Life throws challenges at all of us: aging, long-term care, death, and divorce. These aren’t just possibilities. For most of us, they are near certainties. However, many Americans do little to prepare.
Making financial decisions in the middle of a crisis is stressful and rarely ideal. With thoughtful planning, you can protect yourself, your family, and your legacy. Here is what you need to know and do before life forces your hand:
Life Insurance: The Protection Gap
51% of Americans have life insurance, and 60–70% of those are underinsured
The question isn’t just “Do I have a policy?” It is: If I were gone today, who would be left in a difficult financial situation?
Examples of financial risk:
- A surviving spouse trying to cover bills
- Young children depending on your income
- A family business with no liquidity, faced with possible dissolution
Even policies through work may not be enough. Someone planning to retire in 15 years might only have three to five years of income covered. For a married couple, that could be a loss of 10 years of covering expenses from income, 10 years of lost 401(k) contributions, and a loss of 1 Social Security check.
Key Takeaway: Life insurance is essential if someone depends on your income. Assess your risk, understand what coverage is appropriate, and integrate it into your financial plan.
Sources:CNBC, WorldMetrics
Long-Term Care: Planning for the Unexpected
- Only 4% of Americans over 50 have long-term care insurance
- 70% of people over 65 will need it
Example: One client’s spending jumped from approximately $4,000 per month to $17,000 per month when a spouse needed care. Without insurance in place, a plan designed to last 20 years could be threatened in 18 months.
Timing Matters: Generally, the best time to purchase long-term care insurance is in your 50s. Waiting until your 60s or 70s is often cost prohibitive. Relying solely on Medicaid reduces your control over the situation, with the potential for you and your spouse to end up in separate facilities.
Key Takeaway: Visualize who depends on you and the financial support they would have received from you. We encourage our clients to explore insurance options during their ideal purchasing years, even if they ultimately decide not to purchase a policy.
Wills and Trusts: Avoiding Probate Pitfalls
- 76% of Americans don’t have a will
- Without a will, your estate may go through probate, costing roughly 2-5% of its value
- Property owned in a revocable trust avoids probate entirely and usually costs $2,500 to $5,000 to set up
- Beneficiary designations override your will, so review all accounts, especially after job changes or retirement rollovers
Action Steps:
- Consider using your past experience as your motivator – both bad and good estate experiences should provide incentivization to do it right for your heirs
- Consult an elder and/or estate planning attorney
- Update beneficiary designations, TODs, and PODs
Divorce: The Financial Reset
- About 41% of first marriages end in divorce
- Divorce disrupts finances, requiring an average of 30% more income to maintain the same lifestyle (women 40%, men 20%)
- Most divorces take 6 to 12 months. Longer timelines mean higher attorney fees, court costs, and stress
Mindset Matters: Divorce is a property division system, not a system for emotional justice. Focus on financial organization rather than “getting even.”
Options:
- Collaborative divorce: One attorney helps both parties separate property amicably. Ideal for low-conflict situations, especially with children
- Traditional divorce: Needed when disputes are significant
Action Steps:
- Focus on property, not justice
- Choose collaborative or traditional approach
- Create a complete asset inventory
- Stay transparent
- Consult a divorce attorney
Source:L Hudspeth Family Law
At Accel Wealth Management, we have these conversations every day. Reach out to our team and we’ll help you figure out where you stand and which steps make sense for your situation.
Disclosure: Accel Wealth Management does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Securities offered through Registered Representatives of Integrity Alliance, LLC, Member SIPC. Advisory services offered through Accel Wealth Management, a Registered Investment Adviser.