Hear that sound? It’s the can being kicked down the road.

Just visit the website of any law firm specializing in estate planning and you’ll likely find a post about how legacy planning is affected by cognitive decline. There’s a simple reason why, according to Scott Rahn, founding partner at RMO LLP, a boutique law firm specializing in estate dispute litigation: People tend to put off such planning until life makes that untenable, and a diagnosis of a disease like Alzheimer’s does just that.

A diagnosis brings about a scary and emotionally charged time for people and their families, Rahn told Retirement Upside, and they naturally start looking for answers and support. There’s no getting around the challenges that progressive cognitive diseases bring to life in general and estate planning in particular, but the upside is that advisors can help bring peace of mind to clients who are facing the unknown.

Preparation Is the Prescription

“A lot of the media attention we see about cognitive diseases is dedicated to amazing advancements in treatment for older Americans,” Rahn said. “We’ve moved mountains, but unfortunately, the good news has obscured another reality I’m seeing on the ground in the growing prevalence of early-onset disease.”

Data from the Alzheimer’s Association backs up the anecdotal experience:

• The number of individuals developing Alzheimer’s disease has tripled among those aged 30 to 64 over in recent years.

• An estimated 200,000 Americans are living with younger-onset Alzheimer’s disease and related dementias, accounting for roughly 5% of all people diagnosed with the conditions.

Greater awareness would motivate more people to do the serious work of building an estate plan, Rahn said. Putting plans in place or updating an outdated strategy after a diagnosis is certainly possible, but that entails planning at a time of tremendous stress and uncertainty — never a good thing in estate planning, he said.

“Another reality that I’ve seen in my practice is that rapid cognitive decline, at any age, invites exploitation,” Rahn said. “If the client doesn’t have a solid plan in place that all the stakeholders and potential caregivers understand, the result can be pretty disastrous.”

Trust Issues. Legacy planning is inherently more complex at greater wealth levels, especially when trusts come into play. A grantor with diagnosed dementia can create a new trust, but they have to demonstrate the legal capacity to undertake the decision.

While there are caveats depending on state jurisdiction, proving capacity generally requires that one understands the responsibilities created by a trust, the consequences of creating the trust for both the grantor and others, and the inherent risk-reward tradeoffs in trust creation. Conversely, updating an already established trust is much less burdensome.

“Therefore, it is always a smart idea to discuss trust creation earlier, when there are no questions regarding you or your loved ones’ legal capacity,” Rahn said.

Saving for retirement may not necessarily be hard when you charge at least $350 an hour.

But executive compensation in the legal world can be complex. Between K-1 income, capital accounts, deferred comp and buy-in/buy-out terms, there’s a lot to consider, especially when it comes to planning for retirement.

The finances are actually the easy part for many successful law firm partners, said Spuds Powell, managing director at Kayne Anderson Rudnick Wealth Advisors. It’s making the psychological transition from leadership in a high-stakes work environment to whatever comes next that’s a lot more difficult. After decades in the trenches, top attorneys can struggle to navigate the retirement transition on their own.

“They need significant financial and behavioral guidance from experienced advisors,” Powell said.

Giving Up the Reins

Leaders at high-powered law firms are a particular type.

“They’ve gone from being the top of their class in undergrad to getting into top law schools and then top law firms. Then they make it to be a partner,” Powell said. “They haven’t come up for air in 20 or 30 years.”

Many identify with their work, and that perception gets stronger by the time someone reaches their late 50s and retirement becomes a more pressing reality. That’s one reason why executives at law firms tend to retire a lot later than the general population, a fact that is starting to cause strain in the legal industry:

• Roughly a third of lawyers in the US are 55 or older, according to the Bureau of Labor Statistics.
• That includes 14% over 65, and it isn’t unusual for lawyers to work well into their 80s.
• That tendency creates a bottleneck at some firms, and the likes of Latham & Watkins, Morgan Lewis, Debevoise & Plimpton and other large firms have even hired consultants to help lawyers think about their next phase of life, per the Wall Street Journal.

Financial advisors are in the perfect position to break this pattern by starting conversations about finding meaning outside of work, Powell said, ideally sooner than later.

What About the Benjamins? The financial side of retirement for successful lawyers is also important, of course, but it’s usually not too difficult. Many law firm partners will have significant pension income to complement personal investments, liquid assets and Social Security. That brings a meaningful degree of certainty, as does the recommended transition toward a more defensive portfolio that favors high-dividend paying stocks and investments in tax-free municipal bonds.

“The main challenge is dealing with what can be big lump sum payments that come maybe only once a year and translating that into a steady income stream in a tax-efficient manner,” Powell said. “For the wealthiest clients who are going to exhaust their estate tax exemption, trust planning, gifting and philanthropy come into play.”

More money, more problems?

The Social Security Administration announced its 2027 cost-of-living adjustment on Wednesday, setting a 3.6% benefit boost that will raise the average monthly payment from $2,071 to $2,146, or by about $75 per month.

“A 3.6% COLA increase is both good news and bad news for beneficiaries,” said Martha Shedden, founder of the National Association of Registered Social Security Analysts. “It’s good news in the sense that beneficiaries will receive a larger monthly payment. It’s bad news because higher COLAs are generally a reflection of higher inflation.”

Most retirees would probably prefer lower inflation and a smaller COLA, sources told Retirement Upside. Still, they agreed, treading water is better than sinking.

COLA Wars

Data on average inflation from the third quarter is used each year to set the Social Security COLA. This year, energy costs proved to be the biggest factor behind rising prices in Q3, especially in August and September, per data from the Bureau of Labor Statistics:

• The index for gasoline rose 9.1% in September alone, accounting for over half of the monthly all-items increase.
• The broader energy index increased 5.2% over the month, following a 2.1% increase in August and a 1.5% decline in July.

For context, the 3.8% COLA will be above the roughly 2.6% average adjustment over the past 20 years, but it’s well below the most recent high of 8.7% in 2023, when supply chain shocks caused by the pandemic caused sky-high inflation.

“Seniors won’t see any changes to their benefit checks until January, but the inflation the COLA is supposed to account for has already occurred,” said Shannon Benton, executive director of the Senior Citizens League. “In years like 2026, when lots of inflation happens in the first half of the year, it means seniors have to endure elevated prices for months without any financial recourse.”

COLA in Context. The annual COLA gets the headlines, but advisors should pay attention to all the annual Social Security changes. These include the taxable wage base, earnings-test limits, maximum benefits, primary insurance amounts, Supplemental Social Security Insurance amounts and more.

For Medicare beneficiaries, Part B premiums can also absorb a portion of the COLA. In its latest annual report, the Medicare Board of Trustees projected the standard monthly premium for Part B will increase by $6.60, reaching $209.50 per month in 2027. The actual figure is expected to be published soon.

“All these factors can affect planning decisions for workers and retirees alike,” Shedden said. “The number retirees really care about isn’t just the gross COLA. It’s how much of that increase ultimately remains in their pocket.”