I said to a friend of mine the other day that my parents are eating up my retirement income. She was appalled that I thought my parents needed to give me anything! They should be able to spend down all of their money!
What she didn’t understand and what I promptly explained to her is that they are not spending THEIR money, they are spending MY money! When they retired at age 65, their financial advisor told them that $100,000 in the bank, their pension, and social security would take care of them. At that time, they had a life expectancy of 20 to 25 years. Dad is now 93 and Mom is 88. Well at their current ages, medical care, insurance costs, prescription drugs, assistance with their daily lives, retirement housing costs, and general living expenses have eaten through their retirement income. Not to mention, inflation and no cost of living increases. Like any good daughter, I am supplementing their income with MY money. Money that should be going into my retirement account!
I wouldn’t feel so bad about this if my parents had more life insurance that would supplement what I am paying out for their care. OK, yes, I know, I am in the life insurance business. Why didn’t I make sure they had more? First of all, I never thought this would be a problem, and secondarily, when the realization hit, they were uninsurable. Lesson learned. That is why I am telling this story. There are reasons to have life insurance over the age of 65. Here are just a few:
- Medical costs – many of us think that Medicare or our insurance will take care of all of our medical costs when we get older. That is not true. There are limitations to these programs and there could be out of pocket costs.
- Assisted living or long term care costs – Statistics say 70% of Americans older than age 65 will need some form of Long-term-care. The costs for long term care are just getting higher and higher and someone has to pay for it, if needed. (Americans Seriously Unprepared for Long-Term Care)
- General living expenses – if your parents can still live in their own home, that is wonderful, but either way they may need more assistance. We chose a “retirement community”. What we have found is that most raise their rates annually. Plus, my father still drives which means costs for auto repairs, insurance, gas and general maintenance.
- Your time – now don’t get me wrong here; I love my parents and want to do everything I can for them, but, they can be time consuming. I am a business owner so I need to be very conscious of my time. I am also part of the sandwich generation, having children to take care of as well. If you are in this same situation, you know what I am talking about.
- Inflation – just because the inflation rate has been 2.7% over the past 30 years doesn’t mean your pension is going to increase by that rate as well. Social security doesn’t keep up either.
How much longer will my parents live? Not sure. How much longer will their savings last? Looks like a couple of more years if I continue to supplement their income, and after that? Yikes! Just saying….if they had some additional life insurance in place that would provide cash when they pass, it would help me feel a bit better about spending my retirement income now.
Let your clients know that there are reasons to have life insurance later in life. Buying it early, and perhaps a product that has a guaranteed rate for the rest of their lives, including living benefits (chronic illness riders) however long they might live, is a smart thing to do.