Case Study 2: Single Retiree (Widow – Divorced)
Marsha is 75 years old and has 2 children and 5 grandchildren. She has a $1,200 monthly pension from her deceased husband and social security of $1,950. She also is required to take distributions from her $250,000 IRA of about $10,000. She also has $300,000 in a money market account earning next to nothing in interest. She owns her $250,000 home outright. Her total income is right at $50,000/year.
Her most important goals include:
➢ Currently she is struggling to be able to do things she wants with her kids and grandchildren. She feels like she needs another $500/month to be comfortable.
➢ Preserving her current assets for her children. She isn’t interested in taking much risk with her savings.
➢ Making sure she has enough money to pay for long term care.
Solution: Marsha took $80,000 of her money market and bought a fixed immediate annuity that will pay her just over $500/month mostly tax free. She took another $120,000 and purchased a hybrid insurance policy with $300,000 in combined long term care and life insurance coverage. If she never needs LTC her children will receive the $300,000. If she does need the LTC, she can take up to $12,000 per month from that and whatever is left when she passes away will be available for her children.
To summarize, Marsha has more income per month to live on, she still has plenty of cash for emergencies. If she doesn’t ever get sick, her children will inherit $650,000 vs. $550,000 before these changes. And if she gets sick and needs to pay for LTC, she will have more income and assets to draw from. The new plan meets all of her goals.
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