Planning Buckets Make Financing Long-Term Care Strategies Manageable

EDITOR’S NOTE: This content has been provided to Assisting Hands Home Care by Mass Mutual New Jersey-NYC as part of an ongoing series about paying for care

By Richard Pacesa Jr., financial advisor, MassMutual New Jersey-NYC

When it comes to long-term care and its overall effects on your life and retirement, it is never too soon to begin planning.If you view retirement as a short-term state, you may be shortchanging your retirement years. For many retirees, retirement may last 30 years or more. How you manage the money you will need today may be quite different from how you treat the money you will need in 20 or 30 years.

The next two blogs will focus on what you need at each stage of life and suggestions for developing an achievable long-term strategy to plan for your needs down the road. As always, consult your trusted financial professional for your specific situation.

To fully prepare for all your retirement years [and the potential for a long-term care event], one tactic to use may be to consider is dividing your assets into three buckets, each representing about 10 years of your potential 30-year retirement. This helps you visualize the plan in manageable pieces.

Things to consider when deciding on how to manage and prioritize your buckets:

• When do you want to retire?
• Where do you want to live?
• What kind of lifestyle do you want to lead?
• Do you have any health concerns to plan for?

By taking the long view now, you may find yourself on stronger financial footing as you move through each stage of retirement. This can enable you to have peace of mind when it comes to your care needs, whether it is home care, independent living, assisted living or skilled nursing care.

The Money Now Bucket

This will cover the first 10 years of your retirement when you are most likely to lead an active lifestyle. You may want the assets held in this bucket to be accessible—more liquid — so you can take advantage of your newfound freedom to pursue the things you have always wanted to do, such as traveling, focusing on favorite pastimes, or new hobbies.

Your asset allocation may follow a conservative approach, with a higher portion of your assets in cash or cash equivalents.

The Money Later Bucket

This will hold the money you may spend during the second 10 years of retirement when you begin to slow down and settle into routines closer to home. You may want the assets held in this bucket to provide a targeted return on investments. The income generated from these assets should strive to at least keep pace with inflation.

Your asset allocation may follow a more balanced approach, with a focus on securities that may provide a fixed return and an opportunity for growth.

The Money Much Later Bucket

This will hold the money you may spend during the third 10 years of retirement when you will most likely be focused on healthcare needs or providing care for a loved one.

One thing to consider when filling this bucket are your final expenses and how those left behind will pay for them. The median cost of an adult funeral with viewing and burial was $7,640 in 2019, according to the most recent statistics compiled by the industry trade group the National Funeral Directors Association (NFDA). When the cost of a vault is added, something required by most cemeteries, the cost rises to $9,135.

You may want these assets to be growth-oriented as you may not need to access them for 10 to 20 years depending on when you retired.

Growth of assets over a longer-term period may be critical to be prepared for the often necessary, and ever-increasing, health care expenses associated with living a long life. Your asset allocation may follow a more moderate-to-aggressive investment approach that provides growth, but still gives you peace of mind.

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