Hi folks, Dave Piatkowski with Dickinson Investments. This is a follow-up blog regarding financial planning. I run most of our financial plans here at Dickinson Investments. I’ve got three more items that are on the list of things that people forget to think about – or don’t think about in the right context – that come back to hurt their financial plan.
1. Health care: A lot of times we will set up the plan and everyone looks fine. It looks great. The probability analysis shows you will be in great shape. And then we say, “In this dollar amount of living expenses have we talked about the Medicare costs and the out-of-pocket expenses for health care such as drug costs?” A lot of times they really haven’t thought about that.
To be fair, some of those things are out of their control because you never know when, if you are 65 or 75 or 80, you will be prescribed a drug that’s going to be a $100-per-day drug that you have for the rest of your life. Those are just unknowns. But in general, people sometimes forget to include any additional health care costs. They just think everything is going to go on smoothly.
And many times when we will add in the component of just some basic health care costs, it can blow up the plan – or make it at least a lot less covered plan. We want to be cognizant of that so we are covering those health care costs.
2. Long-term care: That goes hand in hand, in a way, with health care costs, but it’s different. We’ve found that only about 15% of people in some studies will use in the range of $250,000 for long-term care costs. When you plan though, the tough part is years ago in our planning process most people were advised to purchase long-term care insurance. Since those years, a lot of those companies have gone out of business or sold their book of long-term care insurance to others. Also, premiums have gone up because premiums weren’t in the right place for the insurance companies years ago.
So, fewer providers, higher costs, and the other thing about that is – unlike life insurance where we know that we all pass away – a little over 50% of folks we know don’t even use or need long-term care insurance. And another 25%, in that range, only need up to $100,000. A little of that on long-term care is the luck of the draw and how things go. But we want to be cognizant of those needs and how it can affect your overall plan – and just as importantly, how it can affect your spouse.
3. Living a long life: When I talk about life expectancy and put it up on the big screen, I have plenty of clients who say, “I’m not going to live that long” or “I can’t fathom living to 92 or 95.” But the reality is we are all living longer, and it doesn’t exponentially go out if live from 65 to 66, you don’t automatically move from 86 to 87 or somewhere in that range.
But, in general, there are more centenarians than there ever have been, and many people are living more healthy into their 90s. So we need to plan for the potential for at least one spouse, or if you are single already, the fact that you could live a long life. We want to be cognizant that we are covering those expenses. Like I always say, “It looks funny in the sitcoms on television when you move in with your adult kids or grandkids, but the reality is most people don’t want to do that.”
So, to review again, here are three important points that are some of the pitfalls of financial planning that we need to be cognizant of: health care, long-term care, and living a long life.
Thanks a lot.
[Financial Planning and Investment Management Services offered through Dickinson Investment Advisors, Registered Investment Advisor. Statistics and market information provided by Litman Gregory Advisor Intelligence.]