Health Risk

Stewart Ogilby

One must not ignore these two "elephants in the room"

Elephant Elephant
Risk Elephant #1 Risk Elephant #2


It used to be that retirement planning consisted of figuring out how much money could be accumulated. Today the focus is largely on addressing risks: longevity risk, inflation risk, market risk, and health risk. The last of these, although often least addressed, may turn out to be the most important for a majority of older clients.

For persons on the federal medicare program a Medicare Supplement insurance policy or, if financially necessary, a Medicare Advantage Plan is a must. Although all medsup "F" plans, for example, provide exactly the same benefits it isn't unusual to save you $100 to $150 a month for the plan that you presently have.

Even with a medicare supplement policy, the huge "elephant in the room" of retirement planning consists of health financial risk. According to a Mount Sinai study published online in a 2012 issue of its Journal of General Internal Medicine, 25% of Medicare recipients spent more than their total assets on health care expenses in their final five years. As many as 43% percent of Medicare recipients spend more than their total assets, excluding their home value, on these expenses. Think of the effect of that financial devastation on families, including surviving spouses!

The bulk of these expenses involved long term care, which many individuals mistakingly think will be covered by Medicare. It is also a mistake to think that placing one's assets into a revocable living trust shields family assets from creditors.

Pre-planning is advisable although human nature tends to avoid this logical step. The making of a will or revocable living trust, for example, is a good example of how we humans procrastinate. Purchasing long-term care (LTC) insurance when one is young enough and healthy enough reflects pre-planning although such insurance is expensive and may never be utilized.

For persons concerned about this huge health risk who did not or cannot purchase LTC insurance policies, the irrevocable trust provides one pre-planning approach. Assets can be protected if this is effected 60-months prior to incurring LTC expenses. The legal and financial ramifications of this should be undertaken with fiduciary help and the services of an attorney proficient in elderlaw issues.

Failure to pre-plan frequently results in experiencing time pressure, necessitating "crisis planning" when asset protection must be implemented as quickly as possible and with limited options. Medicaid crisis planning or VA Benefits planning must be implemented so that eligibility can be obtained in a few weeks. Again, fiduciary help is advisable together with the help of a qualified attorney.

Just because none of us like to think about a time when we must depend on others to assist with basic routines of our daily life does not lessen this huge financial risk that must be addressed logically and handled appropriately.

Fortunately, there exist today additional ways to handle this formidable risk. We insist that they be discussed, if not already in place, particularly for the financial protection of survivors.

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