If a potential recession or market tumble worries you, things could be worse. In his blog post Humble Dollar, Jonathan Clements lists dozens of additional concerns for you. Whether you have little or a lot to invest, follow him on Facebook or Twitter@ClementMoney. He provides refreshing insight.
At the top of Clements’ list was the possibility of needing long term care for a long, long time. Long term care insurance policies have a monthly limit coupled with a lifetime bucket. Policies with generous limits, $7,500 per month, $250 per day, won’t cover 24-hour custodial, in-home care, or stays in memory care units. Further complicating finances are distributions from IRAs/401k plans can trigger higher tax liability on Social Security income along with higher Medicare premiums. Another bugaboo is an unaffordable long-term care insurance premium increase. It appears, however, the sharp rises over the last few years may be tempering; newer policies have better underwriting. In-home care limits can reduce expected coverage. The bottom line is long-term care for an extended period will almost assuredly wreck your finances.
Scrolling down his list, health care concerns pop up more than once. Imagine having small children as a widow or widower. My great-grandmother was a widow with two little kids before Social Security existed. A corollary is a child having a medical condition requiring lifetime financial support. A young adult may decide to choose a limited benefit, but cheaper, health insurance policy, then develop a severe illness. After years of neglect by politicians, Medicare’s funding woes catch up with it. Being disabled and unable to work is worse than a recession, too.
Having grandchildren is terrific, but not when your daughter or son is 15. Speaking of teenagers, a raucous party thrown by your kids when you are out of town could be devastating if they crack open your liquor cabinet. A teenager driving is dangerous, especially if it’s your car and your liability. Speaking of kids, suppose your 9-year-old decides to cook breakfast one morning and your house burns after you successfully negotiated a lower premium with less coverage. Speaking of family, imagine if your retired parents run out of money (see earlier long-term care discussion) or your 42-year-old’s employer finds out someone else can do their job cheaper.
Clements mentioned Social Security benefits having a haircut. Without either benefit cuts or tax increases, Social Security will only be able to pay 75% to 80% of projected benefits in less than 15 years. All pensions face funding woes; it is a combination of basic algebra and demographics. Like or loath Rick Scott, the changes he pushed through strengthened the Florida Retirement System. Rust Belt states simply don’t have the economies to sustain promised benefits.
As Clements noted, there are concerns worse than a slumping market.
You can’t always get what you want, but Buz Livingston, CFP can help you get what you need. For specific recommendations visit us online at livingstonfinancial.net or come by our office in Redfish Village, 2050 Scenic 30A, M-1 Suite 230.