Erin Bui chats about her grandmother’s financial constraints in Vietnam, which mirrors what many seniors are going through in the United States. Creating a protection plan (encompassing estate plan, life insurance, and annuities), should help ease the financial worries seniors face.
After working so hard all your life, there finally comes a time when you should take steps to enjoy life again. This would be during your senior years. No, not senior as in high school, but in late adulthood. Though in many ways, it should be like returning to a more carefree time, like in high school.
I have a grandma in Vietnam who is constantly worried about money: mostly about what will happen to her house if she passes away. There is a huge mortgage liability on the house, and her children are financially unstable. She literally is worrying herself to death. There was a time when she had a $25 bill from the doctor and she found that to be so expensive, that she decided the next time she was ill, she would not go to the hospital. She said she would rather lay in bed, and save money to put food on the table.
Though my grandmother is in Vietnam, this story is all too common here in the US as medical insurance co-pays and deductibles are increasing. She is not as lucky as many seniors in the United States, because she has no Social Security and Medicare available to her, but yet seniors here in the US are facing similar income issues even with Social Security, which is barely enough to live on for many.
Seniors I’ve talked to that have come through the business, commonly ask:
- What happens if Medicare does not cover my health and comfort costs?
- What if my social security income is not enough?
- What will happen to me when I am no longer able to care for myself?
- Who will help me when I am financially unstable?
A protection plan is important to the average senior. These things should be done:
- Estate Plan – An estate plan is a plan for the future transfer of your wealth: for your assets to pass down to children. You have the right to decide which child get the house, car, or other assets (such as jewelry). The last thing you would want is a family argument over money, and cause any tension between your children or other family members after your death. You also want to help your children avoid probate costs.
- Life (Burial/Funeral) Insurance – For those seniors who didn’t get life insurance at a younger age, many choose to do burial insurance for amounts under $25,000, just to cover final expenses costs.
– Most family members care so much for their loved ones, that they wouldn’t want their children (or parents) to go in debt. I would never want my parents to go in debt just to have a funeral for me. Thankfully I’m young, but for a senior, their cost of insurance is too expensive and if their health isn’t good, they can’t qualify for traditional insurance. Therefore, they would want to explore options around “guaranteed issue” life insurance, which covers final expenses.
- Annuities – This is an insurance for living too long (longevity risk). As life expectancies increase, more and more seniors are worried they will run out of money and live too long. But there’s a solution. A lump sum of cash can go into creating a pension for a lifetime.
– Without an annuity, a senior is always worried that they wouldn’t have enough money to spend in the future, so they stop spending today, like my grandmother. Annuities ensure that my grandmother would have a fixed sum of money that pays every month or year for the rest of her lifetime so she can spend freely and not avoid going to the doctor just because she’s afraid of running out of money.
Erin Bui is the Mangus Finance Circles specialist based in Riverside, CA, focused on helping special needs and senior communities with financial education and awareness.