Although financial planners and advisors diligently guide their clients through the complexities of retirement savings, investments, and insurance, a critical aspect of retirement planning rarely receives the attention it warrants until it’s too late: the cost of dying.
Recent data reveals the stark reality that the costs of end-of-life care and funeral expenses are climbing, propelled by inflation and rising healthcare costs. This post will delve into the implications of these cost increases, outlining strategies that financial professionals can use to help their clients fully prepare for the future.
The Unavoidable Cost of Dying
Over the last year, the Consumer Price Index shows a 4.8 percent increase in funeral costs, and the upward trajectory of end-of-life expenses is only expected to continue. At life’s end, the average American now faces over $24,000 in medical and funeral costs. More specifically, end-of-life medical expenses average over $16,000, while the median cost of a funeral is nearly $8,000. These figures highlight the discomfiting truth that even death is no escape from the financial implications of inflation.
Increasing Funeral Costs
The average funeral in the U.S. costs between $7,000 and $12,000. Funeral expenses include caskets, embalming, transportation, plots, flowers, services, headstones, and funeral home fees. If you opt for more elaborate services or higher-end options, this can inflate these already significant costs even further. Most people would prefer not to leave this financial burden for their relatives after they pass away.
The True “Killer”: Medical Care Costs
Funeral expenses are steep, but the cost of end-of-life medical care is even more daunting. Although Medicare provides some financial relief, the costs of hospital, palliative, and hospice care continue to surge. Hospital stays can exceed $10,000 per day before insurance, and although most people prefer to pass away at home, only about one in four individuals do so—the majority end their lives in some form of medical facility.
Estate and Legal Costs
In addition to the medical and funeral costs we’ve described, there are also estate and legal fees to consider. The legal process of settling an estate and distributing inheritances can be incredibly complex, adding another layer of expenses that can easily propel your total end-of-life costs beyond $50,000.
Strategic Planning for End-of-Life Expenses
There are a number of ways that seniors can plan to cover the end-of-life expenses we’ve described above, mitigating the financial impact on their loved ones:
Savings and Investments
Allocating a portion of savings and/or investments specifically for end-of-life expenses can make that final cost significantly less burdensome for clients.
Insurance Solutions
Insurance solutions such as life insurance or specialized end-of-life insurance products can provide a safety net for funeral and other final expenses. However, seniors in particular may face high insurance premiums, and those with existing life insurance policies may be overinsured if they plan to use those funds solely for their end-of-life costs.
Life Insurance Settlements
Seniors facing costly life insurance premiums or who are overinsured should consider pursuing a life insurance settlement. Selling their policy on the secondary market provides a lump sum that can cover end-of-life expenses while freeing them from the cost of increasing premiums.
The Role of Agents and Advisors
The costs of end-of-life care continue to rise, and financial professionals play a pivotal role as their senior clients navigate these challenging circumstances.
Inflation may be a relentless and unyielding force, but thoughtful planning and strategic advice can make it easier to navigate the financial aspects of end-of-life. Advisors can conduct policy appraisals to determine whether life insurance settlements are appropriate. If so, their clients can reallocate those funds toward long-term care insurance or directly to end-of-life expenses. By alleviating the financial strain on clients and their families, advisors help their clients achieve a more manageable and dignified end-of-life experience.
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