What's your worst-case scenario plan?

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workathome
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Re: What's your worst-case scenario plan?

Post by workathome »

"Obamacare" only lets you change your plan once per year, but currently I'm on a high deductible plan with HSA. If I get a permanent debilitating condition, I'll pony up for the highest end Gold plan.

Otherwise, once FI is hit for me then family should be free & clear no matter the situation.

champ0608
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Re: What's your worst-case scenario plan?

Post by champ0608 »

I don't know of there is a perfect response. My plan is to continue accumulating and investing money, even in retirement, allowing that money to compound upon itself. With time, hopefully that builds into enough of a small fortune to help defend myself and my family in such a scenario.

I suppose that's also a good reason to keep your resume current. Should it be your spouse or a child that needs the medical help, you'd probably want to be able to get back to work to help support their needs.

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jennypenny
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Re: What's your worst-case scenario plan?

Post by jennypenny »

This is tough with the rules changing right now. We've discussed this at length. I think it helps to look at different scenarios instead of just looking at it as one type of issue.

I see three main events:
(1) lifelong, non-life threatening, chronic condition (genetic issue, diabetes)
(2) catastrophic illness (like cancer)
(3) debilitating, end-of-life illness (stroke, dementia)

#1 might still require working. It depends on the care provided for that illness and whether you find it comprehensive enough. Many of the extra care items for such things aren't covered.

#2 Medical insurance should cover these adequately as long as your doctors and hospital participate in your plan. Life insurance policies can be written so that in the event of something like a terminal cancer diagnosis, the life insurance can be collected before death to help offset costs. If you're at risk for this, you can convert your term insurance to perpetual to guarantee coverage.

#3 I'm still trying to figure out the best route for this. The goal (I think) is to shield as many assets as possible. I'm looking into the possibility of converting assets to an annuity in the name of the healthy partner in the case of an illness like that. That *should* preserve income for the remaining family members but shield that money from being swallowed up by long-term care costs. I'm still looking into it though. I'm not sure how it would work for someone single, but if they are single, does it matter if their money gets used up? Not sure how I feel about that.

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We've dealt with some of this. When our coverage was poor, we struggled. The hospital that specialized in my illness wasn't covered. We've had annual bills of $100K and $75K. Now that we have better coverage, we rarely run into that problem, and are usually only on the hook for the deductible, OOP, prescriptions, medical equipment, and occasional tests. I don't mean to minimize that--it can be over $20K a year--but we have two people with chronic illnesses here so I don't think our situation is normal. We haven't had much trouble dealing with catastrophic illnesses, but I think the insurance companies don't argue as much about those because they're one-off's. It's the chronic stuff where they give you a hard time IMO.

edited to add: I carry more life insurance than I need to, assuming that my illness will put a big dent in the savings at the end. That way the insurance will replenish what was lost to medical bills.

workathome
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Re: What's your worst-case scenario plan?

Post by workathome »

At would net worth would you *not* carry life insurance?

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jennypenny
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Re: What's your worst-case scenario plan?

Post by jennypenny »

I'm not sure. It might be more age related than net-worth related. $25K/year in medical bills would crush most people if it started at age 40, but might be managable at age 60. I converted my insurance to perpetual. DH didn't convert his. Once I'm gone and the kids are grown, he'll cancel it and take his chances.

workathome
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Re: What's your worst-case scenario plan?

Post by workathome »

Hmm, fortunately even my super high deductible HSA should prevent $25k in medical bills. I think it would be $12k maxish. I'm thinking maybe a rule would be like insurance until max medical payments don't exceed 2% of networth or something?

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jennypenny
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Re: What's your worst-case scenario plan?

Post by jennypenny »

My OOP and deductible is @ $10K. Not everything is covered, and certain things like therapy have limits. You might need PT 2x/week for the year, but the policy only covers 26 visits per year. You pay OOP for the extra visits but they don't count towards the official OOP. It's also the stupid stuff, like inhalers are covered but not the chamber, or like when I needed heparin injections and they covered the heparin but not the needles. :roll:

You'd be surprised what you end up paying OOP.

--------

Sorry, I'm not trying to derail the thread, just pointing out that FFJeff's question is a good one because medical issues can really eat away at your finances (even when you have good coverage).

workathome
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Re: What's your worst-case scenario plan?

