
We regularly discuss the importance of a comprehensive Financial Plan with clients and prospective clients. No matter where you are in your journey, a Financial Plan is a tool that can provide clarity to some of the most important questions we have in our lives – Am I on track to meet all my goals? Do I have the right amount of insurance? Will I be able to leave a legacy? Can I afford care if I have a long-term need? – to name a few. The foundation of all good plans is accurate data and informed assumptions because, as the adage goes, ‘garbage in, garbage out’. Time and effort are required on the front end to ensure the data you collect is as accurate as possible. We also believe it is crucial for us to spend time clarifying and discussing client data to ensure your initial plan reflects what is presently most important to you and your family.
While accuracy at the onset of a plan is always a primary goal, the only guarantee is that things will not go exactly according to said plan. It is imperative to continually monitor and update your plan as circumstances change personally, professionally, market-wise, and economically. Significant changes that are not accounted for can give either a false sense of security or unwarranted concern. However, it is also important not to overreact to short-term trends that do not impact the overall success of your long-term plan. To be successful requires open communication, research, analysis, and accountability to ensure this does not happen. As an example, we recently performed an extensive review of our methodology and assumptions regarding how we illustrate the number one wealth destroyer – a prolonged long-term care event.
The long-term care marketplace today is not what was projected even a few years ago, and we have adjusted accordingly as demand and worker shortages have caused the cost of care to rise even more significantly than anticipated. This has been especially true in the home health space, which saw the average national cost for a home health aide rise almost 34% from 2020 to 2023. Assisted living facilities have also seen a significant increase, up nearly 23% over the same period. When projecting out many years or decades, missing a shift like this could be detrimental if not properly adjusted. Additionally, the available options to insure against a long-term care need have evolved. Gone are the days of traditional policies with low premiums, lifetime benefits, and substantial compounded inflation riders that cover a large portion of needed care. Many who purchased these policies years ago with “level premiums” have seen their annual outlay double or even triple. However, there are new hybrid products that combine life insurance or annuities with a long-term care rider. While they are not right for everyone, they may offer a good alternative for those who need to transfer some of the financial risk to an insurance company.
The changes in the long-term care marketplace are just one example. For us, financial planning is an ongoing process in which we analyze changes in the world that will impact your plan’s potential success, ensure you are meeting spending and savings goals, and ensure potential risks are addressed and mitigated when appropriate. We look forward to having many client conversations over the course of 2025 to confirm your plans are accurate and updated to reflect your current needs, wants, and wishes in the new year. If you do not currently have a Financial Plan and are interested, let us know, and we would be happy to start the conversation!
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