During trying times like these, it’s understandable if you feel like your retirement is on life support. But even if you’re feeling like this, now is not the time to pull the plug on your retirement plan. Instead, now could be a good opportunity to look at how you can put some protections in place to make sure your plan, and your ideal retirement, is safe from harm.
We recently came across a great article in the Investments & Wealth Monitor by Harry Margolis called The Three Biggest Risks To Your Retirement And How To Avoid Them. What’s interesting about the three risks Harry outlines is that they have nothing to do with the markets or stocks and bonds — or even with money in a way that you would normally think about it.
Instead, the three big risks Harry outlines are:
Long-term care costs
Why exactly are these risks to your retirement, and how can you protect your ideal retirement from them? Read on to find out!
Long-Term Care Costs
The cost of care can be a big hit to your retirement.
After all, we’ve all heard stories about people around us who have needed care in assisted living facilities, a nursing home, or something of the sort, which can cost anywhere from $5,000, $10,000, or even $12,000 a month.
That’s why these costs are a big risk to not only your retirement — but also to your spouse’s.
It’s likely that only one spouse will need care first. When they pass, $100,000 or $200,000 or more might have been spent on their care. But what will happen to the surviving spouse? They’re now likely receiving less social security, maybe have less coming in on a pension, and have less money to take care of themselves should they also need care.
However, most people just don’t plan ahead about what will happen if they’re the second spouse to pass. But we don’t want you to be caught off guard if that happens to be the case. That’s why, when you’re planning things out with your spouse, we recommend trying to figure out what you or your partner will also need in the case of long-term care should you be the surviving spouse.
When you sit down together to plan this, here are three things for you to consider:
Who will take care of you?
Is it going to be your spouse? Your kids? A professional?
Where will you live?
Can you receive care in your home? Is it accessible? Will you need to move to a new home or a care facility?
How are you going to pay for your care?
Are you going to pay out of pocket? Do you have insurance to help? Will you get the government to help?
Long-Term Care Insurance
One option for helping you fund your cost of care is long-term care insurance. Although many people call this type of insurance “nursing home insurance,” it doesn’t actually keep you out of the nursing home. Instead, a lot of the time, it can actually help you stay in your home for longer.
We also like to joke that long-term care insurance is the “stubborn old man insurance.” After all, you likely need the care, but if you’re a stubborn old man, you’re probably going to say “No thanks, I don’t need it.” And when the doctor says you need some care — and you’re the one that needs to pay for it — you’re probably going to start thinking about all the reasons why you can do it on your own rather than paying someone else to do it for you.
But when you’re in this situation, usually things get worse and worse until something big happens — and then you end up going straight to the nursing home.
However, if you actually buy long-term care insurance you’re more likely to receive care - because you know someone else is helping pay the costs - and you might be able to stay in your home longer.
Even if you just get a small policy, having long-term care insurance can be a big help when the time comes. Even small policies can help you make sure that you’re going to get the care you need — and the insurance company can even help you help you find nursing homes, assisted living facilities, and in-home care. You’ve likely never shopped for these services before, but the company has had a lot of clients who have needed the help.
So, even if you get a small policy, anything is better than nothing. Talk to your advisor about what makes the most sense for your family so you can start planning - before you become a stubborn old man (or woman)!
With the rise of technology has come a host of new scams, many of which are targeting your personal or financial information for monetary gain.
Since there are a lot of manipulation tactics that come with scams, it can be difficult to feel safe from them. But there are a few key ways you can protect yourself, and your financial plan, from harm.
One option is to get a durable power of attorney, which gives legal permission to someone you trust to handle your finances if you are no longer able to. As you get a little bit older, you might have more trouble taking care of your finances, and unless you’ve given legal permission to somebody beforehand, your kids can’t suddenly show up and take over if something fishy is going on.
To help keep an eye on your finances, you could also consider having a joint account with one of your kids, or having them listed as a joint owner on your checking account. Or, if for privacy reasons you don’t want to allow your kids access to the funds, another way you could go about it is to just grant them online access. This way, they can view what’s going on in your account and if something seems off, then they can talk to you about it and try to figure out what’s going on.
Another way you can protect yourself is by getting some identity theft protection. Here at Keil Financial Partners, we’re part of the Thrivent Advisor Network, which offers member benefits including free identity theft protection.
We also recommend simply being aware of the different scams that are you there to help make it easier to spot a scam. There are several places you can find out about common scams. For example, here in the Milwaukee area, WE Energies has a great webpage about the different scams that are out there — check it out here.
Remarriage, or entering a new long-term relationship later in life, is another risk to your retirement.
When you enter a new relationship later in life, chances are that both of you have more assets built up, and likely each have children that are a part of your financial picture. If you don’t take the time to consider your retirement and legacy plan during this time, things may not pan out as you had originally planned.
Even if you don’t get married again but are in a long-term relationship, you might think that you’re safe from harm because all your assets are still separate since you’re not married. But that’s not necessarily true.
What if you have a house together? If you don’t have a prenuptial agreement, or something called a cohabitation agreement, if you pass away, the house could become listed in their name only. Then, when they pass away, their kids might inherit it — not yours. Or, if only one of you owns the house that you’ve been living in for years, and the partner who owns it passes away, there’s nothing stopping their beneficiaries from kicking you to the curb despite it having been your home for years.
There are all kinds of different things that can happen with remarriage or later life relationships. While you might think that you’re making things easier by not getting married, you could be setting yourself up for more difficulties down the line.
That’s why we suggest having some sort of legal agreement to help mitigate these difficulties. You don’t have to be married to go to an estate lawyer and to figure out some of this stuff, like whether you’re considered common law married in your state and what will happen to your assets when you or your partner pass on.
If you do get married, and you both have kids, you should also be sure to address what the expectations are for inheritance.
In my family, there is a legendary story about an aunt and uncle who had millions of dollars. After the wife died, the husband got remarried and all his money ended up going to his new wife, not to any of his kids, when he passed. Because of this, his kids got left out from the family money. Then, when his new wife passed, her kids, who had nothing to do with the uncle in the first place, got all the money.
This just goes to show that if you don’t figure out ahead of time what will happen with your assets when you pass, you might not be leaving the legacy you had intended and worked hard for.
Trusted Contact Forms
There are risks that also come with relationships that aren’t romantic. There are often cases involving older single women who all of a sudden have people come into their lives, like a neighbor, who becomes very friendly with them and gets a bit more involved with their finances than you would expect from someone who hasn’t been deeply involved with them for a long time. That’s where people can be taken advantage of.
Thankfully, there are some laws out there to help protect you when stuff like this happens. One tool that can help protect you is a trusted contact form.
With this form, when you’re 50, 60, or 70 and are still of sound mind and body, you can list someone you trust as a trusted contact for your accounts. Then, if your financial advisor suddenly realizes that something is going on and seems fishy with your accounts, and that somebody is unduly influencing you, they can then reach out to this trusted contact to sort out the situation.
So, when it comes to protecting your assets and legacy with a new later-life relationship, be sure to consider creating a trusted contact form, and to figure out if you can get either a prenuptial or a cohabitation agreement.
We also recommend meeting up with a financial professional who can help make sure you have all your bases covered.
We think that retirement, just like life, is full of risks. And we want to protect you from as many risks as possible so that you can live out your ideal retirement without worries. A lot of these risks have nothing to do with how the market is performing and are instead all about your planning around the different parts of life that could derail your retirement.
That’s why you need a trusted advisor like us who has walked through these conversations with countless other people and can help you protect what you’ve worked hard for. If you want to learn more, or have any questions about your retirement plan and any risks to it, please don’t hesitate to contact us via our contact page!