This is a common concern I hear from financial planners. Many financial planners do a wonderful job of advising their clients on how to invest their money, when to collect Social Security, how to pay less in income taxes, etc. They manage money and most do a very fine job of it.
The problems start when someone without any money asks for advice. The planner cannot manufacture money and is often at a loss of how to assist someone in this situation. Let me give you an example:
A financial planner called me recently and asked if there was anything he could have done. A woman approached him asking for help as she did not have enough money to live on. Her husband had Alzheimer’s and after struggling with his care for years she could no longer do it. She did not have money for a nursing home, she did not even have enough money to meet her monthly bills. She had spent their nest egg down to $75,000 and did not know where to turn.
This is not the typical client of a financial planner and he had no idea what to do for her, as there was no money to invest. I suggested he call the client back and I would sit in and see how I could help her. We met two days later. I explained that Medicaid, a federal/state program would pay for her husbands long term care once she was down to $50,000 in assets (in Wisconsin). To get to that level I suggested we establish two $12,500 irrevocable burial trusts so that at death their children would not have to foot the bill for their funeral expenses (Medicaid requires all life insurance over $1500 face value to be cashed in to qualify). We immediately did this making her husband elligible for Medicaid nursing care.
I suggested that once she places him in a nursing facility and gets the Medicaid payments started we need to meet again. We met a month later and I brought in a reverse mortgage specialist who was able to help her secure a reverse mortgage on the (paid off) home. There are no payments to be made on a reverse mortgage, and the money received is not income taxable. It is only repaid at death or when the surviving spouse leaves the home.
The financial planner then searched for the best immediate annuity he could find to produce the most income for life for Mrs. client, thus giving her enough income so that she could have food on the table, lights, heat, etc. An income that is guaranteed for life can be better in this situation than spending the proceeds of the reverse mortgage until gone and then find yourself in an even worse cash flow situation.
I understand that financial advisors would struggle with retirees health care costs as for many of them, this is not their area of expertise. That is why so many of them in Wisconsin team up with Romeo Raabe, TheLongTermCareGuy.com to help their clients.
Of course, planning in advance with long term care insurance is much less expensive than trying to solve the problem after funds are gone, but I can help in almost any situation. I simply suggest that the financial advisors ask this question “Would an extra bill of $50,000 to $90,000 a year be a problem in Your retirement”? If the answer is yes then bring me in to help protect their nest egg, as well as their choices for care with long term care insurance or other strategies.