Before choosing financial planning strategies for different times in your life, consider the “Steps of Life” above. Even though the lithograph was created in the early 1900’s, not much has changed today.
We start life as a baby on the lowest step of a long staircase. As we climb each step we grow in statue and age until at the top we are adults. Beyond that, the steps lead down until near the bottom, we become old, infirm and weakened — receiving homecare and financial support from a family member.
Have you, as a 21st Century adult child caregiver, parent or business owner considered what your family’s assets and health will look like in the future? While the stages of life may not have changed much in 120 years, life expectancy (along with the risks of outliving savings, paying for eldercare, and being unable to leave a legacy to your children) has increased. If you could purchase one financial product today that would enable you to reduce those three risks tomorrow, would you?
The key to building wealth and protecting your future is simply this: Look at the old woman about halfway down the staircase and pretend you are asking HER what she should have done. Where time trips us up is never believing we are going to be the son or daughter providing financial support and homecare until we are — and then it is too late.
It’s tougher and tougher to scramble up steps at every turn. A spouse and kids are a big responsibility. You are lucky if you have two nickels to rub together at the end of the year. Most of us who are not in the actuary business don’t think about life after age 50, the peak of an average college-educated person’s annual earnings potential, unless we are offering financial support or care to our parents.
There is a multi-tasking product that offers forced savings, funds homecare expenses while you are alive, and insures a death benefit for your spouse and children when you die. If we could talk to that old woman and her son on the steps down they’d tell us, “Get whole life and long-term care insurance policies while you are young and healthy, and they are cheap. The bargains will vanish by the time you need insurance.”
Here are some stats to consider for yourself, your kids, and you parents:
How Long Will $3 Million Of Retirement Savings Last Without Major Homecare Expenses?
If you retired today at age 65 with $3 million in liquid assets, desire 15k of gross monthly income for living expenses, receive $2300 monthly from Social Security, and assume a 5% average annual pre-tax total rate of return on your liquid assets and 3% average annual inflation rate, your assets will last to age 90. If you smoothly traverse the steps of life without any health issues, you might have money left over to leave for your children.
How Long Will $3 Million Of Retirement Savings Last With Major Homecare Expenses?
Someone turning age 65 today has almost a 70% chance of needing some type of eldercare services and support in their remaining years.* The average cost of a private caregiver hired via an agency in New York City is $27/hr. The cost for a 12-hour shift is $324 per day or almost $10,000 (You can typically save 10% to 25% by directly hiring background-checked aides via Care Concierge NY.) If you need $25,000 of gross monthly income ($15k + $10k) and assume the parameters above, your assets will last 12.6 years or until age 78. Who’s going to feed you and your healthy spouse after age 78? How will you leave a legacy for your kids?
How Much Do Employed Adult Caregiver Children And Spouses Typically Lose In Income & Benefits When Taking Time Off To Manage A Parent Or Spouse’s Care?
Total lost income and benefits over a caregiver’s lifetime is estimated to range from $283,716 for men to $324,044 for women, or an average of $303,880.30**. If your adult children support you, will they be able to leave a legacy to their own children?
The Solution: A Hybrid Life & Long-Term Care Insurance Policy
“Who cares about statistics? I could die tomorrow or live until 100” you might say. However, statistics don’t lie. To beat the system, you’ve got to force yourself to do now what you have no need for yet: Buy a whole life insurance policy with an Enhanced Accelerated Death Benefit (long-term care) Rider. Put the policy in your file drawer, never look at it again, and just keep paying the yearly premiums like they were taxes due.
Now that you are that old woman or man with the cane going down the final steps. You are two inches shorter, your knee bothers you, you take a lot of pills for blood pressure, and you joke about “senior moments.”
But you still exercise every day, feel pretty good, and want to enjoy a comfortable lifestyle with your spouse while you still can. You have no actively earned income because you are retired. But you feel comfortable because you followed the old woman and her son’s advice to buy insurance years before when she was on the descending step and you were on the climb. If need be, you can pull that whole life policy out of your drawer to pay for long-term care expenses, live on its cash value if you run out of savings, and maybe still have a death benefit to leave a legacy to your children.***
@2018 Robert Lovenheim & Aaron D. Schindler CFP®, Not for reproduction without permission.
https://publicdomainreview.org/collections/the-steps-of-life/
Retirement savings calculated using www.calcxml.com.
*U.S. Department of Health & Human Resources
**Valuing the Invaluable, AARP Public Policy Institute, Updated February 2015
***Using a life insurance policy to pay for chronic illness care will reduce the policy’s death benefit. Distributing cash value from a life insurance policy will also reduce the policy’s death benefit.