Elder Law

The SOA defined the phases this way:

Phase 1: Retirees are in good health. If they’ve saved money, they may travel, remain physically active and see this as a time “to fulfill their dreams.”

Phase 2: Because of health problems, physical activities become limited and additional medical costs may be incurred.

Phase 3: A decline in mental and physical health means a substantial amount of assistance may be needed, including expensive nursing-home care.

How can you prepare for the financial risks of Phases 2 and 3? The SOA suggested:

1. Immediate annuities: These pay a specified amount of income for life.
2. Longevity insurance: This type of annuity doesn’t start to pay benefits until a person reaches an advanced age, usually 85.
3. Long-term care insurance: This can help you and your spouse maintain financial independence through Phases 2 and 3 by paying for nursing home care and in-home care.

The SOA also advised retirees and those nearing retirement to limit stock market exposure. Financial advisers always point out that stocks “do better in the long run,” but older people may not have the time to recoup losses from a nasty downturn like we’re experiencing today.