3 Unexpected Post-Retirement Events that Can Put a Strain on Cash Flow

Jan 18, 2018 10:50:00 AM / by Darwin Bayston, CFA


Preparing for retirement is a significant financial challenge during the working years, but the envisioned reward of enjoying stress-free golden years keeps most of us motivated to earn and save as best we can. Indeed, according to a story this week in the Wall Street Journal, “people at 65 to 74, the so-called time affluent, reported having more fun than any other age group,” according to a 2016 study by Age Wave and Merrill Lynch.

However, very few of us will coast through our retirement years without a few bumps along the way, and some of us will unfortunately collide head-on with major life events that will unexpectedly impact our quality of life in those golden years. This could include an economic downturn that drives down investments and drives up inflation, a natural disaster that destroys residential property or a medical incident that makes it difficult to do the things you enjoy.

Some of these events will be sources of personal emotional challenges, but some of them will also represent financial challenges during the retirement years. Here are three unexpected post-retirement events that can put a strain on your cash flow:

  1. Financial Fraud

    Sadly, one in five Americans over the age of 65 has been a victim of financial fraud, according to a survey by Investor Protection Trust. Seniors are unfortunately primary targets of financial scams, such as the infamous “Grandparents Scam” where elderly people are told they need to wire money right away to help a grandchild facing an emergency. The elder financial fraud problem is getting worse: three in 10 state securities regulators say they have seen an uptick over the past year in cases and complaints involving senior financial fraud and exploitation. This is more than a reprehensible crime against vulnerable citizens, it’s also a growing problem for seniors from a financial perspective. A 2015 report estimated that older Americans lose $36.5 billion each year to financial scams and abuse, a figure that CNBC reports might actually be low. Victims may be able to recover at least part of their losses from banks or credit card companies, but some are left with a depleted nest egg.


  2. Health Incident

    The reality of life is that we deal with more health issues as we age. We can take better care of ourselves, see our doctors more regularly and stay active as much as possible – these things will help to avoid serious ailments – but the Senior Living Blog reports that “almost a quarter of all seniors will visit the emergency room” at some point. Of course, at age 65, you qualify for Medicare, an enormous benefit that provides health insurance for seniors. However, beyond what Medicare covers or excludes, retirees should take into account other healthcare considerations: the average 65-year-old couple could pay almost $490,000 in total health-related costs throughout retirement, according to Forbes. A good supplemental plan can help fill that gap, but most seniors discover that an unexpected health incident at some point in the retirement years serves as a drain on resources from their bank accounts.


  3. Death of a Spouse

    As unpleasant as it may be for us to consider, it’s likely that either you or your spouse will die before the other and that one of you will find themselves widowed at some point during the retirement years. This is a traumatic personal event that will be wrought with grief and emotion. In addition, it is a significant financial event that should be considered in advance so that you can manage your affairs more intelligently amid the emotional challenges of that difficult time. You will have expenses to manage related to the death itself (e.g., burial, funeral, etc.), perhaps some end-of-life medical expenses to take care of, and of course a variety of bookkeeping items to review with respect to your family’s debts and income sources. If the deceased spouse was the one primarily responsible for handling the marital finances, this can be an especially stressful time on cash flow management for the surviving spouse.

Whatever the cause, an unexpected post-retirement financial event may place you in the position of needing to find sources of cash to help ease your sudden fiscal burdens. A possible source that many seniors are pleasantly surprised to discover has immediate cash value is their own life insurance policy. A life insurance policy is considered your personal property and – as such – you have the right to sell that policy just like any asset that you own, such as a house or a stock portfolio.

The sale of a life insurance policy to a third party – for more than the policy’s cash surrender value – is known as a life settlement transaction. A policy owner receives a cash payment, while the purchaser of the policy assumes all future premium payments and receives the death benefit upon the death of the insured. Candidates for life settlements are typically aged 70 years or older, with a life insurance policy that has a death benefit or at least $100,000, and those seniors who sell a policy can obtain roughly seven times more money than the cash surrender value of the policy.

To learn more about life settlements, call the LISA office today at (888) 521-8223. We’ll be happy to answer any questions you have and to steer you in the direction of qualified professionals who can help you decide whether a life settlement is a good option for you to help manage cash flow needs brought on by unexpected life events during your retirement years.

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).