Post by workathome »

Good point, medical is the main issue. I just assumed if I died and had no debts it's not a huge issue money-wise if I'm already Financial Independent (just one less mouth to feed...)

Of course Spouse would need to feel comfortable living frugally and managing investments.

leeholsen
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Re: What's your worst-case scenario plan?

Post by leeholsen »

champ0608 wrote:I don't know of there is a perfect response. My plan is to continue accumulating and investing money, even in retirement, allowing that money to compound upon itself. With time, hopefully that builds into enough of a small fortune to help defend myself and my family in such a scenario.
i'm also taking the continue to accummulate approach. i'm FI now because i cut my expenses to the minimums that i wanted to live with last yr; but if i'm still saving + wroking for probably another 5 years just in case some extreme hospital bills come calling.

its going to take a while for obamacare to turn into the finished product, tis just getting started; but i'm sure there will be some sort of part insurance, part cash option available; the people that have the money to pay for operations are not going to wait in line and will expect a discount for cash. cash is still king.

Dragline
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Re: What's your worst-case scenario plan?

Post by Dragline »

Good question with no good answers in the US.

This has been the number one cause of bankruptcies in the U.S. So much so, that in my peer-to-peer lending, I won't ever (again) invest in a loan to pay "medical expenses." They usually default.

I don't know how this will play out with Obamacare. Supposedly, it will prevent that scenario, but I'm not sure yet. Under the old Medicaid rules, you essentially need to go bankrupt before you can qualify. There are ways of getting around it, but it essentially means putting some portion of your assets in something that creditors can't reach, or in the hands of family members or other trusted individuals who will give it back. Borderline legality. OJ Simpson (or rather his lawyers) were good at this to avoid paying his civil judgments.

This underscores the financial importance of staying as healthy as you can be. This is also one of the reasons you might want to have your DNA analyzed, particularly if you have family members with chronic conditions. You need to know whether to worry about Alzheimer's or Parkinson's or something else.

Then there is always my DW's solution -- "when I'm dying, just put me on an ice floe and let me float out to sea and get it over with". But she has the stereotypical Irish obsession with death. (Not gonna do it, wooden be prudent.)

akratic
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Re: What's your worst-case scenario plan?

Post by akratic »

If I can function well enough to read and type or speak, then I can make new money if necessary.

If I can't function at all for so many years that my nest egg runs out, I'd prefer to die. This reminds me that I need to get my Living Will straightened out.

In my opinion oversaving is a guaranteed loss of life energy.

George the original one
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Re: What's your worst-case scenario plan?

Post by George the original one »

Dragline wrote:This has been the number one cause of bankruptcies in the U.S.
Sometimes I wonder how many of those bankruptcies are strategic rather than absolute...

rube
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Re: What's your worst-case scenario plan?

Post by rube »

In the Netherlands and I believe in most EU countries most medical costs are covered by the required insurance or social system. Huge medical bills as I see above are no issue here.

However, if the the medical costs will increase like it has done the last 10-20 years (likely with the demographic changes) they (government) will have to cut somewhere. Still, I don't see this as a major risk/issue.

Is this typical an USA issue/worry?

simplex
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Re: What's your worst-case scenario plan?

Post by simplex »

@rube,

that's not true anymore in NL. Medical costs are still covered, but long term care if you are elder not anymore!. That is, if you have more than about 100k (e.g. house) or income, it goes automatically to fund your care.
You can pay up to a couple of thousand euro per month, but get not any better care than someone who pays nothing.

*rant* Of course people who are richer usually put their money in estates in NL (ans so formally have low net worth) or don't depend on the public care system, so don't pay for this. This means that usually middle class people will pay for long term care, but not rich or poorer parts of society. I'd rather see higher taxation for the elderly, such that everyone who can contribute, including the rich and the healthy pay. Sickness or frailty if you are older is for most a stage before death. Your lifestyle can help in becoming sick later, but a healthy lifestyle does not guarantee a late and healthy dead.

rube
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Re: What's your worst-case scenario plan?

Post by rube »

Ah, yes. I forgot about that, likely since I see that more as "care", not specifically medical costs. So you will run out of money in such a situation but the "system" will take care of you, also if/when you run out of money.

