The Alemian File: Retirement Killer No. 5 - Major Medical Illness

The average couple retiring age at 65 today will have over $275,000 in uninsured medical expenses, and if long-term care is required, that number skyrockets from there. Here's how to prevent a major illness from sidetracking your retirement.

In 2014, AMA Insurance reported on the financial preparedness of employed US physicians. Funding long-term care needs emerged as the second key personal financial concern among physicians.

Physicians are correct to be concerned about funding long-term care needs, because major medical illness is one of the "7 Retirement Killers." The average couple retiring age at 65 today will have over $275,000 in uninsured medical expenses, and if long-term care is required, that number skyrockets from there.

Another way that a major medical illness can kill your retirement is if a critical illness strikes during your working years. A critical illness for physicians can be financially devastating because it can also be also be a career-changing event. The majority of physicians have disability insurance; the question is, do you have enough? Do you have enough to support your lifestyle and pay for additional medically related expenses? Do you have enough to start yourself on a new career path should you need to do so? When was the last time you talked with a disability insurance agent? If it’s been a while, there’s a very good chance that your needs have changed and you need to make changes to your disability coverage to meet those needs.

Did you know that today there are new ways to supplement your disability coverage as well as your long-term care coverage? There is a new type of life insurance called life insurance with living benefit riders. There are 2 types of living benefit riders. The first one is called a critical illness rider. Depending on the company and the policy, it can provide a benefit of up to $1 million dollars in cash, tax-free, if you are stricken with a covered critical illness such as a heart attack, stroke, cancer, blindness, ALS disease, or end-stage renal failure. The benefit is paid in a lump sum, and is in addition to any disability insurance coverage that you may have.

The second living benefit rider is called a chronic illness rider. It's a great supplement to long-term care coverage. It provides a benefit of up to $1.5 million dollars in cash, tax-free, if you cannot perform 2 of the activities of daily living. It also covers you if you suffer from cognitive impairment, dementia, or Alzheimer’s disease. Just like the critical illness rider, this benefit is paid in addition to any long-term care insurance coverage that you may have. It also makes a good alternative to long-term care coverage.

Episode 3 of The Alemian File gives an overview of what I call the “Physician’s Retirement Plan.” The plan utilizes an investment grade life insurance policy with living benefit riders as the retirement savings vehicle. This is a key part of the plan because it protects you from a major medical illness killing your retirement. If your spouse is healthy enough, you can also cover your spouse in the plan.

If you’re concerned about funding long-term care needs for yourself and your spouse or partner, make sure you check out Episode 3 of The Alemian File. If you have questions, send me an email to David@TheAlemianFile.com. Check out my website www.PhysiciansRetirementPlan.com and make sure you come back here next week to Physicians Money Digest for another edition of The Alemian File.