If you've been diagnosed with a chronic illness, you already know that it affects more than just our physical health. Digesting the news and coming to terms with this new reality often takes a toll on our mental health, relationships, family life, career and finances.
The latter is particularly important. Chronic illnesses account for 86% of our nation's $2.7 trillion annual health care expenditures. What's more, researchers say it isn't uncommon for folks with chronic health conditions to spend hundreds—or even thousands—every year, on top of their regular insurance premiums. Things obviously vary widely depending on the type and severity of the condition, but the main takeaway is that if you aren't prepared, a chronic illness could do a number on your finances.
Like anything else, knowledge is the key to empowerment. At JJ Burns & Company, we’re no stranger to serving clients who are living with chronic conditions. Our first order of business is restoring your financial confidence and putting you back in the driver's seat. Here's how.
Get a Handle on Your New Health Care Expenses
Understanding your outgoing expenses is the foundation of every financial plan. This is especially true for those with a chronic illness. Depending on your diagnosis, you may find yourself up against a long list of new health care expenses. The average person battling Parkinson's disease, for example, spends close to $23,000 every year in medical expenses. Connect with your health care providers to get a clear idea of what you can expect. Between medications, doctor visits, therapies, medical equipment, home health care aides and the like, is it possible to ballpark your annual medical needs and expenses? (Joining a support group is a great way to connect with those who are in the trenches and can provide some valuable perspective.) From there, it's time to take a deep dive into your health insurance policy to project your out-of-pocket costs.
There are a lot of numbers to crunch, which is why it's always wise to sit down with your financial advisor to map out a big-picture plan before making any moves. (We'll touch on this more in a moment.)
Leverage Tax-Advantaged Accounts
Tax-friendly funds like health savings accounts (HSAs) and flexible spending accounts (FSAs) can go a long way in easing the financial burden of a chronic illness. Each lets participants earmark pre-tax money to be spent on eligible medical expenses. FSAs have a use-it-or-lose-it setup (funds don't roll over from year to year), whereas HSAs stay with you over the long haul.
An HSA is particularly good to have in your arsenal because not only can you withdraw from it for medical expenses tax-free at any time, those funds become 100% yours, no strings attached, once you turn 65. You can spend the balance any way you wish. Just keep in mind that HSAs are only available to those who have a high-deductible health plan. They also have contribution limits ($3,450 for single folks under 55; $6,850 for families). That said, it's worthwhile to check in with your employer about whether they offer an HSA. If not, you can open one on your own if you meet the eligibility requirements.
Continue Honoring Your Life
A new diagnosis, while certainly life-changing, doesn't have to derail your dreams. Instead, it's about balancing your life with this new reality. Once you've connected with your medical team and have a firm handle on what to expect, take the time to really revisit your bucket list. What experiences stand out to you the most? Which line items ignite a sense of excitement within you?
Let this intuition guide you and your financial advisor so that your financial plan stays aligned with your values. Sometimes a chronic illness can be a blessing in disguise in that it reminds you what's really important in life. Taking an extended family vacation and making memories together, for instance, may suddenly feel like the best use of your money.
Reevaluate Your Investment Strategy
This really underscores the importance of having an in-depth conversation with your financial advisor as early as possible. A chronic illness complicates your finances, which is why our clients never have to go it alone. Depending on your health situation, your advisor may suggest reallocating your assets to free up more liquidity. If your illness is preventing you from working, whether temporarily or permanently, responsibly bridging that income gap becomes priority number one.
At JJ Burns & Company, we don't believe in making rash decisions. Instead, we take the long view and consider your overall financial health before tweaking your investment strategy. Remember: Our goal is to set you up for long-term success and stability. This is where estate planning comes in.
Despite the misconception, this isn't reserved only for those knocking on death's door. On the contrary, it's a simple way for anyone, regardless of where they are in life, to preserve their wealth and safeguard their family's future. After all, this is what financial planning is all about.