in a strategy aligned to your risk tolerance. This method could potentially turn a modest monthly contribution into a helpful self-insurance fund down the road. But how and where you put those savings or investments is key…

Health Savings Accounts

A powerful way to fund your own healthcare costs is through triple tax-advantaged health savings accounts (HSAs). These offer the ability for your money to go in tax-free, grow tax-free, and be withdrawn tax-free for medical and LTC expenses. You can contribute to an HSA while you’re still working, and, once you turn 65, you can use the HSA funds to pay for Medicare Part B and Part D premiums. In 2026, you can even use HSA funds to cover qualified LTC insurance premiums. But access to these accounts can be stricter as they’re often offered through employers, and you must have a specific kind of health coverage to qualify for opening one.

Going the Distance: Our Commitment to Your Empowerment

As we celebrate Older Americans Month, let’s reframe what it means to grow older. It isn’t just about adding years to life but adding life to years. It’s about vitality. It’s about developing a strategy for independence and self-determination. Successful aging begins long before you reach “senior” status. Retirement planning is a lifelong journey of financial management that requires both foresight and flexibility. If you don’t carefully plan for your healthcare in retirement now, you could end up with a greater financial burden than was necessary. That’s why it’s important to be proactive. Even the most health-conscious individuals might find themselves in need of expensive healthcare services later in life.

But regardless of where you are in your journey toward retirement, there may be more options than you think. So don’t wait. Call us so we can discuss ways to manage your financial strategy and help you pursue your goals in the later years.

Sources:

https://acl.gov/oam/older-americans-month

https://acl.gov/ltc/costs-and-who-pays/what-is-long-term-care-insurance

https://www.usbank.com/wealth-management/financial-perspectives/financial-planning/long-term-care-insurance-costs-and-benefits.html

https://www.consumerfinance.gov/about-us/blog/celebrating-older-adults-communities-strength-supporting-them/

https://www.fdic.gov/consumer-resource-center/2025-05/financial-education-every-stage-life

https://www.schwab.com/learn/story/health-care-costs-retirement-are-you-prepared

This information is designed to provide general information. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice. You are encouraged to consult your personal tax advisor. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. This hypothetical example is shown for illustrative purposes only and is not guaranteed. SWG 5299645-0326

Understanding financial literacy concepts such as budgeting, saving, and investing is crucial for everyone, children included. Financial literacy is the ability to comprehend and make decisions that contribute to financial readiness. This proficiency isn’t inherently taught in schools and often falls on parents or other family members.

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Genealogy can be a truly fascinating hobby, and uncovering your family’s history can bring the past to life in a fresh and personal way. If you’re someone who loves history or is just interested in how your own story fits into the larger human narrative, researching your ancestry offers a meaningful way to connect with the generations that came before you. For those enjoying retirement, it can be an especially rewarding way to use your extra time to reflect, explore, and leave a lasting legacy for children and grandchildren. But how do you get started?

Start with Stories

One of the biggest mistakes new genealogists make is diving straight into 19th-century census records when the most valuable archives are much closer than the local courthouse.

Before you spend a dime on subscriptions, interview your oldest living relatives. Ask about daily life and the big moments they remember from their lifetime. Ask specific questions that evoke a real sense of time and place that can help put a future reader in a particular moment that this person lived. These kinds of descriptions and memories can’t be discovered in courthouse records. Ask things like:

1. What did the family kitchen smell like on Sundays?
2. Who was the “black sheep,” and why?
3. What is the story behind certain pictures or family mementos?

Record these conversations. A name on a paper tells you someone existed, but stories can tell you who they were.

What if you’re the oldest living relative? Don’t neglect your own story! Whether you’re the oldest or not, it’s important to write down your childhood memories, the technology shifts you’ve witnessed, and the personal milestones that shaped you. In a hundred years, a descendant will be looking for you just as eagerly as you are looking for your great-grandparents.

The Paper Trail: Moving Backward

Once you’ve exhausted oral histories, it’s time to bridge the gap to the past. The rule of thumb in genealogy is simple: Work backward from the known to the unknown. Start with yourself, then your parents, then your grandparents. Vital records—birth, marriage, and death certificates—are your primary evidence. From there, the U.S. Federal Census (released every 72 years) acts as a snapshot of your ancestors’ lives every decade.

Don’t feel pressured to map out the 14th century by next Tuesday. Start small and local before you branch out.

• Rummage Through the “Junk”: That shoebox in the attic is a goldmine. Letters, funeral programs, and old Bibles often hold more data than a government database.
• Digitize the Magic: Use your phone to scan those old photos. Not only does this preserve them, but it makes them shareable with family who live farther away.
• Network: Join a local genealogy and/or historical society.
• Learn the Tools of the Trade: Take some time to explore how to search large primary databases like Ancestry, Family Search, Findmypast, and MyHeritage, and get to know their resources.

Add Context with Historical Details

Make sure you research beyond just the dates and names. What was happening in the area around the time of your great-great-grandparents’ wedding? If you find an ancestor who immigrated in 1847 from Ireland, don’t just record the date. Research the Great Famine. If your great-grandfather was a coal miner in Pennsylvania, look up the strikes of that era.

When you layer historical events over your family’s timeline, you stop seeing them just as names on paper, and that’s what really brings family history alive.

