The financial well-being of clients approaching retirement depends on many factors, some that are within their control and others that are not. With the current increase in life expectancy, long-term care costs are a necessary expense that should be incorporated into every retirement plan. Plans that don’t incorporate these expenses can significantly overestimate the sustainability of the plan. However, sometimes it’s too late.
In the following case study I share how not having long-term care insurance changed the retirement plan for my client who is a couple nearing retirement, and how I found creative solutions when needed most. How well equipped are your clients’ financial plans to handle long-term care costs?
Planning for retirement with a serious diagnosis
A couple entering retirement sought a comprehensive financial plan and an advisor they could trust to help them manage their money. Both individuals appeared to be in good health, physically and financially, as they had saved well and the husband had a nice pension income. While exploring the need for long-term care insurance, it came to light that the husband had Parkinson’s disease. He had postponed making a buying decision until it was too late. The wife was able to get the insurance, but the husband was not, and this became a major stressor on their retirement portfolio. Thus it became time for me to be resourceful.
The solution comes into focus
I researched and discovered there were annuity products that could provide higher income payouts and multiples of that income in the event of a long-term care claim. These products did not require underwriting, so we were able to get a substantial amount of money out of them to provide extra income. Sadly, the situation continued to worsen as the husband’s health deteriorated and we faced yet another shortfall of income to cover treatment costs. The wife was forced to move from the retirement community where they lived to a room within her daughter’s house.
The takeaway — and a plan of action
Be more emphatic when identifying the real risks that clients could face in retirement, and include long-term care costs. Costs for long-term care are increasing rapidly and experts believe that 70% of people over the age of 65 will eventually need some type of long-term care.
There are innovative products on the market that can provide relief for different situations clients face. As advisors, we need to remain curious and creative in our planning. Try to place clients in the future to help them imagine what the worst-case scenario could look like. In doing this, have an open and honest discussion about the real-life consequences of being “penny wise and pound foolish.”
You can draw upon this story, and stories like it from other advisors, to vividly illustrate how not making a decision now can leave one vulnerable in the future. Protecting clients with long-term care insurance will not only assist in mitigating their costs, but will help protect their retirement savings.
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