The idea of losing ourselves to dementia is a distressing prospect that people often don’t like to consider, let alone plan for. When we think about retirement we like to imagine the fun things: grand vacations, new hobbies, travelling to visit family, and spoiling the grandkids – not the exponentially rising cost of medical care and long-term care facilities. It’s an unpleasant reality that many financial advisors don’t like to address with clients, because they don’t want to be the bearer of bad news and they don’t have any easy answers.
I might not address these difficult considerations if Alzheimer’s didn’t run in my family. I lost my father earlier this year. He no longer knew who I was before he passed away, just as his father forgot him when he was my age. As a financial planner, I think about my own finances and eventual retirement more than the average person, and along with my retirement planning, I must ask myself uncomfortable questions and plan for a future I hope not to have. I help my clients tackle these concerns too, because one in three seniors currently die with some form of dementia and there are steps we can take to ease the burden on ourselves and our families.
Developing a comprehensive plan with a financial planner is one key step that is better taken sooner rather than later. Waiting until dementia has taken hold, like my father did, can lead to uncertainty and lingering doubts during an already stressful time. A comprehensive plan will include estate planning, investment recommendations, insurance coverage, and a cash flow analysis that incorporates factors such as the rising cost of medical care. These are all important factors for anyone who plans to live into old age, whether dementia is a specific concern for you or not.
Nearly as important as looking at the numbers is building a relationship with a financial planner you meet with regularly. The more I am able to get to know my clients and their unique situations, the better I am able to identify concerns and help make sure their wishes are carried out if they can’t advocate for themselves. Having dementia also puts people at greater risk for elder abuse, which regular meetings with a trusted financial planner can help uncover or prevent.
At Merriman, we regularly work directly with our client’s other professional advisors, such as accountants, estate planners, and insurance agents. Having a team of professionals that can work together on your behalf is valuable for everyone, but it’s vital for people who can no longer recall the specifics of their financial situation. We also help clients identify family members and other trusted individuals that we can contact in the event that they no longer seem able to make important financial decisions. Many people chose to proactively include their loved ones in financial planning meetings, so their loved ones develop a trusting relationship with their financial planner, and have the peace of mind of knowing who to call if they need help.
We at Merriman want our clients to know that families struggling with dementia have our support. If you have questions about how best to prepare yourself or your family, please don’t hesitate to contact us.
What could be the cost of ignorance? For some mistakes it could be a couple of dollars; for others, it could run into hundreds or thousands of dollars every year. Not paying attention to your enrollment benefits falls under the latter.
Recent research indicates that more than half of employees spend 30 minutes or less reviewing their enrollment benefits and 93% of people make the same enrollment selection without evaluating their options. While it may be easy to re-enroll in the same options every year, I recommend grabbing a cup of coffee or a glass of wine and setting aside a couple of hours to consider your options thoroughly. With the open enrollment deadline approaching soon for many, consider this essential advice to help you take full advantage of your employer benefits.
Medical, Dental & Vision
Many employers offer different medical plans to choose from. With insurance premiums, deductibles, and out-of-pocket costs on the rise, it’s crucial to evaluate your choices every year and make sure your plan still makes sense for you. If your spouse has coverage that will cover you or your dependents, don’t forget to compare these options with your employer’s plans as well.
It’s common for risk-averse people to choose a plan with a higher monthly premium in order to have a lower deductible and out-of-pocket maximum, but this isn’t always wise. If you are young or in good health, selecting a high-deductible plan and bolstering your emergency cash reserve by at least the amount of your annual deductible can save you money in the long term. This is especially true if you have the ability to contribute to a Health Savings Account (HSA) in combination with the high-deductible plan. All contributions to HSAs are pre-tax and all withdrawals used for eligible medical, dental and vision expenses are tax-free. For people in high income tax brackets this can be a significant savings. If you don’t end up needing the funds for medical expenses you can invest them to grow tax-deferred until needed, which can be a considerable help in retirement.
Flexible Spending Arrangements (FSAs) are another common benefit option that can provide tax savings. Similar to HSA plans, contributions are made pre-tax and withdrawals for eligible healthcare expenses are tax-free. Be sure to check the fine print on these plans, because contributions not used during the calendar year are often forfeited! It’s important to consider your expected medical expenses carefully before enrolling. Some FSA plans can also be used for dependent care expenses, which is a fantastic benefit given that daycare costs are not only expensive, but generally consistent and predictable making the “use it or lose it” feature of FSA plans less daunting.
We generally have fewer choices with our dental and vision plans, but make sure you consider enrolling since the cost of annual coverage is often significantly less than one filling or pair of glasses. If you do have plan choices, compare the copays in addition to the monthly premiums.
With all plan options pay attention to “out-of-network” restrictions and check to see if your favorite doctor is considered “in network” if you are unwilling to make a switch.
At the very least, you want to be sure you are enrolled in your company retirement plan and contributing enough to receive the full benefit of any employer contributions. This is free money, so don’t leave it on the table! If you really want to take advantage of your retirement benefits, it’s best to take a careful look at all of the options, evaluate whether you are contributing enough to provide for your future retirement, and analyze your investment allocation at least once a year. Many people find this process overwhelming, but this is an area where a financial planner can prove their worth, so don’t hesitate to ask for help. Even savvy investors can miss out on significant benefits by overlooking options in their retirement plan such as mega back-door Roth contributions or discounts in an employer stock plan.
Many employers automatically provide a certain amount of life insurance for you, generally a multiple of your salary. For a lot of people this is not enough coverage, but you often have the ability to purchase additional coverage through your employer’s group plan. This insurance is generally less expensive and can make sense for a portion of your insurance needs, particularly for people whose health may preclude them from qualifying for an individual policy. However, it’s important to keep in mind that the premium will likely increase every year as you age and the policy often terminates when you leave the company. It’s therefore important to consider whether you should obtain additional outside coverage, either because you have a long-term need or to lock in a rate while you are young and healthy.
People often protect their loved ones with life insurance, but fail to plan for a disability which is statistically much more likely to occur. Make sure to enroll for both short-term and long-term disability coverage.
As part of your annual benefits evaluation process it’s always a good idea to double-check that your beneficiaries and dependents are correct and up to date.
If you’re working with a financial planner, make sure to bring them your enrollment packet and get their advice before you finalize your enrollment. It’s surprising how many people don’t truly understand or take full advantage of their employer-sponsored benefits, and your financial planner can’t give you proper advice without knowing everything you have access to.
The Bottom Line:
Benefits enrollment might appear to be a trivial task, but it could have substantial financial implications if done incorrectly. Be smart about your choices and do the necessary homework to maximize your benefits.
Get the latest blog posts delivered directly to your inbox