Mature…

Think with me for a moment.  Do you know of any senior citizens at the age of 70 or older?  Do they still eat food?  Do they still require a place to live?  Do they still require clothes, daily maintenance, etc.?  I know these questions may sound silly but here is the reality.  Most people do not presume they will be alive at the age of 70 or older.  It seems that society does not believe in long life.  Therefore, we are conditioned to live in the now, not to prepare for the future. 

Addressing the needs of our growing senior population is something every individual must take personally.  In reality, I have said and will continue to say as a professional, “Tell me the date you plan to die, and I will tell you the amount of money you need to maintain your standard of living.”  Providing for the senior population is draining our social security system which is currently designed as a pay-as-you go plan.  Therefore, all working individuals buy into our system which provides for the retired, disabled, unemployed and survivors of the deceased.  In addition, every employed individual also pays for Medicare.  Having said that, we are in the early stages of the baby boomer generation beginning to collect on funds they set aside for this moment in time.

However, the system is already bankrupt.  The country is already in financial turmoil, yet we have an obligation to provide for those who paid into the system in good faith.  There are two problems with this issue.  It seems that as one gets older, they begin to realize when it’s almost too late, they have never accumulated enough financial resources to provide for a steady, comfortable standard of living that they’ve grown accustomed to throughout the years.  The perception that social security will be enough when a senior retires is quickly erased as one prepares for that date.  The second challenge is that at the point of retirement and beyond, a senior’s health naturally begins to deteriorate.  So in addition to poor or deteriorating health, a senior citizen is no longer working and is now relying upon a fixed income for the remainder of their life.  The challenge is that a retiree no longer has the luxury of time to save.  They are in the twilight stages of their life but that twilight season cannot be measured.  In reality, a person can be in retirement for an average of 25-30 years.

What should be done?  How do we handle our baby boomer generation with dignity and respect?  How do we make certain their standard of living can be maintained, even if they are plagued with multiple health challenges?  Planning for a senior citizen’s long term needs is critical and should be a family commitment.  In the next few weeks, we will discuss long term care and insurance to cover the activities of daily living.  We will also discuss the emotional transition that occurs when a person’s value has been wrapped up in their contribution to society through employment and now they are lost or without purpose.  Finally, we will discuss the impact of a person facing their mortality because now people surrounding them;  family members, peers, etc. are dying of natural causes.  In this discussion, I invite your feedback and will address these issue and more…

Just in case you can’t, insurance can!

You have been working for years, months, even weeks enjoying life and grateful that you have gainful employment.  Whether it’s the morning shift, you have evening hours, or even the graveyard shift while others are sound asleep.  You are glad to be working.  The income you receive per pay period allows you to maintain a reasonable standard of living.  Even if you haven’t had the chance to begin a comprehensive savings plan, you can still count on living comfortably because in two weeks, another check will come.

What happens if you can’t work?  What if you became violently ill or worse yet, you suffered an untimely accident?  Will your job still give you a check even if you can’t go to work?  Are you in the position that if even one paycheck was lost, you would be financially crippled?  Where would you stand if you could not get out of bed and earn an income? 

If you can’t afford to miss a paycheck, then you can’t afford NOT to have disability income insurance.  Statistically speaking, you are more likely to miss weeks of work than to die prematurely.  The effects of not replacing your income can have long term repercussions.  So how do you protect your family against the unexpected, the inevitable?  Let me begin by explaining the definition of disability insurance. It is a form of health insurance which provides periodic payments when the insured is unable to work as a result of sickness or injury. 

Simply put, disability insurance will ensure that you will receive a check even if you can’t work because of being sick or an untimely illness.  Most people believe they are automatically entitled to disability insurance in the state in which they reside.  However, most states have significant restrictions that often eliminate a person’s claim and if you qualify, they only pay an average of 62% of your income.  Can you afford to survive with almost half of your income over an extended period of time?

Therefore, it becomes your responsibility to see what type of benefits your employer provides.  Once you can determine that, the most responsible action you  can take is to cover the gap between what is available through the job and how much money you need to maintain a reasonable standard of living during your period of illness.  You will never be able to cover 100% of your income because the state and private sectors work together to not exceed a certain threshold.  The reason for this precaution is to encourage you to return to work as soon as physically possible.

Generally, it is never anyone’s desire to collect on disability insurance because it means something is physically wrong.  Good health and physical fitness is something everyone strives to maintain.  However, if there is ever a period of physical vulnerability, your first response is to focus on recovery 100% so that you will not have additional challenges in the future.  Going back to work because you can’t afford to stay home financially, leaves you vulnerable to permanent disability or reoccurring illness.

