Healthcare is one of the largest and most unpredictable expenses clients may face in retirement.
A retirement plan can account for housing, travel, everyday spending, and portfolio withdrawals, but an unexpected health event can quickly change the financial picture. When that happens, families may be forced to make important financial decisions at exactly the wrong time.
For financial advisors, the opportunity is to have these conversations before a crisis occurs.
At Abacus Life, we believe life insurance should be part of that planning process. For clients with policies that no longer serve their original purpose, a life settlement may provide an additional source of liquidity that can help address healthcare needs while preserving other retirement assets.
Healthcare Planning Is Retirement Planning
Healthcare should not be treated as a separate conversation from retirement planning.
As clients age, medical expenses can become a larger part of their financial lives. Beyond routine healthcare costs, clients may eventually need to prepare for expenses related to:
- In-home care
- Assisted living
- Skilled nursing care
- Long-term care
- Unexpected medical needs
Without a plan, these expenses may need to be funded through retirement accounts, investment portfolios, or family support.
That is why advisors should consider healthcare costs before they become immediate needs.
The Problem With Waiting for a Crisis
When a significant healthcare event occurs, the priority is understandably getting the right care.
Financial planning can quickly become secondary.
Clients and their families may suddenly need to determine how to pay for care while navigating an already stressful situation.
Without adequate liquidity, they may be forced to:
- Sell investments during unfavorable market conditions
- Take larger withdrawals from retirement accounts
- Reduce assets intended for future needs
- Rely on family members for financial support
These decisions can have lasting consequences for a retirement plan.
Planning earlier gives clients more choices.
Build Healthcare Liquidity Before It Is Needed
One of the most important questions advisors can ask is:
If a major healthcare expense occurred tomorrow, where would the money come from?
The answer may include cash reserves, investment accounts, insurance coverage, or other assets.
But advisors should also look for resources that clients may not realize are available.
For some clients, that includes an existing life insurance policy.
An Overlooked Asset in Healthcare Planning
Many older clients purchased life insurance decades ago for reasons that may no longer apply.
The policy may have originally been intended to:
- Replace income for a spouse
- Protect young children
- Support an estate plan
- Cover business obligations
Years later, those needs may have changed.
The children may be financially independent. A business may have been sold. Estate planning priorities may be different. Meanwhile, the client may still be paying premiums to maintain the policy.
Rather than automatically continuing coverage, surrendering the policy, or allowing it to lapse, advisors can evaluate whether it has value in the life settlement market.
Turning an Existing Policy Into Healthcare Liquidity
A life settlement allows an eligible policyholder to sell a life insurance policy to a third party in exchange for a cash payment.
For a client who no longer needs the coverage, the proceeds can create a new source of liquidity that may be used to address healthcare and retirement needs.
Depending on the client’s circumstances, those funds could help pay for:
- Home healthcare
- Assisted living
- Long-term care
- Medical expenses
- Other retirement needs
At the same time, selling the policy generally eliminates the client’s responsibility for future premiums.
For someone facing increasing healthcare expenses and an unnecessary premium obligation, both sides of that equation can matter.
Protecting the Rest of the Retirement Plan
Healthcare planning is not only about finding money to pay medical bills. It is also about determining which assets should be used and when.
Consider a client who needs significant liquidity during a period of market volatility.
If their only option is an investment portfolio, they may have to sell assets at depressed prices. That could reduce the amount of capital available to participate in a future market recovery.
If an underutilized life insurance policy can provide another source of liquidity, the advisor has another option to consider.
A life settlement does not replace a comprehensive healthcare or long-term care strategy. Instead, it can become another tool within that strategy.
The Value of Planning While Clients Have Options
The best time to discuss healthcare funding is not when a client urgently needs it.
It is while the client and advisor still have time to evaluate different scenarios.
Proactive planning gives advisors an opportunity to review:
- Available healthcare coverage
- Long-term care strategies
- Emergency reserves
- Retirement income sources
- Investment liquidity
- Existing life insurance policies
This broader view can help identify potential gaps before those gaps become problems.
It can also give clients greater confidence knowing they have considered multiple ways to respond if their circumstances change.
Make Policy Reviews Part of the Healthcare Conversation
Advisors do not need to wait until a client says they want to surrender a policy.
Life insurance reviews can become a routine part of retirement and healthcare planning.
When meeting with older clients, consider asking:
- Why was this policy originally purchased?
- Does that need still exist?
- How much are premiums costing each year?
- Has the client’s health or financial situation changed?
- Could the policy serve a different purpose today?
- Has the policy been evaluated for a potential life settlement?
These questions can reveal opportunities that may otherwise remain unnoticed.
Helping Families Make Decisions Before They Become Difficult
Financial planning is often most valuable before the need becomes urgent.
By preparing for healthcare expenses early, advisors can help clients maintain more control over how their assets are used, where their care comes from, and how much of their retirement portfolio remains intact.
For some clients, an old life insurance policy may play an unexpected role in that plan.
The policy does not necessarily have to remain untouched until the end of life. If the original need for coverage has changed, evaluating its current market value may reveal another way for that asset to support the client today.
Prepare Today for the Costs of Tomorrow
Healthcare expenses may be difficult to predict, but the financial conversation does not have to wait.
Advisors who proactively evaluate potential funding sources can help clients build retirement plans with greater flexibility and more options when circumstances change.
And sometimes, one of those options may already be sitting inside the client’s financial portfolio.
Discover What Your Clients’ Policies Could Be Worth
If a client’s life insurance policy no longer serves its original purpose, consider evaluating it before healthcare expenses or premium obligations create financial pressure.
