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Five Steps to Take when Illness Interrupts Your Retirement Planning

A new diagnosis can be scary. Here are some tips to help better plan your finances amidst the diagnosis.

By Sandra D. Adams, CFP

The last year has had the world focused on COVID-19 and its implications not only on how we live day-to-day, but potentially on how we may live in our future retirements. The virus, in many ways, has taken our attention from some of the more serious illnesses that impact those around us on an ongoing basis — one of those being cancer. The American Cancer Society’s 2021 Facts and Figures report that 2021 will bring us over 1.9 million new cancer diagnoses and over 608,570 deaths in the U.S. alone. 

Sandy Adams

Sandra Adams

Imagine heading into retirement with your financial plan well in order. All that you and your spouse need to do is stay on track for a few more years, remain disciplined, and you will be well on your way to your dream retirement. And then…BAM!!! Out of left field your spouse suddenly becomes very ill and is diagnosed with cancer. And if this isn’t enough, the bills for treatments start coming in. While you are both working and have insurance coverage, you see the explanations of benefits and what the treatments would cost if you didn’t have insurance, i.e., chemotherapy treatments at $90,000 each. You realize how quickly you could be financially harmed if you weren’t covered.


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This is a situation where well thought out decisions along with prudent financial and estate planning lead to the best results. But where and how do you start? Here are 5 action steps you might consider taking:

  1. Get Information from Your Doctor: In order to plan properly, you need realistic information about the likely progression of the disease and the likely expense of treatments, medical services, etc. Your doctor will be able to help advise you if you may have to reduce your work hours in the future or retire early due. 
  2. Adjust Your Retirement Income Need: Work with your financial planner to adjust your retirement income plan for any additional costs you are likely to incur as a result of the disease. You may need to make decisions about extending employment or delaying Social Security for the well spouse in order to meet the increased retirement income needs. 
  3. Review Your Insurances: Many clients decide that keeping employer health insurance, if possible, is their best choice given the costs of cancer treatments and prescriptions.
    In addition to health insurances, it is also good to review any other insurances you have and how you might be able to utilize them throughout the course of your illness, including disability insurance, long term care insurance, and any life insurance or annuity contracts that might have chronic care or long-term care riders.
    Review any term life insurance to see if it can be converted to permanent life insurance. If you have whole life insurance policies with cash values, you may have the ability to borrow against those policies.
    If you will need to hire home care workers to assist during the illness, consider reviewing your home owner’s policy to see if a rider is needed to cover home care workers and/or any home improvements you may need to make. 
  4. Review Your Estate Planning: When there is a diagnosis of a chronic disease, it is an opportunity to review your estate planning and end-of-life documents. Your Patient Advocate/Durable Power of Attorney for Health Care document and General Durable Power of Attorney are two of the most important documents to keep updated during your lifetime.
    Other documents to consider are your will and possibly a revocable living trust. Review beneficiary designations on your accounts, like IRAs, 401(k)s, annuities, life insurance policies, and transfer-on-death accounts. Create and/or update a personal record keeping document that keeps track of all of your personal financial information, account numbers, institutions, advisors, passwords, etc. This will be used by whomever will handle things for you if you’re unable to, or will handle things after your death. You might also consider adding a Letter of Last Instruction document that allows you to leave final instructions for your executor/family that might not be appropriate for legal documents:
    · Things you would like included in your funeral
    · Things you would like included in your obituary
    · Values you would like passed on to family
    · Personal items you would like passed on to specific individuals 
  5. Put Together a Team: Critical illnesses, like cancer, are traumatic the person diagnosed as well as the spouse and entire family. As they say, “it takes a village.” It’s important to assemble a team to support you to make sure you have the most qualified and best support possible, giving you time to concentrate on getting better/caring for your partner. Who should be on your team? It can vary depending on your needs, but can be folks like:
    · Financial planner
    · Estate planning attorney
    · CPA
    · Oncologist or other physician specialists, depending on your diagnosis
    · Care manager
    · Psychologist/therapist

None of us think that cancer will happen to us. The reality is 1-in-2 men and 1-in-3 women will develop cancer in their lifetime, according to the American Cancer Society. Not all of those diagnosed will die from the disease, but the costs and stress incurred can cause impacts that last a lifetime — especially without proper planning. Work with your financial planner to make sure you are planning for the contingencies that might occur in the life of your financial plan.

About the author: Sandra D. Adams, CFP®

Sandra D. Adams, CFP®, can be reached at 248-948-7900, Center for Financial Planning, Inc., 24800 Denso Drive, Ste. 300 Southfield, MI 48033. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James