Be Flexible, Willing To Adjust Long-Term Care Strategy

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OCEAN CITY — Whether embarking on a new career, earning an advanced degree or pursuing a combination of for-profit, nonprofit and leisure interests, Americans increasingly view retirement as a gateway to a second act. It’s understandable: The average 65-year-old today can expect to live well into his or her 80s, so the time to pursue new careers could be extended by decades.

While having more time to pursue a second act is good news, it also means that you need to plan financially for your new path, taking into account that many unanticipated events will likely come along the way.

As you map a course and devise a strategic financial plan to get you there, there are four questions you should consider asking yourself (and your advisors). Last week, we looked at two questions regarding Social Security, and this week we will look at the final question.

Do I have a long-term care strategy?

Even the best-laid retirement plans can go awry. A protracted illness could require full-time care, either at home or in a nursing home. "It is important to consider the need for coverage against catastrophic loss and how you’re going to pay the premiums for long-term care," Hunter says. Roughly 70% of Americans older than age 65 will require this sort of care, according to the U.S. Department of Health and Human Services and the costs will only increase.

You may want to consider a long-term care insurance policy, which will pay a specified daily amount for various long-term care costs for the remainder of your life; the younger and healthier you are when you purchase the policy, the lower your premiums will be.

And if you designate an annuity to pay for long-term care, you won’t have to pay federal income tax on the annuity income, although this should not be considered a substitute for long-term care insurance.

Having to mull over things like Social Security, health care costs and long-term care might not sound like an exciting way to start thinking about your second act, but you’ll be glad you did, since this type of planning can help you take advantage of the financial opportunities in your future. In the end, while it’s important to plan your retirement, it’s just as important to stay flexible and be open. Indeed, it may be on one of life’s detours that you find the most rewarding next act.

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)

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