The Financial Protection Program

1. Plan for medical, vision, and dental expenses

Many healthcare plans cover the bulk of your medical expenses, but all plans have gaps in coverage that can add up, sometimes quickly.

The gap for uncovered medical expenses often doesn’t have a cap, which can make your potential out-of-pocket expenses a risk to your short-term finances and even your long-term retirement planning. Dental and vision expenses are a good example, with both often requiring a separate plan or out-of-pocket payments.

Examine your coverage and look for a solution to cover any gaps that can lead to large and unexpected expenses.

2. Consider disability risk

Whether you’re nearing retirement age or in the early or mid stages of your career, a disability due to an injury or illness can threaten not just your current income but your retirement security as well by forcing you to shift funds for retirement savings to your current financial needs.

Look at your cash flow and assess the potential impact of a disability that prevents you from working and then develop a plan to provide income if you are unable to work due to a sudden disability or change in health.

3. Invest in your future with guaranteed lifetime income

It’s never too early to start planning for guaranteed income. An often-hidden risk in retirement is the risk that you’ll live longer than your retirement savings will last. This is called longevity risk, and the risk increases the longer you live.

In addition to the simple math of needing a certain amount of money to live each year for X number of years, living longer brings more exposure to cyclical changes, such as changes in markets that can affect the value of retirement investments.

The new goal then is to make savings and investments secondary for retirement income needs, instead of relying on guaranteed income for your day-to-day retirement expenses. Income from Social Security and pensions can be considered to be guaranteed. Rental property income or any other ongoing income or royalties can also be included but be mindful of risk. Vacancy or unexpected expenses can instantly change an income stream.

The goal is to have guaranteed income to cover 80% to 100% of your base living expenses. If your expected guaranteed income falls short of this range, you can make your own pension plan that covers the difference through lifetime annuities.

Some types of guaranteed income, like annuities, can be purchased at any age but will provide income during retirement even if your other investments let you down.

4. Have a plan for long-term care needs

Nursing homes are no longer just for geriatric care. In recent years, adults age 31 to 64 have been the fastest growing population in nursing homes. Many injuries or illnesses can change your life’s landscape instantly, leaving you with the need for assistance with daily life activities like bathing, eating, and dressing.

The cost of a nursing home can approach $100,000 per year. In many cases, nursing home stays or assisted living can be of a shorter duration, but the costs still add up quickly and many people haven’t planned for the expense.

Many health plans don’t provide coverage for specialized ongoing care. With the cost of long-term care potentially dwarfing all other expenses, it’s crucial to get a plan to cover long-term medical care. Even a short stay due to illness can cost tens of thousands of dollars, leaving a trail of medical bills and possibly risking your entire retirement.

5. Have a living will in place

Life has a way of changing on us unexpectedly, turning a normal day into a hospital stay hooked up to machines due to a sudden illness or accident. A living will is a document that describes what type of care you wish to receive if you aren’t able to communicate.

Sudden health issues or injuries can create a burden on family members who may then be forced to make health decisions on your behalf. A living will relieves loved ones of these difficult decisions and ensures your wishes are known and followed.

6. Finalize your legacy planning

Even if you’re decades away from retirement, it’s important to plan for a time when you’re no longer here, particularly if you have close family or loved ones. Your will describes what should happen with your assets and belongings.

Your will should be reviewed or updated every 3 to 5 years because situations change, including relationships and assets, particularly if you’re younger and life is ever changing.

Also, take the opportunity to collect the things you’d like to leave to others, perhaps something dear to you that you’d like to share be it memories or memorabilia, last wishes, or thoughts born of the wisdom earned in life.