What's the Plan?
“I should have died two years ago.” That’s what John told me the other night. He’s 75 years old, college educated and owned his own business for over 30 years.
Sally is planning a trip to the Caribbean with her 10 kids and grandkids. She is also 75 years old, college educated and enjoyed a lengthy career in education.
What’s the difference? Why is Sally debating which island to visit, while John is wondering how to pay the light bill? The answer is planning.
When Sally was 55 years old, she met with a financial services professional who told her she wasn’t going to make it unless she made significant changes to her investment strategy. Sally listened. John never sought any counsel. At age 55, they were in roughly the same place financially. Twenty years on, they couldn’t be further apart.
Recently I had the pleasure of speaking with a group of 20-something’s called Hartsville Young Professionals (HYP). The title of my talk was, “What Would My 75-Year-Old Self Tell My 25-Year-Old Self?” The basis of the talk was the true story of these two people (names changed to protect privacy). The premise is that it is much easier to deal with things now, when we are relatively young, than it is when we are older. We all face three risks in our lives, and we all need a plan to deal with them.
The three risks we all face are Death, Disability and Retirement. Statistically speaking the chances are pretty high that we are going to have to deal with at least two of these events, if not all of them. So, what’s your plan? How are you going to navigate in such a way that you end up like Sally and not like John?
Death is not a fun topic, but let’s be honest with each other. As the Foo Fighters say:
“It's a shame we have to die my dear
No one’s getting out of here, alive.” (Foo Fighters, DOA)
We can never replace you, but we can replace the financial hole you leave behind. If your family depends on your income right now, they will need it at least as much if you passed away suddenly. Debts that you owe do not follow you to the grave. Your family will be tied down by those debts. What is your plan?
Disability is a lurking menace to whom we do not give much respect. The truth is that “just over 1 in 4 of today's 20-year-olds will become disabled before they retire.” (www.disabilitycanhappen.org). When someone is disabled, they can no longer earn an income. Quite often the spouse becomes the caregiver, which can impinge on her ability to earn an income as well. A skiing accident, a car wreck or a mishap at work can put an immediate end to your income. Disability insurance can provide a vital source of income when you need it most. The alternative is moving back into your parents’ basement or couch-surfing with your college buddies. Neither of those options has much appeal to yours truly. So, what’s your plan?
Retirement is a goal for most, but it is a risk for all of us. Remember our friend John? He is experiencing the pain of having more month than money. His options are severely limited by his health. Wal-Mart is not hiring any more door greeters. Now add in the specter of skilled nursing care. The costs for elder care are sky-rocketing. It is not unusual to spend $43,000 to $82,000 per YEAR. The average need is 3 years. That’s $129,000 to $246,000 per PERSON. (www.genworth.com/about-us/industry-expertise/cost-of-care.html) Are you saving enough to pay those bills? The tragedy is the first spouse uses up all the savings, forcing the surviving spouse to make some very difficult and scary decisions. Long Term Care Insurance provides a great way to hand off the risk of outliving your savings to the insurance company. What’s your plan?
The moral of the story is simple: Be like Sally. Make a plan.
Dan Askins is the leading specialist in the Pee Dee area of South Carolina for Life, Disability and Long Term Care Insurance. His focus allows him to help clients make a plan for the three greatest risks we all face--Death, Disability and Retirement. He lives in Hartsville, SC, is married to Susan and is the father of two beautiful girls who are busy making their own plans.