Dear Atty. Tully,

Several years ago I went through a horrible experience with my mother when she became ill and had to go into a nursing home.  Unfortunately, my mother did not plan in advance and she lost just about everything she owned.  I vowed from that date to plan early and to protect my estate and family.  I plan to retire in 10 years.  How soon should I start planning for my retirement, estate and long-term care?

ANSWER: Ideally, people should begin planning for retirement early.  They should consider all of their potential expenses and consider purchasing long-term care insurance policies.  It is preferable to have an elder law attorney oversee all aspects of a client’s retirement planning.  This includes establishing the estate and tax plan (e.g. wills, truss, durable power of attorney and advance medical directives), purchase long-term care insurance, when appropriate, and consolidating investment account.  This overall approach wors better than a piecemeal approach.  In many cases, the attorney works with a client’s existing advisers as a team.  

One major problem with failing to plan early is that people underestimate their retirement expenses.  They may base their plans on the often-cited figure of 70 percent of their income after they retire.  In fact, many people may need nearly 100 percent of their pre-retirement income.  Some retirees still have mortgage payments and the same expenses for maintaining their homes.  

Additionally, some may want to travel for recreation or to visit children and grandchildren.  Some retirees want to enjoy the same or higher levels of restaurant and entertainment activities than they did while they were working, or they want to pursue new hobbies.  All of these activities cost money and this means that people may have to work longer than they planned.  

In later years of retirement, people become less active for health reasons.  Although travel, entertainment and hobby expenses may decrease, medical and care expenses can increase dramatically.  This can be the result of hitting the “doughnut hole” in a Medicare Part D prescription drug plan, in which drugs are not fully covered.  Some health care experts estimate that the health care deductible, co-payments and other health care needs of a retiree can easily exceed $1,000,000 during retirement. 

Many people do not plan properly to take care of long-term care expenses should they need extended care at home or care in an assisted living facility or nursing home.  The time to consider purchasing a long-term care insurance policy is when the policy is most affordable.  This may be at a younger age. 

However, the younger one is when one purchases a policy (e.g. in one’s 40’s), the higher the possibility that new policies may evolve and improve and other care options may be available that are not covered by their older policy. Discussing long-term care options should be part of one’s comprehensive retirement plan.

Start today to plan retirement.  People think they have plenty of time to get around to it.  They don’t.  With the compounding of investment returns, time is your enemy.  Many people think they can wait until they get their children out of college before they sit down and seriously think about their retirement plans.  

You can’t afford to wait.  Sure, you can wait, but it’s going to hurt you financially in the long run.  

Daniel O. Tully, Esq.

ktelderlaw.com