How To Financially Plan For a Critical Illness

Americans work hard to achieve the financial security and lifestyles they desire. As we work, many of us are able to use our earning power to purchase homes, save for retirement, do some traveling, and engage in hobbies and other lifestyle activities.

What happens if you were to become seriously ill? How can you protect your financial assets and your lifestyle if faced with a critical illness that impacts your earning and how you live your life? In this series of blog posts, we’ll discuss ways to protect your assets by laying the groundwork and preparing for whatever the future holds. There are several steps one can take to ensure continuity of lifestyle, and our blog series will cover some of the best ways to keep financial assets where they belong: in your care.

What is Earning Power?

Before delving into asset protection during a critical illness, it is important to discuss the concept of earning power. In simple terms, this means your ability to earn an income. It is the most valuable of one’s assets, and everything we do is dependent on earning power during our working years.

Earning power consists of four income sources:

  • Your income (salary)
  • Your spouse’s income (salary, investments, and other income sources)
  • Investment income (such as gains in value of stocks, bonds, mutual funds, real estate, etc.)
  • Other income (including bonuses, tips, and monetary gifts)

Each of these income sources is important, and each of them can be impacted by a life-threatening illness. An interesting statistic to be aware of is this: if a couple 30 years of age earns $100,000 over their entire careers, they have the potential to earn $3.5 million. This occurs even if no raises are given during their work lifetimes. This statistic demonstrates earning power and how important it is to achieving the financial goals and lifestyles we work so hard for.

What are Critical Illnesses?

When we use the term “critical illness”, we are not talking about colds and flus or other illnesses that may cause you to miss a few days of work. Here, critical illnesses are life-threatening health complications like heart attacks, strokes, cancer, and pulmonary diseases. Some good news is that many of these illnesses are survivable, thanks to advances in medical care and treatment, the fact remains that any of these serious health issues can greatly impact one’s finances and ability to earn an income.

Let’s dig deeper into several of the major critical illnesses and discuss some statistics of these life-altering situations:

Heart Disease – over 85 million Americans are currently living with some form of heart or cardiovascular diseases. It is one of the leading causes of death in the United States; such a disease strikes someone in the U.S. every 42 seconds on average.

Cancer – U.S men have about a 50% chance of developing some form of cancer during their lifetimes. For U.S. women, there is about a 33% chance of developing cancer. In 2016 alone, over 1.5 million new cancer cases were reported. While cancer survivorship has increased over the past decade, it remains a very serious illness that can interfere with one’s life.

Strokes – a stroke occurs, on average, every 40 seconds in the United States. Strokes are the leading cause of long-term disability in the American workforce; many will face long periods of disability, while others will become permanently disabled as a result of a stroke.

When considering the prospect of critical illnesses during your lifetime, it is important to think about several questions:

  • How long can you remain financially stable if such an illness strikes and you are no longer able to earn an income?
  • How will you pay your bills if a critical illness strikes?
  • Will you have the funds available for long-term care, including insurance co-payments, treatment, transportation, household and childcare expenses, and home health care?

What are the Costs of Critical Illnesses?

Each year in the United States alone, billions of dollars are spent in combatting and treating critical illnesses such as cancer, heart disease, and strokes. The medical treatment costs alone are staggering, but there is more to these diseases than just medical treatments. It is estimated that $316 billion is the annual average price tag for the direct and indirect costs of cardiovascular diseases and strokes in the U.S. Cancer treatments and indirect costs add another $74 billion to the tally. In these figures, both healthcare costs and lost workplace productivity are factored in.

Heart disease ranks as the #1 killer in the U.S., and strokes are not far behind at #5. This is true for both men and women. As recently as 2013, over 800,000 people lost their lives to heart disease in the U.S.

In addition, heart disease and strokes account for chilling frequency of long-term disability. If a person should have a heart attack or stroke, he or she may not be able to work for long periods of time, if ever again. Of course, this means that finances must be in place in order to pay for healthcare costs and for household expenses for the duration of the disability.

Next Up: Funding Sources to Help Financially Survive a Critical Illness

We’ve gotten the definitions and statistics out of the way – these are both very chilling areas to be aware of. In our next blog post in this series, we will begin to discuss some of the funding sources, particularly insurance, that may be able to help pay for the direct and indirect costs of critical illnesses. Stay tuned for more.



Read more: How To Maximize Earnings for Retirement >>

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