Asset Protection During Disability and Elder Care

In the years leading up to retirement (and maybe even during retirement), you work hard to build a “nest egg.” Many factors determine whether your retirement savings are sufficient, such as whether you have a pension, the rate of inflation and the buying power of your money, investment returns, your lifespan, and your healthcare needs.

People are living longer than ever. The life expectancy for a man born in 1955 is 78. Women, on average, live five years longer than men. And there’s a 50% chance that a person born in 1955 will live to age 85. In fact, people age 85 and older are the fastest growing demographic in America. For a couple reaching age 65, there’s a one in two chance that one spouse will reach age 94, and a one in four chance that one will reach age 97. Actuaries call this “longevity risk:” the risk that you will outlive your assets. That’s why you need to plan for it; longevity can be expensive.

In cases in which people have become mentally or physically disabled due to illness, injury, or old age, the cost of care can destroy the wealth they spent a lifetime building. According to the Council for Disability Awareness, one in three people will become disabled at some point in their lives. Given that alarming statistic, planning for nursing care is a crucial step in protecting your wealth.

The government will only pay up to a certain point for nursing care; after that, it’s your responsibility, whether you choose to go into a nursing home or prefer to receive care in the comfort of your own home. By planning, you can arrange in advance for whatever outcome you most prefer.

That means planning for the possibility that you will reach age 90 or higher, and need long-term care for some years. (A good rule of thumb for couples is to plan your assets to last you until you are 100.) Naturally, there are situations in which health or family history suggest a shorter life span, in which case your planning should account for that. But in general, when planning for the future, people tend to underestimate their life expectancies by an average of five years.