Even if you’ve spent decades smartly saving and carefully planning for a storybook retirement, there are still some unexpected twists that could throw your finances—and life—for a loop.
Last posted at Athene
The good news is you can be proactive now to plan for the unexpected later, says Lauren Locker, CFP, founder of Locker Financial Services, LLC in Little Falls, New Jersey. While there’s no predicting the future, these three common situations could alter your course. Here’s how to be prepared.
You or your partner has a health scare
Your employer health insurance or Medicare may not cover all the costs that can pile up with a serious illness or disability that could affect your family for years, or even decades. If your spouse is still working, but is diagnosed with early-onset Alzheimer’s, for example, the disease could wipe out several years of earnings and potentially tack on tens of thousands of dollars in care expenses.
Your move now: During your working years, take a good, hard look at your family’s health history. “If a serious disease is in someone’s family history, that’s as good a reason as any to start an emergency fund for long-term healthcare costs,” says Locker. Also explore your options for purchasing insurance to help offset the cost of long-term care. The key, she says, is to take more measures than you think are necessary.
Your spouse dies early
“Not only do you lose somebody you expected to live and travel with for the rest of your life, but now you’re also living on one income instead of two,” says Locker. Death is a touchy conversation topic, but it’s a necessary one to tackle. “You’re going to have to sit down at some point to discuss how to handle finances if one of you dies early.
Your move now: Make sure your accounts are organized and that you both have a firm grip on the working parts of your finances. If one spouse or partner has been handling the bulk of money matters, Locker says it’s crucial to start splitting that task. Meeting with a trusted financial professional can also be helpful. Consult a financial professional to determine if any changes to your accounts or investments are in order. It’s also a good idea to review your life insurance policies. “You’ll want to be sure your income is going to be enough for the surviving partner to continue pursuing the retirement goals you’d imagined,” she says.
Your family needs you
Locker says it’s increasingly common for retirees or those nearing retirement to spend down their retirement savings in order to support ailing parents, adult children, or grandchildren for a variety of unanticipated reasons—from chronic illnesses to loss of housing or other domestic issues—and assume the responsibilities associated with their care.
Your move now: When looking at different investment options, ask yourself if there is anyone you may someday need to financially support. If the answer is yes, she says, you can ease the potential financial burden by setting funds aside in advance for that purpose, either through a trust or other investment vehicles. “The goal is to protect your retirement savings,” says Locker.