As we age, financial planning and investing take on greater significance, particularly for those facing health challenges such as dementia or other serious illnesses. These circumstances necessitate a comprehensive and thoughtful approach to ensure that financial stability is maintained and that the needs of both the individual and their loved ones are met.
Financial Planning for later life and health concerns
By Portugal team
This article is published on: 13th July 2024
The Importance of Financial Planning
Financial planning for older adults or those with health issues often requires more detailed and forward-thinking strategies compared to younger, healthier individuals. This is because health care costs can be substantial and may increase significantly over time. Furthermore, cognitive impairments like dementia can make managing finances independently increasingly challenging.
A key concern in such situations is the possibility that one spouse may have predominantly managed the household’s finances. If that spouse were to pass away or become incapacitated, the surviving partner might be unprepared to handle complex financial decisions. This gap in knowledge and experience can lead to significant financial difficulties, or even permanent financial loss which is why proactive planning, and the involvement of both spouses, is crucial.
Put your plan in place
- Comprehensive Financial Review: Begin with a detailed review of your current financial status, including assets, liabilities, income streams, and expenses. Think about how these are likely to change in the event of a prolonged illness or on the death of one spouse e.g. will pension income stop or costs of care increase? If assets will need to be sold or will be gifted on a death, what are the tax implications? As this could leave the beneficiary with less than expected. Understanding the full financial picture is essential for making informed decisions and early planning is key to avoid any unexpected outcomes.
- Health Care and Long-Term Care Planning: Consider the potential costs associated with health care and long-term care. This may involve looking into long-term care insurance or earmarking certain investments specifically for medical expenses. Planning for these costs can help prevent the depletion of assets and ensure that care needs are met without compromising financial stability.
- Estate Planning: Ensure that wills, trusts, and powers of attorney are up-to-date. These legal documents are critical in ensuring that one’s wishes are carried out and that there is a clear plan for the management and distribution of assets in the event of death or incapacitation. A well-structured estate plan can help avoid legal complications and ensure that the surviving spouse and other beneficiaries are taken care of according to the individual’s wishes.
- Simplifying Finances: Simplify financial accounts and consolidate where possible. This makes it easier for the surviving spouse or a designated caregiver to manage the finances. Reducing the number of accounts and financial instruments can help streamline management and reduce the risk of oversight or errors.
- Regularly Updating the Plan: Life circumstances and health conditions can change rapidly. It is vital to regularly review and update financial plans to reflect current needs and goals. Regular reviews ensure that the plan remains relevant and effective in addressing changing circumstances.
The Role of Financial Professionals
Given the complexities involved, it is often beneficial to work with a financial professional who can provide objective guidance and help navigate the intricacies of financial planning, especially when health issues are a factor.
You also have the control to choose a trusted professional for you and your loved ones to work with. Doing this ahead of any event can provide comfort, continuity in financial safety and quality of advice, especially for financially inexperienced individuals.
An advisor can help in developing a comprehensive plan that considers both current needs and future contingencies. They can also work alongside other professionals such as lawyers, accountants or your executors, to ensure that all aspects of your financial life are coordinated and optimised.
For those with dementia or other cognitive impairments, actively managing investments can become increasingly challenging and an advisor can take over this responsibility, ensuring that the investment strategy remains aligned with the client’s goals and risk tolerance.
An advisor can also help ensure that the surviving spouse is prepared and supported. This includes educating them about the financial plan and ensuring they know how to access accounts. This support can be invaluable in helping the surviving spouse navigate financial matters during a difficult time.
Conclusion
Financial planning and investing for older adults or those facing health challenges requires a proactive and comprehensive approach. The potential for increased medical costs and the possibility of cognitive decline make it crucial to have a well-thought-out plan in place. When one spouse handles most of the financial matters, it is even more critical to ensure that the surviving spouse is not left unprepared.
By addressing these issues head-on and seeking professional advice, older adults and those with health concerns can safeguard their financial future and that of their loved ones. Proactive planning, regular updates, and professional guidance are the keys to managing the financial complexities that come with aging and illness.