I recently spoke with three clients who are retired (or close to it) and dealing with unexpected health issues.
One case is a terminal illness, in one other there is a possibility of the illness being terminal and in the third it may be something debilitating that will have a major impact on his/her life. In all cases, each are 70 years old or younger. These health issues were unexpected and the ages at which they are getting this news is a lot earlier than expected.
When working on a client’s financial plan, I plan for them to live until age 100. I am aware that not many people make it to 100. However, having a little extra money is better than not having enough.
The average age that someone enters a nursing home is 791. When we run retirement scenarios, we typically assume these type of health issues do not start until the mid to late 70s.
Each client is dealing with their issue in a different way. The one with the terminal illness is going to do as much as possible on her bucket list, with no regard to cost. She has been saving and putting things on hold her entire life. Now she can focus on what she wants without being concerned about money.
The client with the possibly terminal illness is still waiting for some test results. He is in good spirits. He is reviewing all his assets and considering making some significant changes. Hopefully, he gets some good news when the results come in.
The one with a major debilitating issue is also in good spirits, although she is concerned about what the future holds and how long her independence will last. She was planning to move a few states away to be closer to her family, but she is not sure if she will be able to endure it physically. She was planning to retire this year, move and spend a lot of time traveling.
Having these conversations, one after the other, leads me to a question I am often asked. How do you balance your wants and needs for today while planning? Should you take that trip or save that money for the future.
The financial planning answer to these questions is once you have met your needs for today and are on track for your savings goals, whatever is left can go towards whatever you want. You can save what is left or spend it.
The problem is many people do not have this level of excess and the ones that do either don’t want to spend the additional money or are afraid to. My younger clients typically do not have anything left after they meet their current financial needs and save for their goals. The people who tend to have this level of excess funds are either retired or close to it. When you are retired, assuming you have the money to splurge, sometimes you don’t because you are set in your ways, other times you are concerned about spending money no matter how much money you have.
This is one of those real-life problems that there is no exact answer to. When I think about how I decide what to do myself, I believe the answer lies in happiness. The value of the money is in what it can provide for you. The most common thing people look for their money to provide is freedom or security. Will splurging make me happy in the short term but leave me worried in the long term?
No matter how much planning you do, there will be adjustments you need to make. When planning for how to spend your money versus save, you must make your plans based on the information you have today.
Enjoy your good health, because that can change at any time.
1 https://www.morningstar.com/articles/564139/40-mustknow-statistics-about-longterm-care.html