In a recent conversation, an advisor shared the tension and anxiety related to adult children in their 30s to 50s having conversations with their parents about aging, future caregiving needs, and health changes. A key factor is financial independence or dependence on the family.
As retirement has changed over the past several decades, longevity has become a vital component of financial planning. With people living longer, continued inflation, and rising healthcare costs, outliving one’s retirement plan is a real concern.
This is why a frank discussion about health, longevity, and long-term care needs to be part of every retirement strategy session with your senior clients. Here are a few thoughts to get the conversation started with clients.
What type of information is discussed or gathered in ongoing planning discussions with clients? Many advisors use age 95 as a standard life expectancy for retirement planning because it’s a conservative estimate. When it comes to finances in one’s advanced years, being conservative is important. However, to develop the most sustainable financial plan, some advisors have opted to use a longevity calculator instead of the industry standard for every client. This will allow you to create a more personalized plan for every client.
Consider including the following question on planning checklists about physical and mental health, lifestyle, and their vision for what their life looks like in their late 80s to 90s.
"If there was a change to your health, where do you see yourself living? At home or in a community with others your age? Does this change if one spouse passes before the other?"
The good news can sometimes be the bad news. It's wonderful that people are living longer than anticipated, but often, their financial plan did not project them living into their late 80s to 90s. What if the planning is running low on cash flow? Retirement-age client’s health history and outlook are vital when it comes to effective retirement planning.
For example, a client who lives only to age 70 but spends the last five years of life in a long-term care facility could very well end up needing more money in retirement savings than a healthy person who ages in place and lives ten years longer.
Long-term care has become financially burdensome for most families, and those expenses continue to grow.
Since Medicare and Medicaid cover only a percentage of the care most people entering nursing facilities need, seniors - and their families - are left to make up the difference. With annual costs for a private room in a nursing home close to $110,000, that difference is often significant.
Having an open discussion of your client’s health history, family health history, and longevity expectations can help set realistic goals regarding how much they may need to cover long-term care.
"How are you planning to pay for those later years? The average cost can range between $5K- $10K per month for any higher quality option."
Over one-third of the country will be part of the longevity economy, which in turn could financially impact the remaining two-thirds of the country. How are families prepared to address the potential cash requirements for their aging parents and loved ones? This is also a good time to bring an alternative for paying for long-term care – life settlements. This solution allows clients to sell their life insurance policy for a lump sum of cash that’s greater than the policy’s cash surrender value.
On average, a life settlement transaction using a competitive auction platform through an independent life settlement broker can earn your client 5x the cash surrender value. This not only creates liquidity but also eliminates future premium obligations, allowing those funds to be used for other planning needs like retirement, investments, and long-term care.
"Do you foresee your adult children or someone else assisting in paying for long-term care? Have you explored all available options to fund these needs?"
Longevity Throws a Wild Card in Even the Best-Laid Plans
Society of Financial Service Professionals
by Jamie L. Mendelsohn, EVP, Ashar Group
Ashar Group is a nationally licensed life settlement firm representing the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Enjoy more blogs in our Longevity Series:
Shooting for the Centenarian Club
The Keys to Longevity – It’s Never Too Late but Start Now!
Ashar Group has created a special checklist for tax season that helps you conduct a new and timely discussion that strengthens your current relationships and opens the door to new ones.
Most tax practitioners are unaware that existing life insurance policies can provide a value significantly higher than the cash surrender value offered by the issuing insurance carrier.
“Almost 85% of term policies fail to pay a death claim; nearly 88% of universal life policies ultimately do not terminate with a death benefit claim. In fact, 74% of term policies and 76% of universal life policies sold to seniors at age 65 never pay a claim.”
Wharton School Study by Daniel Gottlieb and Kent Smetters
What happens to all those policies that were put in place to protect families and businesses? They are lapsed or surrendered. Most of those policies are dropped by senior clients in financial transition. The reasons are many. Their policy may no longer be needed for estate tax planning, they are outliving their coverage, the policy is too expensive to maintain, a business owner is retiring, or they are going through bankruptcy proceedings or divorce proceedings. Often, they simply want to apply any cash they can obtain from the policy and use that cash - and the ongoing premiums they have been paying - to other aspects of their financial plan. They may need extra cash for medical or caregiving expenses, donate money to charity, or simply maintain their standard of living during retirement. Furthermore, many tax advisors and consumers are unaware of the additional value that can be obtained through a life settlement.
What can tax professionals and financial advisors do to help?
It’s simple, all you must do is be in the right place at the right time before your client decides to lapse or surrender an existing life insurance policy. That’s where our Tax Planning Checklist for Existing Life Insurance comes in. Tax season is the perfect time to reach out to your clients and tax professionals and ask them the questions on the tax planning checklist. This creates awareness about options that are available that could have a significant impact on decisions that they make when considering dropping their existing life insurance coverage.
We’ll be at Finseca in D.C.
Please stop by the Ashar Group booth #201 to get access to the Tax Season Checklist and options to co-brand this checklist.
Over time, the need for life insurance coverage naturally changes. While life insurance can sometimes be the largest asset a client owns, it’s rarely reviewed for fair market value like other assets, including real estate, art, and jewelry. This results in clients making uninformed decisions, missing lucrative planning opportunities, and paying unnecessary premiums.
We all know the advantages of early detection when it comes to identifying health risks. We never want to hear the doctors say, “If only we had caught this sooner…”.
Your automobile is equipped with all sorts of warning mechanisms to detect a problem before it turns into a costly repair.
Your children’s report cards provide early detection of a drop in grades before your child needs to repeat a grade.
Your annual dental visits for cleaning and x-rays help detect cavities before they turn into serious problems.
What about existing life insurance policies that your clients currently own? When was the last time you had your client’s existing life insurance appraised to detect all available planning options?
Right now, you have clients in financial transition. Whether it is retirement, selling a business, divorce, bankruptcy, or simply outliving their financial plan, your clients ask, “What are my options?” Is it best for me to keep paying premiums, change my coverage, surrender my policy, or sell my policy for its life settlement value? If you aren’t answering these questions, someone else will. This leaves your clients and the relationships/trust you’ve built with them vulnerable and in jeopardy.
There are many reasons to consider an Early Detection Valuation to explore the suitability of maintaining existing life insurance coverage. You don’t need to be a life insurance expert or hold a license to consider a valuation or a life settlement. We’re here to help. We’re a qualified appraiser of life insurance for estate and tax planning, charitable donations, and other aspects of financial and retirement planning. Contact us today.
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes.