However, if that might happen to me and my partner/family is not willing or able to take care of me, I guess I am in such a situation I don't care too much anymore / don't have long to live. If I am still capable, I would probably move to a cheap Asian country and hire a private nurse 24/7 :D.

Chad
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Re: What's your worst-case scenario plan?

Post by Chad »

rube wrote:Is this typical an USA issue/worry?
For some people it is.

Unfortunately, I can talk about this from one side of this situation. My 59 year old mother has been dealing with terminal brain cancer for the last year and a half. This is a VERY VERY expensive disease (doesn't get more expensive than multiple MRI's and brain surgeries) and we haven't even gotten to the point of needing home care yet, as she can take care of herself to a point, with my father's help. Eventually, this will become too much for my father and we will have to hire some help (only one of my siblings lives close).

I don't know how the "average" American's finances could survive something like this, as it forced my mother to quit her job. She had done really well in her career (CFO of a regional hospital system) and was able to save up a lot. These assets along with my parents having reduced their expenses by paying off their house years earlier helped prevent a financial disaster.

On top of that, her employer was awesome. They basically gave her almost 8 months of full pay (also gave her a bonus) and benefits after she was unable to work, and then paid her health insurance premiums in full until she qualifies for Medicare at 65. The unfortunate part is she had elected to take a high deductible plan because she was one of the healthiest people we knew, so every year she has to immediately pay out the few thousand in deductible payments before the insurance picks up the bill. Luckily, they have enough income producing assets to cover this.

Another bit of good fortune, was that my father had already retired with a pension and some money in retirement accounts, which enables him to help her all day when needed. So, we didn't have to hire anyone to come in.

This type of thing could even destroy someone who had planned well. For instance, they live in a very rural area, which is dirt cheap. Great for saving, but not so great when you need a specialists care. Lots of driving for appointments and even one emergency helicopter flight...insurance generally doesn't cover that and it's not cheap. Again, they had the assets/income to afford this.

The above is one reason I don't shoot for true ERE and go more for ER. (Though, ERE principles definitely helped them attain a level of financial security that helped them weather the storm. We lived on $3,000 for one year I was a kid and I never knew it.) I want a large cushion that can handle multiple disasters (like the above) or major societal changes (countries unable to fund social safety nets, long-term recession/depression, etc.). Plus, I want to be able to purchase a longevity annuity at some point, as extra insurance.

Dragline
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Re: What's your worst-case scenario plan?

Post by Dragline »

Thanks for sharing, Chad.

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Re: What's your worst-case scenario plan?

Post by jacob »

I think I've come to terms with my own mortality.---That life is finite and that my goal is to optimize quality and not quantity. I put much more value on being in tip-top condition than simply being alive. My first and last tattoo will be a "no code" on my chest.

The worst-case scenario would be to developing dementia (or some other condition that renders me unable to make and act on decisions) and DW strangely insisting on keeping me vegetating in a home just to see how old I can get because she can't let go. I hope that should I catch something terminal that I'll fade away gracefully---or die heroically rescuing a kitten from a tree or something.

I will definitely not spend an extra ten years working in order to pay for medical technology to extend my lifespan by an extra six months of misery.

In any case, should I/we lose all our money, how different will we really be from the average middle class person?

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jennypenny
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Re: What's your worst-case scenario plan?

Post by jennypenny »

jacob wrote: I will definitely not spend an extra ten years working in order to pay for medical technology to extend my lifespan by an extra six months of misery.
I understand, but the trick is being able to tell which six months are the last six months ahead of time.

Seneca
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Re: What's your worst-case scenario plan?

Post by Seneca »

Sorry to hear, Chad. Been there unfortunately.

I'm not sure which is most common, major debilitating injury (brain/spine) or illness like cancer/stroke, but I believe these striking in your younger years and/or children at home years are the biggest risk.

I haven't really thought about what I'd do if I wasn't working, right now I carry both LTD and LTC insurance through my employer.

The poor and the rich have little to fear, the middle class and ERE, IMO, actually share this one. It seems to me ERE/MMM "retirees" are unlikely to have these types of insurance, and focus on self-reliance for lifestyle, which may be taken from you. There is not enough money to get over the gap. The Middle Age/Class guy will have no to moderate savings, so will simply see standard of living fall to government subsidy levels without external help.

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