Could You Be Making the Same Financial Planning Mistake as Suzy Orman?

I was recently forwarded an article from the Chicago Sun Times which outlines a common financial planning mistake made by none other than Suzy Orman and her mother. Countless others have made the same mistake simply by failing to plan for the worst! The popular money maven shares the news that her mother needs around the clock long-term care, which costs Suzy $25,000 every month.  She asked her mom numerous times to sign up for long-term care insurance, but she refused.  Now, that denial is costing Suzy a fortune.

While Suzy may have the book sales resources to cover this $300,000 per year blunder - for many readers a mistake of even 25% of this could spell disaster. The average cost of long-term care in Minnesota is approximately that, $76,716 per year according to the 2012 Genworth Cost of Long Term Care Survey. While long-term care expenses can vary somewhat depending on the amount of care needed and where the care is received, the U.S. Department of Health and Human Services advises us that statistically a staggering 70% of all retirees will need some form of chronic care during their lifetime.

I find that families view long-term care coverage only in the context of protecting assets. While having a long-term care plan might eventually protect assets, its real purpose is to protect cash flow and income. Consider your own situation.  If long-term care was needed tomorrow, how would your family increase income by an additional $76,000 per year to provide for your care? If you think it involves selling investments, what happens if these investments are down in value when most needed? Have you considered the potential tax consequences of liquidating your retirement accounts? How long will your investment assets last? Would your spouse still have a comfortable retirement after providing these long-term care expenses?

Does history repeat itself? In Suzy’s case, quite possibly. While we would assume that someone as financially savvy as Suzy Orman would learn from prior mistakes and protect herself from repeating one, the conclusion of the article explains that Suzy was recently turned down herself from long-term care coverage due to a recent health concern. Reminds me of an old adage, the best time to buy any insurance is before you need it, not after your house is on fire.  If protecting your income is important to you and your spouse in retirement, the best time to plan for your protection is before it’s too late.

While many have looked at traditional long-term care insurance, there are alternatives which can provide the unique protection that may work better for you and your family. Next week, I will elaborate more on traditional versus alternative long-term care planning.

As comprehensive financial planners, our role when working with our clients at Secured Retirement Advisors is much more than simple investment planning (managing stocks, bonds, mutual funds, annuities, etc.), we also guide our clients in other important financial planning areas such as tax, estate and income planning.  Our advisors work with our clients to not only maximize profit potential when the stock markets are doing well, but also protect them from potential financial risks so that they can continue to spend with confidence in their retirement years. Feel free to visit us at www.securedretirements.com and help yourself to our educational materials.  If you would like a complementary “3 Step Review” of your own retirement plan, call Secured Retirement Advisors at 952-460-3260.