Finance “What if my health deteriorates?” It’s inevitable: as we age, we need to see the doctor more often. Sometimes we can see that need coming –maybe there’s a condition you’ve been dealing with, or an ailment that runs in your family, or an old injury that you know you’ll need to deal with sooner or later. Other times, the need is just a part of aging. Either way, it can cause financial problems if you don’t plan ahead. Many Canadians believe that our universal health-care systemwill take care of this “what if.” And that’s true, to a point: government benefits provide a solid foundation for “base level” health-care expenses during retirement. Depending on where you live, however, you may still be responsible for dental coverage, eyeglasses, long-term care and home nursing, and prescriptions not on your province’s list of approved medications. Critical-illness insurance, long-term care insurance and disability insurance are the ultimate “what if ” planning tools here: all of them can offer excellent supplemental protection for some of the most expensive “extras” that basic government benefits don’t cover. Keep in mind, however, that such insurance can be complex, so make sure to review your options with a qualified advisor or insurance specialist before making any decisions. “What if I live too long?” It seems like a strange question. But longevity can pose a serious financial risk if your retirement portfolio doesn’t survive as long as you do. And, with newmedical treatments and ever-evolving knowledge about how we should take care of ourselves, that’s a very real possibility. If you don’t have a defined benefit pension (unfortunately, many of us don’t), you may want to consider purchasing an annuity with at least a portion of your portfolio. Annuities guarantee a set income for life, which can provide you with a “base income” for life. Purchase one with an inflation rider and your income will increase as inflation rises over the years (see our note above). Just remember that annuities can be complicated, withmany options and features that aren’t necessarily easy for do-it-yourselfers to understand. So if you’re interested, seek professional help. “What if an emergency happens?” Maybe the roof will spring a leak; maybe the car will need a new transmission; maybe the washer and dryer will give up the ghost; maybe it’s all of the above, all at the same time – yup, stuff happens. And when it does, it usually requires some money to make it better. The best way to deal with these kinds of “what ifs” is to keep a cash reserve in a “just in case” account distinct from the rest of your assets. How much is in that account depends on your risk tolerance – six months’ worth of basic living expenses is a good place to start, but feel free to add more if it helps you sleep at night. Now, let’s hope that you never have to use it… “What if my spouse dies?” No, it’s not something that we like to contemplate. But the death of a spouse can be one of the most financially devastating events which we go through in our lives. Particularly if you’ve neglected to write a will, or you haven’t updated an older one. Take some time now to deal with this “what if ”: take a look and see if your beneficiaries are up to date. Does your will list all of your current assets? Have there been significant life changes (a new spouse, the birth of a grandchild, the death of an executor, etc.) that make some of the provisions incomplete, contradictory or nonsensical? If so, make it a top priority to see an estate lawyer and get things sorted out. Sure, it takes some time and money. But the hassle pales in comparison to the legal and financial difficulties which you might experience if you or your spouse dies without a current will. Just get it done – and rest easy. “What if I have to support my family?” It’s hard enough to manage your own retirement portfolio. But what if you have to save and invest for your family – for your parents’ home care, or your children’s house, or your grandchildren’s education – at the same time? Howmuch of an impact will that have on your ability to fund your retirement and spend money on the things that matter most to you? Other than the trite advice to save as much as you can, the best way to plan for this “what if ” is to have a candid conversation with your parents/children/grandchildren about their expectations for financial assistance, and your ability to provide it. Get the conversation started well before the need arises. Involve your siblings or other family members, if that helps. Although conversation doesn’t always lead to practical solutions, it will give you a heads-up about needs that may be just beyond the horizon, and help you prioritize your financial objectives. “What ifs” that are yours alone This category encompasses risks that are highly specific to particular life circumstances. They may or may not be relevant to you, or may not be relevant right now. But it’s a good idea to at least think about them. 34 | www.snowbirds.org
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