Dealing with Unexpected Death

Re-evaluating your plan and re-evaluating your opportunities is really important. According to Northwestern's 2020 Planning and progress study, 71% of Americans feel their financial plan could use some improvement. So maybe you have a plan, but you're saying, “Maybe I can use some improvement”. At Trilogy Financial we look at the work that's been done in the past. Remember that we're not judging what was done in the past, but we'll look at that and say, is there any way that we can make improvements upon what's been done in the past to help you plan for the future. Understanding that is really important. A plan is not static, it's a living, breathing document, and you want to make sure that you're updating and reevaluating your opportunities on a regular basis.

Another thing to think about is interest rates is we don't know what's going to be in the future. I think this is an interesting one as well. Many Americans for 2020 stayed at home a lot and a lot of them spent less money. Matter of fact, Northwestern Mutual did a study for 2020 on average, people say it's about 10% more money in their personal savings than they did in 2019. Well, why didn't they spend? Some of it was lifestyle – they didn't go out to dinner as much; they didn't go on their vacations- there’s a lot of things that were held back due to all the craziness that had gone on. But there were people that spent on home improvements in other areas as well. People were spending more on their houses because they were living in their houses more. There's a lot of people that saved more or in that period. You might want to evaluate what to do with that savings. Maybe that's the first step in building out a financial plan. Maybe that's the money that should be put towards the college plan. Maybe that's the money that should be put towards lowering your debt overall. Maybe that's money that you should use to increase your path to financial independence. Re-evaluating your opportunities, your long-term financial plan.

I would highly encourage you to re-evaluate those opportunities again. At Trilogy Financial, we do that all the time. We look at current plans and make sure they make sense. Then when you have extra money that's saved, we look at is it working hard for you and is it working hard for your financial why. Maybe you're in a place where you can refinance. Saving money, and refinancing is another really good tool to help create more cash flow and help you get on that path to financial independence.

I'm big on this thing called Financial date nights. Earlier, I talked about the fact that people argue about money, financial date nights once a month, get out of the house, go do something different. I've had people do financial date drives that live in big cities – go have a cup of coffee, have dinner, whatever it is. Get out of the house and talk about your financial whys, talk about your planning, and talk about your goals. Don't argue about them. This is an opportunity for big picture, global type discussions within the couple and then work through those things. And when you need help and more clarity, that's where a financial advisor can really jump in and help you jump-start whatever is going on in your financial plan.

Another thing is to be flexible and willing to adapt. I said this earlier but good financial plans are living breathing documents. In regard to this, all of our clients at Trilogy Financial have their own portal. Inside that financial portal is their financial plan that updates on a regular basis. We can put paperwork in there or documents in there and it's something that's living and breathing. You may need to be flexible with what's going on in your world. Timeframes constantly are getting adjusted. We've had people come in and say, “You know what? I'm thinking about retiring early” or “My companies offering me an early retirement package.”, or “I have to work a little bit longer” for whatever reason. That's just something you update in the plan. College scenarios too. Some kids are deferring going to college and I don't blame them. You didn't pay for online college, and you may want the experience. If that’s the case, you’d go in a different direction. Whatever those things are, be willing, flexible, and adjustable and in communication with your spouse, your partner, or business partner.

Meet and talk with your financial advisor regularly. They should be asking you those questions and they will be updating you on the markets and current events. what I would say are the unknowns or the instability side. The other thing about having that advisor is that joyful accountability. Have an advisor, have a coach, have a financial team – they'll help you stay accountable to do what you say. They're not going to be bugging you, they're going to be reminding you of the good things that you've said during those planning discussions. They're going to be reminding you where you are and they're also going to be praising you when you're doing what you said you were going to do. And when you do that, you make great progress, and when you make great progress, then the plan progresses year after year after year.

How much closer are we to financial independence, that's the conversations that happen over time. So, take action on what you can do, be in control of your knowns, and plan for the unknowns. Again, insurance is a great thing for that. Work with your advisor on the unknown, so you have less anxiety. Be flexible and will be willing to adapt and remember the financial planning documents and plans are living, breathing documents. Life happens, life events happen, and you've got to plan for those things. If you're not working with a trust or a financial advisor investment fiduciary, look to find one that can help you build your own personal plan.

Generally, people purchase life insurance because they have a spouse or child they want to protect financially in case they pass away. But, there are several other reasons to buy life insurance that can benefit more than just those who need to protect their family. One of those benefits is accumulating tax-deferred, tax-free, cash value.  Just like a Roth IRA, the cash value in a permanent life insurance policy can grow on a tax-deferred status and be accessed tax-free, but without the consequence of incurring a 10% penalty if accessed before attaining age 59.5. “Living Benefits”, also known as “Accelerated Benefit Riders” are another advantage of life insurance other than the death benefit. As the name suggests, “living benefits” can be utilized in certain circumstances by the policy holder without passing away.

Common living benefits allow the policy holder to access all or some of the death benefit of their policy to help provide managed care if they are diagnosed with a critical or chronic illness. ABRs originated in the 80s and 90s when companies called “viaticals” found a market for purchasing life insurance policies from people that were very sick who realized they needed money now to help pay their medical bills more than their beneficiaries needed the death benefit. The insurance industry realized what was happening and started adapting policies to include Accelerated Benefit Riders to help their consumers get access to expensive medical care, outside of what health care would cover, while they were sick.

Living Benefits that are common today are terminal, chronic and critical illness or critical injury riders. It is important to talk to your advisor and read the fine print when considering different insurance policies because riders can differ significantly between insurance companies and policies. Terminal illness riders will allow the insured to accelerate a portion of their death benefit, tax-free if they are diagnosed with a terminal illness. Some companies require a diagnosis of 24 months or less to live while others require 12 months or less to live. A chronic illness rider is generally triggered when the insured has a long-term illness in which they are unable to perform two of the six “Activities of Daily Living” including eating, dressing, toileting, transferring, bathing, and maintaining continence. Some companies structure these riders to pay a large benefit upfront and some will provide a much smaller amount but spread over a long period of time. Lastly, critical illness/injury can include many things – heart attacks, stroke, cancer, brain trauma, severe burns etc. and the amount of benefit that is paid out depends on how critical the injury/illness is and how much it will affect the insured’s life span.

Because medicine and medical technology have advanced so rapidly, people are living much longer lives than they used to live. The US Census Bureau reports that at least 70% of people over age 65 will require some long-term care at some point in their lives . In 2014, the annual rate for a skilled nursing facility was $95,707 .  Because traditional, stand-alone Long-Term Care policies can be incredibly expensive, utilizing life insurance can be a great way to build assets throughout your income-earning years that are earmarked for advanced medical costs later on and can protect yourself and your loved ones from unknown health scares.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company. Withdrawals from the policy may result in the reduction of the death benefit.

1. US Census Bureau, American Community Survey 2013
2. Univita Cost of Care Survey, Feb 2014