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Financial Planning for Your Final Years: 7 Questions to Consider

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Maybe you feel you have plenty of time to financially plan for how you’d like to spend the final years of your life. Perhaps you are already into retirement or you’re helping senior loved ones with their plan. Regardless of your perspective, planning for those final years – the years going into retirement and beyond – may require continual self-reflection, according to the experts.

“The biggest problem is that many people, because of a reluctance to face these kinds of issues, may fail to do so,” said Beth Ludden, Senior Vice President of Product Development at Genworth Financial. “That leaves individuals potentially at financial risk in their final years.”

Continuing to reassess your life situation and priorities could help make those years meaningful. Regularly asking and answering the following questions may determine how someone’s life song plays out, according to Ludden and the experts at Home Instead Senior Care®.

1. How do you want to live your final years? Think of the final years in broader terms than just retirement. “Consider a phased-in approach,” Ludden said. Perhaps you’d like to take up downhill skiing or hang gliding during those early years. Maybe a trip to Europe is on your bucket list or volunteering at your favorite charity. Do you have a plan in place that will help you support this type of lifestyle? And, as you age, how do you see your life unfolding? Is your goal to remain independent to the end? And where do you want to be at the end – at home or in a care community? “Consider that some of those years will be more active than others,” Ludden said. “People used to be pictured on the beach or playing golf in retirement. People now seem to want to be more active. But there may be a period of time when you are less able to engage and where would you want that to be?”

Ludden noted that it’s important to involve a financial professional such as a financial planner or life insurance agent when you start thinking about final years planning to ensure you have the means to support your goals. Final Years Planning: Where to Find Assistance can help you learn more. Plan the fun part as well as those aspects of care you’ll need to have in place as you age. “Ultimately getting organized helps people feel more relaxed,” Ludden said.

2. Where do you want to live? Ask someone where they want to spend their final years and most will say “at home.” That’s what a number of studies have revealed.[1] Unfortunately, it’s not always that simple. “Do you have a practical plan to address your final years at home, will assistance be available and who would you like to help you?,” Ludden questioned. “All of those issues will impact the financial plan you should put in place.”

3. What’s your plan if you need help? Experts say that 70 percent of people will need long-term care at some point in their lives according to the U.S. Department of Health & Human Services (Who Needs Care?)[2]. But people often are more willing to talk about death than they are disability, Ludden said. In fact, North American seniors are more comfortable planning for their funerals (79 percent) than planning for when they need full-time care (74 percent), or hospice or palliative care (71 percent), according to a survey conducted by Home Instead Inc., franchisor of the Home Instead Senior Care network. Both cognitive and mobility issues are significant issues in aging, Ludden said. “About half of Genworth’s long-term care claim dollars are paid to claimants with cognitive disorders, including dementia.”[3]

Many people mistakenly believe that Medicare will cover assistance for long-term medical needs, Ludden noted. In fact, according to the 2017 Genworth Cost of Care survey, two-thirds of respondents believe the government will cover some or all of the costs of care. Medicare by itself may pay for a limited amount of long-term supportive services. Medicare covers up to 100 days of care in a nursing home (skilled nursing facility) after you have spent three days in the hospital and only as long as you need the skilled care.

“Medicare is designed to pay for acute care situations such as hospital stays or doctor visits,” Ludden said. “There are very few provisions for long-term care service – only as an outgrowth for acute care and only for a brief time as long as someone is showing increased progress. Because people mistakenly believe that Medicare pays for long-term care costs and individuals are required to spend down their assets to receive Medicaid, many people have lost assets they’ve wanted to preserve,” Ludden added.

Check out more information about what Medicare does and doesn’t cover.

There are ways to cover such care, Ludden explained, even at home and in a disabled condition. “Many long-term care insurance policies sold currently provide for home care that is designed to support activities of daily living that cover a wide range of providers.”

4. Do you know the cost? Costs of care can be sobering. According to the Genworth 2017 Cost of Care Survey[4], the annual median cost of long-term care services increased an average of 4.5% from 2016 to 2017, the second-highest year-over-year increase for nursing homes and home care since the study began in 2004 and nearly three times the 1.7 percent U.S. rate of inflation. Learn more about the survey and find out costs in your area. Rising costs may increase the urgency for many to create a plan.

5. Are products and services in place to support a plan? The good news is that a variety of long-term care plans exists to meet varied needs and budgets, Ludden said. “There are still traditional long-term care policies that are stand-alone and designed to pay for the types of services you would need in a chronic care situation, whether in a nursing home, assisted living or at home.

More recently, hybrid products have been developed that are life insurance or annuities with a long-term care insurance rider.  While you are living, these types of policy riders allow you to access a portion of the face amount of the policy to meet your long-term care needs. There also are combination long-term care and life policies that have living, long-term care insurance benefits that mimic more of the stand-alone types of long-term care insurance products. These policies can be designed to pay out on a monthly basis rather than in a lump sum.”

A handful of insurance providers also offer an underwritten immediate annuity, which can be helpful for people who did not plan and would like to stretch their dollars. “This product pays out a guaranteed lifetime income based on an initial lump sum premium.  Because this type of annuity is underwritten, for a person with adverse health conditions, monthly income payments may be higher than those from a non-underwritten immediate annuity. This type of product can help cover an immediate financial need for someone who is already impaired and looking for a way to get the most out of their dollars for care.”

6. Is your plan flexible? Circumstances sometimes change plans sooner rather than later. “Events may be the trigger to look at your financial plan,” Ludden said. “Unexpected deaths in the family can be a factor, as can family moving away. Life events are much more of a line of demarcation to reassess the plans you’ve made. If you’ve planned adequately, it may not be necessary to make frequent changes. In fact, that’s one of the benefits of putting a plan in place.”

7. Does your family know about your plans? It’s important that family members know about your plans and that you share specifics about the types of products and services you have in place. “In the event an individual becomes disabled or impaired, long-term care insurance companies do have mechanisms in place to alert someone to the fact a bill has not been paid or an important change has been made to their product or service. Also, there are required protections in place if someone’s policy would lapse as a result of a cognitive or physical issue.” Regardless, having a beneficiary on a policy or a power of attorney designated can reduce the risks of being vulnerable.

Additional Resource:

6 Ways to Get Started on a Final Years Plan
Final Years Planning: Where to Find Assistance
The Risks of Not Planning for the Final Years

[1] The 2016 Long-Term Care Poll, The Associated Press-NORC Center for Public Affairs Research, with funding from the Scan Foundation.

[2] U.S. Department of Health and Human Services https://longtermcare.acl.gov/, October 10, 2017

[3] Genworth long term care claims experience data, Dec. 1974 through Dec. 31, 2015

[4] Genworth 2017 Cost of Care Survey, Sept. 2017.

Last revised: February 23, 2018

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