About 15 years ago, Sheila Munch was a bank branch manager and saw something that didn’t add up.

A widowed, elderly client was regularly withdrawing $1,000 via money order. When she started withdrawing that amount more often, Munch asked the woman if everything was okay. The client said it was.

But Munch pressed, and asked to visit the client’s home. There, she says, “I saw all this junk that she claimed she was ‘winning.’ The guy would tell her she just had to pay for shipping. And then he became her friend, calling her all the time [saying], ‘Wow, I can’t believe you won again.’ ”

She explained to the client that her phone friend was in fact a fraudster taking advantage of a lonely senior. She urged the client to call PhoneBusters, the National Anti-Fraud Call Centre. The client did, and the calls stopped.

Read: Protect elderly clients from scams

Since then, Munch, now a senior financial planning advisor at Assante Financial in Oshawa, Ont., hasn’t had to deal with client abuse.

But with the population aging, advisors need to listen for cues. Many of these aging Canadians are divorced or widowed, and don’t have dependants—or, if they do, those dependants live far away.

So, start asking single clients more questions, says Darren Farwell, senior wealth advisor, ScotiaMcLeod in Toronto. For instance, he has an older client in Toronto who told him Alzheimer’s runs in her family. “My first question was, ‘If something were to happen, and you can’t look after yourself, where are you going to go?’ She said, ‘I’m going to live with my daughter in Calgary.’ ”

Farwell questioned whether she’d asked her daughter if that would be fine with her. She hadn’t. So he’s told her to call and explain her wishes.

If the daughter isn’t agreeable, he and the client will explore other options, such as a nursing home. He’ll ask which one she’d prefer to live in, “and if we learn it costs $4,000 a month, we’d build that into the plan.”

Read: Dealing with POA abuse

Munch, meanwhile, asked a 70-year-old widow who didn’t have children what her plans were. She told Munch she was going to name a friend as her executor, rather than a third-party trustee. Yet, when Munch asked how old that friend was, Munch learned the client was the same age as the friend. That triggered a delicate conversation about what would happen if the friend died first; the client would have to rethink whom she’d want as executor and PoA, and redo her will. Or, she could include a contingent executor and PoA now to save hassle later. “You raise questions and they come to conclusions on their own,” says Munch. “After discussing all the ‘what ifs’, she ended up asking the friend to be primary executor and PoA, and the friend’s daughter to be secondary. I don’t think she would’ve done that had we not had the conversation.”

Retirement income

The per-capita cost of living is higher for singles than it is for couples. “It’s not half as expensive, just because you’re single,” says Munch. “Lighting, hydro and phone costs are the same.”

Malcolm Hamilton, pensions expert and senior fellow at the C.D. Howe Institute in Toronto, agrees. “A single person will have expenses that are about 50% higher than half of a couple. So if a couple needs $30,000, a single, to have a similar standard of living, would need about $22,500.”

This means a single-person household needs more for retirement. And, unless a client has existing health problems, she or he should plan to live until at least age 90.

For that planning, Hamilton recommends using the 4% rule, and then adjusting up or down based on inflation. So, if a single person is aiming to be retired for 25 years, she could withdraw about 4% of her capital in year one, and then more or less in subsequent years.

“If she has a half million saved in an RRSP, she could take out $20,000 that year. And she might get another $20,000 from government benefits, so that’d be an after-tax total annual income of about $35,000. She has to manage her expenditures accordingly.”

Read: Learn the signs of elder abuse

One way to get more income is by using life-only annuities (see “Annuity triggers,” below). Single clients are “excellent candidates for annuities because they may not need to leave behind an estate,” says Bruce Cumming, executive director, Private Client Group, HollisWealth in Oakville, Ont.

So if a 70-year-old female invests $100,000 today, she could get a 7% annual cash flow, which is about $595 in monthly income. “If she buys a GIC, she’d be hard-pressed to earn 2%,” he says. “She’s going to get north of 7% with an annuity, so that’s a 5% gain every year, which is $5,000.”

While some clients may not like that the remaining capital in the annuity isn’t paid to her estate upon death, “if her life expectancy is in the high 80s, that 5% higher guaranteed rate of return for the rest of her life is enough of an argument to offset the [concern that] she’ll lose her capital.”

Another example: a 70-year-old single male with a $100,000 annuity can get $659 monthly. That’s about $7,900 annually, which is almost 8% return. This is in comparison to a couple, both over 70, who’d get $516 monthly or $6,192 annually: a 6.2% return.

