2006 Archived Retirement Planning Tips:

January 2006

Controlling the Uncontrollable Events During Your Retirement (continued)

In a prior Retirement Planning Tip, we emphasized the need for retirees to investigate long-term preventive measures to protect their families from financial ruin due to a catastrophic illness.  Many retirees are not aware of the probability of experiencing a catastrophic or chronic illness.  Let's examine some facts:

·         In 2000, there were 35 million people age 65 and over in the U.S.  This number is expected to double in the next 25 years.

·         Of those 35 million people, 4 million of them were age 85 and over in 2000.  This number is expected to increase to 20 million by 2050.

·        30% of these seniors will have 3 chronic illnesses.

·        Almost 50% of them will suffer from Alzheimer's or some other form of dementia.

(Financial Planning Aug. 2005)

Although many healthy retirees do not want to believe this will happen to them, it is prudent to address the financial impact of an illness and what resources are available to meet these expenses.  This requires the same type of scrutiny a retiree attaches to a retirement cash flow analysis that is used to determine long term financial security.  In fact, many Financial Advisors will rerun a retirement cash flow analysis with added extra out of pocket medical expenses (after insurance claims) to see how much a retiree can afford to assume on their own, or, transfer the risk to an insurance company.

This raises additional questions such as:

ü      Medicare and/or my major medical insurance will cover how much of these expenses?

ü      If the illness is chronic, what other expenses will I have?

ü      Are there other ways to protect my financial security besides additional insurance?

Next month, we will offer some answers to these important questions.