The Responsibility of the Historian

Becoming your family’s historian is a gift to the future. You are ensuring that generations from now, your descendants won’t have to wonder who they are.

By pulling together old records, family stories, photographs, and documents, you can begin to piece together the journeys, struggles, and achievements that shaped your family. What starts as simple curiosity often grows into a rewarding pursuit that not only honors those who came before you but also creates a legacy of knowledge for generations yet to come. In retirement, when you finally have the time to reflect and look back, this meaningful work can become one of the most fulfilling chapters of your life.

As you think about the legacy you want to leave—both personal and financial—having a thoughtful plan in place matters. If you’d like guidance on aligning your retirement goals with your family’s long-term objectives, contact our office today to schedule a complimentary consultation to help build a strategy intended to support your legacy for generations to come.

This material is intended for educational purposes only and is not intended to serve as the basis for any purchasing decision.  SWG 5234919-0226

Near the top of the list at the start of every year are often financial resolutions—commitments to save more, spend less, pay off debt, or prepare for upcoming financial milestones. The challenge, however, lies in sticking to these financial resolutions throughout the year.

Here are some strategies and tips to help improve the likelihood of sticking to resolutions.

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Do you have a lead foot when you drive? Or are you a bit more cautious behind the wheel? Think of the sportiest cars you’ve seen on the road: The car is capable of comfortably reaching speeds exceeding 150 MPH, but as the driver, how comfortable would you be traveling beyond 150 MPH? In the world of finance, the difference between risk capacity and risk tolerance is summed up by what you can do versus what you want to do.

Aligning your investment choices with your capacity and tolerance for risk can help establish your financial philosophy as something representative of who you are and what your goals are. By understanding how these concepts complement each other, you can use them to help guide how you manage financial risk in your life. Let’s take a moment to address some of the ways risk tolerance and risk capacity can influence your finances.

The Role of Risk in Your Financial Decisions

Risk tolerance takes human nature into account and refers to your personal readiness to accept financial risk, while risk capacity is an objective measurement of your financial situation and its ability to manage potential volatility. To address risk capacity, you might ask, “How much can we afford to lose?” And for risk tolerance, you might think about, “How much volatility are we willing to endure?” The difference here is between your hard limits—based on tangible assets—and your soft limits that are based on your level of comfort.

You might be wondering whether risk capacity or risk tolerance is more important for making financial decisions. The truth is that your investment strategy should generally be considerate of both. While risk capacity is viewed objectively, and risk tolerance is subjective and psychological, your feelings matter and contribute to your overall financial security just as much as dollars do. But it’s also important to remember that risk tolerance and risk capacity aren’t inherently good or bad; no matter where you are on the risk spectrum, positive and negative outcomes are all possible.

So, how do we measure them?

Risk capacity is determined by your financial situation (e.g., your debt, income, goals, liquidity needs, and expenses) and your timeline. If you’re 25, you may have high risk capacity because you would theoretically have more time to recover from market volatility. For example, if you’re 64 and retiring next year, considering other factors, your risk capacity may be low because your potential for future earnings to help you recoup an investment loss is also low. But age isn’t the only factor—if you have a sizable emergency fund, your capacity to withstand risk might be higher. Or consider this: maybe you’re a high earner but also have high expenses. Here, your risk capacity could potentially be on the lower side because you may not have much flexibility to lose money without significant changes to your lifestyle.

As for risk tolerance, it is your emotional willingness to handle the volatility and uncertainty that comes with risk-taking activities. Risk tolerance is subjective and can change based on personality, past experiences, and emotions at any given time; that’s why it’s critical to be honest with yourself about your financial situation and your long-term goals. Some people are naturally risk-averse, while others are more adventurous, and some assess risk differently depending on what’s at stake.

So, what can happen if your risk capacity and risk tolerance are out of alignment?

When you have high risk capacity but low risk tolerance, you have the time and money to invest aggressively, but you’re apprehensive about market dips and other threats to your principal. Choosing safer investments can help shield your principal investment from losing value, but that also means you might miss out on growth or fall short in overcoming inflation. When you have low risk capacity but high risk tolerance, you might find yourself chasing big returns without the resources to back up any potential losses. For example, if the market and your portfolio dip together, but you’re relying on your portfolio to cover costs, you could be forced to sell at a loss, shortening your financial longevity.

Your finances are about more than cold, hard cash. The human element of decision-making can’t be ignored, and it can influence your retirement just as much as your account balance. That’s why it could be important to have a financial strategy that helps instill confidence, no matter what the situation is. For example, you might reevaluate your risk capacity when your salary changes, or you might find your risk tolerance being tested when the market slips. At the end of the day, you should remember that both of these concepts are flexible, and it’s possible that your current capacity or tolerance for risk could be misaligned with your long-term financial goals.

But that’s what we’re here for. We can help you recognize and calibrate the risks that influence your financial outlook, so call us today to get started.

Sources:

https://www.investopedia.com/ask/answers/08/difference-between-risk-tolerance-and-risk-capacity.asp

https://blog.riskrecon.com/the-difference-between-risk-tolerance-and-risk-capacity

This information is provided as general information and is not intended to be specific financial guidance This information is not intended as tax advice. Tax laws are subject to change and individual circumstances vary. Please consult a qualified tax professional before making any decisions based on this information. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. SWG 5260511-0226