There’s also the option to invest in corporate class funds, which defer tax by returning capital. Say a client invests $100,000 on a fund and it earns 5%, says Farwell. She’d receive a $5,000 return, of which about 95% is tax-deferred. So, she’d get $4,750 after tax. “If that 5% was fully taxable as interest income, even at the 40% tax bracket, then of that $5,000, she’d only keep $3,000,” he says.

Farrell tells clients these funds still earn interest, dividends and capital gains income. He also reminds them the 5% isn’t guaranteed, like it would be with a GIC.

Annuity triggers
Source: Bruce Cumming, HollisWealth
The chart below outlines the differences in income for 70-year-old singles vs. couples at the same age, with each
investing $100,000.
Single male Single female Couple
Monthly income $659 $595 $516
Annual cash flow 8% 7% 6.2%

Getting older

When a single person gets sick, he or she will likely have to pay someone to take care of them.

Read: 8 ways to celebrate senior clients

One of Munch’s elderly clients had a net worth exceeding $2 million. She’d downsized to a condo after her husband died. When she got sick, she decided to stay in the condo because she could afford 24-hour care. That full-time help cost between $2,000 and $3,000 per week.

After four months, the client died of a viral infection. Her total private home care bill was about $48,000, and she donated the remainder of her estate to charity.

But not all clients can pay for this type of care, so Cumming recommends long-term care insurance. “These clients have no natural caregivers, so it will be very expensive and challenging to have care in their later years” (see “Why clients should consider long-term care insurance” ). When discussing this insurance with a client, he points out the perceived advantage of not having heirs also means there are no natural caregivers. Then he explains that long-term care insurance allows her to buy that care.

Cumming also watches for signs of failing health. “You’ll start to see unusual behaviour, like more phone calls about investments; or their near-term memory is shot, and they’ll ask you the same questions several times.”

If a client starts acting out of the ordinary, he notifies the PoA. “I don’t have a clear protocol under which I’d do that, but I’d do it with the best of intentions,” he says. “It depends how well I know the PoA.”

If it’s a family member with whom he’d already had contact, he’d reach out with his concerns. If it were an unknown third party, he’d speak to his compliance department first.

And, if the situation worsens, Cumming suggests contacting the Community Care Access Centre (CCAC) or the provincial equivalent. At the CCAC, a healthcare expert will interview Ontario-based clients and review their situations. “If the client is living in her own home, she’s eligible for a certain number of hours of care, including someone to come in and straighten the house. If she’s in a retirement home, she can get CCAC attention for bathing, for instance,” he says.

Read: What the right-to-die ruling means for POAs

So watch out for changes in behavior, and offer your assistance. These clients will depend on you, and may have nowhere else to turn.

When an elderly client marries

Peggy Gates-Hammond, director, Wealth Services of BMO Private Banking in Halifax, has a client in her late 70s with assets in the millions and a generous company pension.

Running out of money isn’t an issue.

But when the client mentioned during an annual review that she was getting married for the first time, Gates-Hammond had questions. “My immediate concern was, ‘Is this someone who wants to take advantage of her? Is it someone who needs a caregiver?’ ”

She asked the client about her fiancé’s background, and learned he was a widower, and 11 years her senior. Gates-Hammond reminded the client that the marriage would invalidate her will in Nova Scotia, so they’d have to reopen that discussion. Since the client never had children, the original beneficiaries of her will were her siblings (two lived in Ontario, the third in Costa Rica), and her nieces and nephews.

But even with heirs to protect, she didn’t understand why she needed a prenuptial agreement. “She found those concepts difficult. I offered to meet with her fiancé and help her explain. After meeting him, I was able to form my own opinion. I didn’t think he was after financial gain because he had his own wealth.” Gates-Hammond adds she also noticed “he was smitten.” When she asked what the rush to get married was, “he said, ‘At my age, you don’t put these things off.’ ”

The advisor recommended the couple see a lawyer. They did, and Gates-Hammond attended the meeting to review the documents. “My biggest concern was that she was going to leave her home and move into his, so I wanted the prenup to address that.” The fiancé has three adult children, so he planned to leave the home to them. Gates-Hammond worried what that would mean for her client.

So, on her advice, they revised the will and prenup, stating her client would have a life interest in the property. If he dies first, she can live there as long as she wants. All parties, including the children, agreed, and the couple wed in early February 2015.

Suzanne Yar Khan is a Toronto-based financial writer.