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Protect your retirement benefits from health care expenses

If you are the adult child of elderly parents, you may be concerned about their retirement benefits getting eaten up by health care costs. A major health crisis can wipe out a couple's life savings and leave their finances in ruin.

Not only can this obviously have an adverse effect on the senior citizens, but it can also be to the detriment of adult children who may have to assume financial responsibility for their parents. In some cases, this could put undue strain on a marriage if the spouse grows resentful of the expenditures.

The costs are high

According to a senior vice president of financial planning at a financial services company who also hosts the radio program, Investing Sense, "Health care costs for the average couple over the age of 61 are $241,000. People never put these expenses into their long-term retirement planning."

With retirement ages creeping ever northward, many older workers don't get to enjoy their retirement years before they are felled by ill health. Even if they survive a serious health crisis, they may be too debilitated to ever return to work.

Another financial planner had this to add: "Many people don't realize how common a serious illness can be." Because of their naivete, roughly 70 percent of employees quit working earlier than planned because their health crises force them to take an early retirement.

It's not just about the money

When people are diagnosed with serious illnesses like cancer or suffer from strokes and other debilitating illnesses, they suffer emotionally as well as financially. Older adults who have never had to rely on any types of subsidies or social service programs suddenly find themselves unable to cover their expenses and meet their basic needs. No wonder it knocks the wind out of their sails.

Have a "Plan B" (and maybe "C")

Because no one knows what the future holds - and the finger of fate can be quite fickle - it's important to have retirement contingency plans in place. This way, couples and individuals in their golden years can protect their retirement assets in the event of catastrophic health crises or other unforeseen events.

Take a holistic approach to retirement planning

In addition to basic estate-planning documents like wills, health care proxies and powers of attorney, your parents should consider including in their retirement plan:

  • Easily liquidable assets and emergency funds
  • Legacy plan to protect savings and provide a smoother transition in the event of a crisis
  • Expenses involved with palliative and home health care, as well as assisted living costs
  • Enough resources to cover costs formerly covered by employee benefit packages - dental, eye care, hearing aids and mobility devices
  • Long-term care and/or catastrophic illness insurance policies

Have a frank discussion

Talking about money and mortality is never easy, but often necessary in these circumstances. Arrange a time to talk with your parents about their expenses and budget. Remain calm and help them understand that you are only interested in their best interests. You can better help them plan for their retirement years if you can see the whole picture.

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Enea, Scanlan & Sirignano, LLP
245 Main Street
White Plains, NY 10601

Phone: 914-269-2367
Toll Free: 800-724-1327
Fax: 914-948-9316
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