I have had the pleasure of getting to know Dave London as we meet weekly and listening to his stories about people who have not adequately prepared for their later years. He has made me think about my own preparations and those of my parents, as well. Here are his words of wisdom related to planning ahead so you and your family are protected. Note that I am not a financial advisor, nor do I represent any financial institutions or insurance companies, so any questions you have will need to be addressed by either Dave or your own professional providers.
Proper planning for one’s later years has become essential for many reasons—not the least of which is the dramatic increase in longevity in recent years. Although as recently as the 1980s, one could expect to live to a maximum of perhaps 80 or 85; in the last decade, it has become very common to live well into one’s 90s or even beyond 100. This increase in longevity presents three major challenges: (1) planning finances so that they continue one’s lifestyle for the rest of one’s life—up to thirty or more years beyond retirement age; (2) leaving assets to one’s family; and (3) preventing those assets from being wiped out by the need for long term care.
In order to plan properly, one should have a team consisting of an elder law or estate attorney, a financial planner, and an insurance specialist. Such a team will look at the entire picture and ensure that one will be able to continue one’s lifestyle, and that one’s wishes for his or her later years will be carried out.
The elder law or estate attorney will create the proper documents and see to it that one’s wishes for their later years and for their family and heirs will occur. These documents include a will or a revocable living trust, a power of attorney and durable power of attorney agreement, medical directives, and other documents that may be needed in a particular situation. If there is concern about estate taxes, proper irrevocable trusts or other methods can be set up.
The financial planner will develop a plan allowing one to have sufficient funds invested and allocated to ensure that one will not outlive his or her assets regardless of how long they live, and leave the desired amount to their heirs.
Lastly, an insurance specialist is essential to (1) help maximize the amount one can invest and then take from his or her retirement savings without outliving it; (2) leave sufficient funds for heirs income tax free; (3) pay for estate taxes with pennies on the dollar; and (4) most importantly, make certain that one’s life savings— which were created to sustain one’s desired lifestyle in later years– are not decimated by long term care expenses.
According to the Department of Health and Human Services, approximately 70% of the population will need some form of long term care. The average need for this care is three years with 20% of the population needing it for over five years. According to the Mayo Clinic, those with strokes, Alzheimer’s Disease and other illnesses, may need long term care much longer—some even up to twenty years.
Genworth and Nationwide statistics show that the average cost of long term care in the Baltimore area in November, 2019 was approximately $ 123,000 per year for a semiprivate room in a nursing home and $ 57,000 per year for a home health aide to take care of an individual at home for 44 hours per week. However, many people do not just need long term care 44 hours a week at home. Daily round the clock care at home, necessary with many illnesses, would cost approximately $ 198,000 per year. However, with the proper planning, there many ways to cover such expenses painlessly. In some cases, a simple reorganization of assets is all that is needed. In other cases, a long term care or hybrid policy can pay for long term care expenses if needed; but, if it turns out that one passes on without needing long term care, nothing is lost, the funds simply go to the family income tax free as a death benefit. Each situation is different, and the proper planning for each person and situation needs to be individualized.
Now more than ever, proper planning for one’s later years is essential. The current generation is seeing this first hand as they see the hardship their parents and grandparents went through before many of these new planning methods existed.
If you have any questions, or would like further information, contact Dave at (410) 905-1077 or dlondon@PersonalizedInsuranceSolutions.com