Are You Prepared for a Life-Changing Event?
“Recently, I had a bad car wreck and ended up with only a minor concussion from hitting the windshield. My wife was not hurt. I am 55 years old and have not thought about long-term care planning due to a life-changing event. I work for a large company whose financial advisor has never discussed this with me. What do I need to do?” – Steve
Great question! Americans don’t realize that life can be turned upside down in an instant!
I should know.
I experienced a life-changing event.
A few years ago, I suffered an accident while grilling steaks. My life flashed in front of me as an 8-foot flame busted out of the gas propane tank, singing my face, hair, and left arm. The ambulance rushed me to the burn unit at the Houston Medical Center. Despite my fear and panic, I only had a first-degree burn. The staff released me from the ER with nothing more than a tube of Neosporin cream.
Financial Plans to Protect Your Family
I got lucky with my life-changing event. However, that’s not always the case with everyone. Even if you escape with nothing more than a minor burn and some topical cream like I did, you need to have a financial plan in place. Here are some steps you can take to create a solid financial plan.
Assess the Event
Some of us might hear “life-changing events” and automatically think of a horrible injury or accident even worse than mine. However, a life-changing event is exactly what the name implies—an event that changes your life in some way. It doesn’t always have negative connotations, and sometimes, life-changing events are ones that you can prepare for! Here are some life-changing events that fall into that latter category:
- Marriage
- The birth of a child or grandchild
- Buying a house
- Retirement
- A move to a new city, country, or state
- Starting a small business
- Traveling around the world
- A career change
- Divorce
- Downsizing or expanding your home
Whatever the case, make sure that you understand the nature of the event and its potential financial implications. Prepare for anything and everything. Even if something never comes to pass, it’s better to have a plan in place in case it does!
Create a Budget
Review your current income and expenses to create a realistic budget. Factor in any additional costs associated with the event.
Emergency Fund
Some people might not like to think about emergencies or life-changing events. However, even if you’re someone who’d prefer to assume the best instead of the worst, you need to create an emergency fund. You never know when you might need to cover unexpected expenses or changes in income during and after a life-changing event. Even if you never have to dip into that emergency fund, make sure you have one!
Other Steps You Should Take
As a senior, preparing for worst-case scenarios (but hoping for the best!) is the most you can do. As such, there are additional steps you can take to cover all your bases in the event of a life-changing event. Steve and others, keep reading to find out what else you can do to ensure extra protection!
1. Buy life insurance.
Buying life insurance can be a crucial part of preparing for a life-changing event, especially if you have dependents or significant financial obligations. Make sure you also have life insurance if you’re losing your benefits from your employer when you retire! I always advise our Toni Says Medicare clients to have personal life coverage as a little extra precaution.
There are different types of life insurance, including term life insurance (which provides coverage for a specific period) and permanent life insurance (which provides coverage for your entire life and includes a savings or investment component). Life insurance premiums can vary based on factors like your age, health, and the type of policy. It’s often more affordable to buy life insurance when you’re younger and healthier. Consider consulting with a financial advisor or insurance agent so you can find a policy that fits your financial situation and goals!
2. Have a long-term care plan.
Having a long-term care plan is crucial! Long-term care can be expensive, so make sure you plan accordingly. Familiarize yourself with the different types of long-term care options available, including home care, assisted living facilities, nursing homes, and community-based services.
- Traditional Long-Term Care Policy: The younger you are when you purchase a long-term care policy, the lower the premiums will be. My advice is to search for a long-term care plan while young and in relatively good health. Make sure that the policy covers care at home and in-facility care!
- Hybrid Life and Annuity Policy: Many life/annuity insurance policies have a provision if you need long-term care; you can receive a certain amount of long-term care with your life/annuity policy’s face amount.
3. Create a short-term care plan.
Creating a short-term care plan involves preparing for situations where you may need temporary assistance due to illness, injury, or other unexpected events. This can assist with paying for care at home or in a facility for a maximum of 2 years. However, it doesn’t cover the same benefits as a long-term care plan. That’s why it’s important to review your health insurance coverage to understand what services are covered and how to access them.
Legal Documents You Need
Creating a long-term care plan and buying insurance is only one part of the equation! You also should make sure that you have certain legal documents in place. Not sure what those are? No problem! Keep reading, and I’ll attempt to demystify this part of the process and let you know what documents you need.
1. Power of Attorney
A power of attorney is the cornerstone of a financial management plan. This written document appoints someone to manage that person’s financial affairs in the event of illness or incapacity. Signing a power of attorney is critical to ensure a person’s future independence in the event of illness or incapacity. Without it, one risks having his or her affairs managed by a court-appointed guardian, possibly a stranger, under court supervision and often without the ability to have any input.
2. Medical Power of Attorney
Sometimes known as a healthcare power of attorney, this document gives someone you trust the legal authority to act on your behalf regarding healthcare decisions if you ever become incapacitated or unable to communicate.
3. Living Will
A living will is a written statement that details the type of care you want (or don’t want) if you become incapacitated. A living will bears no relation to the conventional will or living trust used to leave the property at death.
4. Letter of Instruction
While not a legally binding document, a letter of instruction provides guidance to your executor or family members regarding important matters such as burial or cremation preferences, location of important documents, and contacts for professionals (attorney, financial advisor). Write one if you don’t already have one!
5. Business Succession Plan
If you own a business, a business succession plan outlines how your business will be managed or transferred to others in the event of your incapacity, retirement, or death.
Takeaway
Remember, even Christopher Reeve, the actor renowned for playing Superman, didn’t think he would fall off a horse. It’s a sobering reminder of how things can change in an instant. While you shouldn’t live your life in fear or always expect the worst to happen, be prepared for things that may or may not come to pass. Not only will it help you in the future, but it will give you peace of mind in the present.
Call the Toni Says® Medicare hotline at 832-519-8664 or email [email protected] with all your Medicare questions!
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Originally published January 14, 2025
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