(photo courtesy of Kevin Stryke)
In a recent survey, about 45% of baby boomers worried about being alone. And chances are, with the increasing divorce rate, and surprisingly large number of people who die suddenly in their 50’s and 60’s, many boomers will be alone at least for some period of time.
With all of the things that go on in the life of a busy 50 something year old – including a demanding job, watching out for your not-quite-adult kids, keeping an eye on their parents, and testing the waters in the dating world – it’s quite easy to overlook financial planning because with proper financial planning, it’s “out of sight out of mind.”
Therefore, if you fit into this description, it may be time for you to tend to some outstanding planning needs.
1. Your personal legal documents
Do you have a well-drafted health care proxy (or health care directive) and durable power of attorney documents?
What do these documents do? A health care proxy appoints someone (along with a backup or two) to make medical decisions if you are unable to do so yourself. Durable power of attorney appoints someone to handle your financial affairs and more if you are unable.
If you haven’t designated who will make your decisions for you, someone else will decide (maybe a judge?) and the decision maker might be someone you don’t know. Whom would you prefer to make these decisions for you? Would you like to decide or do you want someone else to decide? If you don’t have these documents, then you have decided to allow someone else to choose for you. if you are single, the choice becomes especially nebulous for a court to decide, so don’t let them – decide yourself and see and attorney.
2. Beneficiary Forms
In my many meetings with potential clients, MOST of the time, I encounter client beneficiary forms that do not represent the wishes of the people who originally filled them out. Do you know who’s on your beneficiary form?
In one of the more famous cases of beneficiary form neglect, a New York man did not receive his wife’s $1 million 403(b) account – it went to her sister – because the beneficiary form, which his wife filled out 70+ years prior to their marriage, put her mom and sister as beneficiaries. Since these were never changed and the wife’s mom passed away before her, her sister inherited it all. And interestingly, according to the article I read, she was not sharing it with her brother in law. Subsequently, he lost a challenge lawsuit against the sister in law.
If you are not married, then this can become soupy as there is no joint owner on your house, no joint owner on your checking account, and perhaps no updated beneficiary on your retirement accounts.
Bottom line – make sure the people you want to get wealthy off you are the people on your beneficiary forms. How would it feel if you knew someone you didn’t want to, was going to get all of your money? If you aren’t sure, request beneficiary statements from:
- Your IRA’s
- Your 401(K)
- Your 403(b)
- Your Annuities
- Your will for your chosen beneficiaries
- Your bank accounts to check for joint owners and payable on death certificates
- Brokerage, stock accounts for Transfer on Death (TOD) elections
Make sure all of these reflect your wishes.
3. Long Term Care Insurance
Being alone means you take care of yourself, which is fine for now. But what happens when you get sick? Who will take care of you? Would you want to be cared for in a strange facility by strangers?
Many people I talk to, and many people who answer surveys, prefer to be cared for AT HOME if the situation ever arose. As you may expect, this can get very expensive and with costs for full time home health aides rising, and the fact that someone who lives alone may need around the clock assistance, you better have a lot of money.
To ensure that the money is there, it makes sense to look into a long term care insurance policy. Remember, not only will you have to pay for care costs, but also, you will still have your usual home ownership expenses – taxes, insurance, utilities, food, etc.
Bottom line – a long term care policy can help keep you independent and living at home if something unfortunate were to happen. Also remember, that long term care policies are much less expensive to secure before age 65 than in later years. Note: if you purchase a policy with an inflation rider, it could help protect you from future care cost increases.
See tomorrow’s part two for numbers 4 and 5!
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