Examples of Insurance Needs

A single mother of three small children earning an annual income of approximately $35000 may find it difficult to pay the bills from month to month.  Life insurance is not at the top of her agenda because the thought of her not being able to raise her children cannot even be comprehended.  A married couple who are focused on accumulating wealth together, find themselves able to vacation regularly, design their house the way they envision it, and purchase luxury items whenever they desire.  They know life insurance is available through their employers, but the need for individual policies has never really been explained to them.  Finally, a senior citizen who has seen death firsthand because their friends are dying from natural causes instead of accidents, understands all too well that funeral expenses and final expenses overall can effectively drain someone’s net worth.

Each of the above case scenarios identified require some form of life insurance.  However, what type is best can only be defined by the financial position of the individual family.   For example, if money is ever an issue, term insurance becomes the only option.  You want to protect your life and replace your financial contribution to the household should you die prematurely.  Therefore a single parent with three small children should purchase insurance that will replace their income until the youngest child reaches the age of majority at minimum.

If you are the couple with a more secure financial foundation, looking at permanent insurance makes sense.  With the value of time on your hands, compound interest can accumulate providing you with another asset.  Several options would be Variable Universal Life or Universal Life insurance.  A cash value builds up and can be used during your lifetime in addition to leaving a death benefit.  The other benefit is that you are no longer bound to your employer if you become uninsurable due to health ailments because you have a stand alone policy. 

Finally, as you reach the twilight of your life, you see firsthand the effects of families who did not have life insurance in place when a loved one died.  You know the pain and suffering they experienced with the loss alone.  Now they must figure out how they were going to bury their loved one because they had limited resources?, how will they bury them with dignity  A small, permanent whole life policy guarantees that provided you pay the premium, they will pay the policy.

The point is that there is always a case to be made regarding our need for life insurance.  The question one should ask is if the life insurance is for you or your family?  Based on your answer, the type of insurance can be clearly defined.

Health Care Affects the Entire Family

I want you to know that I have prepared my communications with you well in advance to ensure that you will never miss a tip as I have made a 52 week commitment to you.  This week I was supposed to begin the discussion on insurance.  It was my intention to talk about life insurance.  However, I wrote this blog at 2:30 p.m. and felt it necessary to post immediately as my tip for the week.

At 9:30 a.m. when I walked into the office, I received notification that someone who had a diagnosis of a disability over ten years ago cannot protect himself or his family in case of an emergency.  This can potentially affect the family’s ability to build a secure financial foundation.   At approximately 11:45 a.m., I received a call from a friend who suffered an unexpected disability on the job and it will ultimately lead to their inability to work during these tough economic times.  They will be forced to seek employment elsewhere after believing their job was secure.  And if the truth be told, it was.  This is a perfect example of the unexpected, unanticipated becoming a reality.

However, even if those two examples seem major, a financial strategy can still be developed for them if they are willing.  Fortunately, they are.  But at 12:45 p.m. I received a phone call that literally has brought tears to my eyes.  After working with someone for years who was diagnosed with a chronic illness, I was faced with the worst case financial scenario.  A professional is responsible for helping a family lay out a strategy that considers unexpected illnesses.  But it is the family responsibility to follow the instructions otherwise the strategy WILL NOT WORK! 

I am writing this article because there are some areas financially that you must address which are non-negotiable.  While you may not see the value of getting long term care insurance, disability insurance, health insurance, or life insurance, it is designed to protect your family and you.  If you cannot work, disability insurance replaces your income.  Just as you would purchase life insurance to protect your family financially if you died prematurely, or if you would purchase auto insurance to protect your car or home owners insurance to protect property,  YOU ARE THE COMMODITY THAT REQUIRES PROTECTION!  The type of protection must be discussed with someone more knowledgeable than you.

My worst case scenario became a reality because family members did not see the gravity of the illness and its eventual affects.  Their eyes were opened today.  What is disheartening is that it could have all been avoided if only they would have listened.  Now my client will suffer the consequences because others did not understand the significance of following the financial doctor’s orders.  

If you are a caregiver, the person who is suffering, or the child who is affected by the illness of the parent, you have a role to play in ensuring that a sound quality of life can be preserved, in spite of illness, disability or loss.  PLEASE PLAY YOUR POSITION-others are depending on you to be a part of the team!