Addressing health care needs in retirement

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By Rob DeHollander, managing principal, DeHollander & Janse Financial Group

In my career, I’ve worked with a lot of families and business owners over the years. The typical cycle of wealth creation involves growth, preservation, and eventual distribution of assets as a financial legacy. I’ll address the legacy step in a future column. This month, I’d like to address the preservation step, particularly as it relates to health care. This is often one of the hardest and most often overlooked financial planning steps for many clients. There is an emotional bias against this area of planning, especially for successful individuals. Who wants to think about the idea that someday they may experience diminished physical or cognitive ability? It can be a hard conversation, but it is a critical one to have with your loved ones.

Moving beyond fear
Most of us are aware that life expectancies are on the rise. However, we avoid thinking about getting older, getting sick, and having to pay for health care for a prolonged period. Medicare and Medigap premiums, deductibles, and copayments alone can consume a significant portion of your income. And long-term care expenses can quickly drain even a large nest egg.

Here are four questions to help get the process started:

What were your parents’ health care experiences like?
Before you begin wrestling with your own goals and concerns, think about your family’s experience:

  • How old were your grandparents when they died? What illnesses were common among other family members of their generation? You may remember that your grandmother was very forgetful, but you likely don’t remember a diagnosis of dementia.
  • Does longevity run in your family? Are your and your spouse’s parents still alive? Are they in good health, or are they declining physically or mentally?
  • What were some lessons learned from your grandparents’ and parents’ final years? For example, did an uncle or aunt — or brother or sister — take on caregiving? How did the caregiver feel about that?

How and where do you want to live?          
Next, consider how you want to age and how you want to use your assets for your care:

  • Have you thought about long-term care and what it would cost?
  • What resources do you have for funding health care?
  • Have you thought about assisted living? If so, what type of assisted living or continuing care residence would offer you the lifestyle you want?
  • If assisted living doesn’t appeal to you, have you considered selling your house and downsizing to a smaller and easier-to-maintain living space, such as a condominium?
  • Will you rely on your children to be your caregivers? One child may be willing to be your caregiver, but has he or she considered how those duties will impact his or her employment and finances?
  • Would you consider relocating to another part of the U.S.? Perhaps your children live in different states, but one of them is more than willing to serve as your future caregiver. Would you be willing to leave established friendships and activities to move where this son or daughter lives?

Whom do you trust?
Over time, most people experience some cognitive decline. Senior fraud has reached epidemic levels and can be devastating. Whom do you trust to manage your assets and carry out your financial plan if you are no longer able to?

After answering this key question, you’ll want to consider several related and equally important issues:

  • Do you have basic estate planning documents, including a last will and testament, power of attorney (POA), and health care POA? If you do have these documents, how old are they? Do they need to be revised?
  • When do you want your general durable POA to take effect — immediately or only years from today after you lose capacity?
  • Do you have a revocable trust? If so, was it drafted and executed before the federal portability and increased exemption amounts became effective?
  • Are the beneficiary designations on your assets correct and up to date? Remember: Those designations — not the terms of your will — determine the distribution of your assets.

What’s your family dynamic?
Finally, ask your children and heirs whether they will be able to put aside any long-standing differences and follow through with your wishes. This can be the most difficult question to answer objectively. Your children may not react well to the subject of your lifetime health care needs. Even though it’s a hard conversation, it’s one worth having. Your heirs will thank you for proactively planning and making these tough decisions clearer and easier when the time comes.

Robert DeHollander is a managing partner and co-founder of the DeHollander & Janse Financial Group in Greenville.

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