Thankfully, train derailments are not a part of daily life. Those considered minor result in destruction of property, disruption of the operation of the railroad and the schedules of a vast number of people. Major derailments may be catastrophic. The three top causes of derailments are negligence, human error, and reckless actions of pedestrians and drivers. The top three causes of train wrecks/derailments are all based in the actions or inactions of human beings! There are lessons to learn, and wisdom to gain!

As we plan for the future, surprises will come. Some will be severe and not the natural result of our actions. We cannot plan for every possibility in life, but we can avoid the risk of negligence. There are issues and risks to be faced that are common to all. We cannot ignore them or assume they will not affect us! Three universal risks that may derail our financial future are the cost of health care, and the cost of senior housing, and disability during our working years.

According to reports from the Employee Benefit Research Institute (EBRI), couples need to plan for $386,000 of savings to cover lifetime healthcare expenses. It is not enough to rely upon Medicare, because the program covers only about two-thirds of health services normally needed by those 65 and older.

Before this six-figure number causes panic, there is information that may be helpful. First, Medicare Trustees have reduced the projected costs for Part D premiums and out-of-pocket expenses by 10%. However, the EBRI concluded this decrease will not provide a significant reduction in the amount of healthcare savings needed by most seniors. Second, the calculated amount is not needed as a lump sum but is the “total average need” of a couple over the age of 65. No one will be standing at the door of the hospital or physician’s office asking for nearly $400,000 on your 65th birthday. Breaking it down to a monthly basis, we should plan for a monthly health care expense of almost $700 per person for 23 years after turning 65!

Next, the cost of housing does not wondrously disappear upon entry to the golden years. Planning for these costs will help maintain the financial plan and keep it on track. Will mortgage payments extend past the shift in income? There will continue to be the normal household expenses of utilities, taxes, insurance, lawn care, painting, and home maintenance. Plumbing, electrical, and HVAC repairs neither disappear nor are subject to senior discounts. Home maintenance is very important, because the value of the family home is normally a significant part of the family savings. Ignoring maintenance decreases the value of the home, which can prove costly. Senior housing planning should also include the cost of senior living facilities. They tend to be surprising. According to Genworth Financial, the current estimated monthly costs of various levels of senior care for Knoxville, TN are as follows:

  • Adult Day Health Care $1,496
  • Assisted living facility $3,734
  • Homecare services/Home Health Aide $4,053
  • Semi-private nursing home $6,893 (Private Room $7,582).

While we are in our years of greatest income and saving, the greatest threat to derail a future financial plan is an interruption of the ability to earn an income. This may be a short term or long-term situation; either or both may result in a) an interruption of saving and/or b) a decrease in savings in order to cover current expenses. If the employer does not provide a disability income benefit, it is our responsibility to consider the risk and find ways to cover it.

Every train derailment is a SURPRISE. No one boards a train as a passenger or an employee expecting an accident. It requires everyone from senior management to the maintenance facility to cover the greatest human error risks of the train being derailed. Similarly, we must be personally diligent avoid human error and keep the train of our financial future on the track we have planned.

Here is to living free and pursuing our passions in every stage of life!