When putting together that financial plan; when it
comes to retirement we prefer to look at the rosy picture. We will have enough money to continue, or
even improve, the lifestyle we had when working. We will cruise, take trips
around the country or even the world. We will summer at a cottage on a
lake. By the way, that lake will be very
crowded with all the retirees that are planning to build cottages on its shore.
We will visit relatives we haven’t seen since the last wedding, or funeral,
hopefully, a wedding.
Let’s assume a somewhat traditional, if politically
incorrect, scenario of a husband, wife and two children. The husband and wife
are close in age and retire at 67 when he is eligible for full Social Security
retirement benefits. The children are married, financially independent and have
children of their own.
The husband and wife; let’s call them John and
Marsha, have planned well. Their home is paid for and requires minimum
maintenance. They have two cars. One is paid for and Marsha’s newer car has a
monthly payment. When her car is paid
for John will buy a new one. A car
payment is their only debt. The children finished college years ago and there
are no student loans outstanding. Their home and non-retirement accounts are in
both names with rights of survivorship.
John’s IRA has Marsha as the beneficiary and Marsha’s IRA has John as
the beneficiary. Both have the children
as contingent beneficiaries. Both have $100,000 term life insurance policies
with each other as the beneficiaries.
So far, so good.
What could possibly go wrong? The short answer is Life. Fast
forward ten years. John is now 77.
Marsha is close behind. The term insurance premiums have become too expensive
to continue. In a perfect world they will continue to live the good life and
quietly pass away in their sleep as they approach 90. In the real world other scenarios take over.
John goes grocery shopping one day and forgets how
to get home.
One gets cancer, or some other terrible
disease. Vacation trips give way to
trips to doctors and hospitals. Their bedroom becomes a hospital room, complete
with a hospital-type bed. Their days are spent fighting the disease.
One, or both,
become frail in mind and body. The other
tries to cope but comes to realize help is needed. Help by visiting agencies
comes at a cost of $20 to $25 per hour and is not covered by their medical
insurance. The very last, and least desirable, solution is a nursing home which
will probably cost over $200 a day for minimal care. It also is not covered by medical insurance.
So, what should they do? Glad you asked. The answer is to anticipate, and plan for,
the worst, while hoping for the best. Do
not wait for retirement to start planning and preparing.
I am a great proponent of term life insurance
because you can get a large amount for a small premium. But it does get
prohibitively expensive as you age. Consider a permanent type policy to cover
those final expenses.
Consider also, long-term care insurance that will
pay for in-home care or, if there are no other options, care in a nursing home.
Other things to look at would be your home. If it is two stories, where are the bedrooms?
At some time the stairs will become an obstacle. Can you have a bedroom
downstairs? Can you build an addition,
possibly a bright sun room?
Where are the children? Are they nearby or hundreds of miles away? Are you concerned that you may become a burden to your children? How would you, and they, feel about your moving in with them?
It’s a lot to consider, but plan now and save you, and your family, from making tough decisions in your old age.