I was having a conversation with a co-worker last week in regards to the planning we do for those who are couples at the time of retirement. How do we acknowledge the loss of income when one of the two spouses dies? Most planning is based on the assumption that both spouses are receiving Social Security, pensions or some withdrawal from IRAs, 401ks, or other qualified plans for a period usually to normal life expectancy. But if you or your spouse do not live until then, what happens to that well-developed retirement plan?
Assume a plan is done which takes into consideration two Social Security income checks for determining if the couple can afford to take out a mortgage or buy a second home or condo. All is going swimmingly well as long as both checks can be counted on to pay for the mortgage and other expected living expenses. What if one spouse requires nursing home care? How will the other spouse afford to live in their now-mortgaged condo and support the cost of nursing home care with no source of additional income?
Here is where simple, advisor-in-the-box planning fails.
Of course, the answer is to review a couples’ life insurance. There are policies now which are a combination of paying nursing home costs along with a death benefit. There are policies which can be set up to allow for income from the cash value of the policy to the at-home spouse to replace the lost income if the other spouse needs his or her Social Security or pension income to pay for nursing home care. And there is always long-term care insurance which will take that problem away all together.
Please be aware when you are planning for your retirement, your need for life insurance to replace lost income may be at its most critical. Before you decide you do not need that policy anymore, intentionally include that asset into your retirement planning. You may find its value is greater to you now than it was before.
If you need some help with this, please contact me. I’d be happy to help you sort it out.