As financial and insurance advisors, every day we help our clients protect themselves, their families, their businesses, and their properties from adverse occurrences large and small. Some discussions are pretty easy — let's insure that new car, include your daughter at college on your health plan, protect your house against hurricanes — but others can be difficult. Even the welcome thought of retirement can bring conflicting emotions: Great, you get to retire. Now what happens if you need nursing care or outlive your retirement funds?
Human nature being what it is, our clients often think of these things very late in the retirement game. There are many 50-80 year olds who do not want to think about them at all. They mistakenly believe that just because they are playing golf a few times a week that they are in good health. The “this could not happen to me” syndrome is rampant.
It is our job to tell them that long-term care (LTC) insurance is a strategic way to protect their accumulated assets. It is the protector of their portfolio and, combined with the new tax laws, offers benefits in different ways. We must help our clients consider all of the options available to determine which make the most sense. At least some coverage is always better than going bare. With proper planning, LTC insurance does not preclude a person from receiving Medicaid. Given the extreme expense of nursing care, the days of Medicaid being “just for the poor” are over.
People also should be encouraged to review their living trusts and other documents with an attorney every few years. The laws are constantly changing, and adjustments should be made to maximize value and minimize risk.
Income Planning
When I discuss lifetime income planning with my clients, I always ask them, “If you made a 30 percent return on your money, would it change your life?” Most say no, but it would be welcomed. Then I ask, “If you lost 30 percent of your money, would it change your life?” That answer is, “You bet it would. I may not have time to make it up, and I would have to change my lifestyle.” Preservation of capital never goes out of style and always has a place in retirement plans.
Seniors in retirement today are finding out that they did not plan well enough. The days of pensions are disappearing. Interest rates have dropped to very low returns while costs associated with health care, dues, and other assessments have increased. This has caused everyone on a fixed income to experience hardships. Many retirees have had to dig into their principal faster than they thought.
Again, this is where we as agents can help. A base of income for life, like a pension in a fixed account, can be set up in many different ways to meet a person's unique needs. At my client appreciation nights, I like to direct some basic questions to the guests of my clients. I ask how many own a home. Typically, the response is around 95 percent. I follow up by asking if they have homeowners' insurance. Again, the response is around 95 percent. Then I suggest that they can protect their retirement plans just as they protect their homes. They can insure their assets with LTC coverage and insure their income with a lifetime income rider from a fixed plan.
Gene Herscher is president of Strategic Partners Insurance in Lake Worth. He may be reached at 561-429-6996.
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