It’s true: Life is unpredictable. Even the most proficient planners can be blindsided by unexpected curveballs. But it’s exactly that attention to detail that helps families weather storms with resilience.
Importantly, there are steps you can take right now to ensure your family is well-positioned to navigate the toughest periods. Learn how to build a financial foundation for major life transitions with immediate actions, life settlements, health insurance, retirement plans, and caregiving cost planning.
Immediate Steps to Take
Begin with a thorough assessment of your current assets, income, expenses, and debts.
From there, build an emergency fund that can cover up to six months of essential costs. Emergency funds force you to consider multiple scenarios that could impact your family in the future, such as a catastrophic illness.
Prepare for a possible slowdown in cash flow. Trim discretionary spending, like pricey vacations or expensive nonessential items.
If you’re immediately facing a crisis, you may need to update your estate plan. Ensure your will, trusts, and beneficiary designations reflect your current situation. Appoint a responsible power of attorney now, should you ever become incapacitated.
Life Settlements
Take this time to review your current life insurance policy with a financial planner. You may discover that a life settlement is better suited to your goals, especially if you want more liquidity. Settlements allow you to sell your life insurance policy for a larger lump sum than the surrender amount.
If you are facing a life-threatening illness, research viatical settlements through an industry source like the Abacus life settlement playbook. The final settlement could be up to eight times the amount of the surrender value. Some viatical settlements are eligible for tax-exempt status if they meet certain IRS criteria, including confirmation by a medical professional.
Review Your Health Insurance
Make sure your health insurance plan can accommodate a major health event. Review your out-of-pocket maximums. Ensure your disability insurance can cover 50% to 70% of your income, according to the U.S. Chamber of Commerce.
Work with an estate planner to draft a living will that reflects your health status. Discuss Accelerated Death Benefit (ADB) riders on life insurance policies, which allow you to access cash to cover rising medical bills.
Retirement Planning
Retirement is often seen through a wealth-accumulation lens, but adopting a distribution mindset will help secure your family’s financial future. Start by mapping out the following retirement income sources:
- Social security
- Pensions
- 401(k) distributions
Talk to your financial advisor about delaying Social Security payments until age 70 to maximize your monthly distributions. Shift your investment portfolio toward income-generating assets to preserve capital. Look into leveraging catch-up contributions to maximize 401(k) and IRA accounts, as this strategy can help budget for long-term care.
Build up your high-yield savings accounts for emergencies, should your income slow down. Consider a Home Equity Line of Credit (HELOC) as a backup resource or even a reverse mortgage during major life transitions.
Caregiving Considerations
Caregiving also introduces unique financial pressures. Prepare ahead with a full cost breakdown, including:
- At-home care supplies
- Adjustable beds
- Meal plans
- 24/7 supervision
- Medical appointments
- General shopping
Budget accordingly for at-home care costs, and consider a high-yield savings account for caregiving, in addition to Medicare. If you or your spouse was in the military, explore Veterans Affairs (VA) benefits that can help.
Plan for the Long Haul
Plan for every aspect of your future, including the possibility of a major health event. Work with a financial planner to uncover ways to best position your family should a crisis, passing, or retirement age arise.
These strategies are part of a holistic approach that includes healthy money habits, wellness routines, positive parenting, and more tips. Follow our blog to stay connected!