New drugs and medical advances have meant a second chance for many people diagnosed with major illnesses such as cancer and AIDS. But for some, the blessing of improved health has been a financial curse.
Having sold life-insurance benefits, run up huge debts, raided retirement funds and gone on disability, many of these people structured a life that had no tomorrow.
“They planned for the inevitable, and the inevitable didn’t happen,” says Brent A. Neiser, director of collaborative programs at the National Endowment for Financial Education in Denver.
Now they must shift gears and figure out how to live. To come up with a new strategy, these people need to take a good, hard look at their health, their assets, their benefits, their dreams and their tolerance for risk. Their new plans need to include not only the cost of a chronic illness but also the possibility of living well into retirement.
For many, the picture isn’t pretty. Thomas W. Swift, a San Francisco investment adviser, has reason to know firsthand. HIV positive, he cashed in his retirement account and moved to San Francisco in 1996, prepared to die. When his prognosis changed, he decided he needed a new plan. That plan led him to his current work, addressing the long-term financial needs of the HIV-positive community.
“I have quite a few people who have zero savings,” says Swift, who is with Horton Investment Advisory Group.
In many cases, the money went to pay medical bills and living expenses. Some people compounded their problems by making irrational financial decisions. Patricia C. Drivanos, a New York financial adviser, tells of a man diagnosed with cancer who immediately sold all his investments. The sales created a massive tax liability that depleted his resources, she says.
Advisers also tell stories of people who, in the face of imminent death, chose to spend extravagantly. One of Swift’s clients, for example, ran up a $45,000 credit-card debt buying electronics equipment.
Whatever their individual stories, all those fortunate enough to count themselves among the survivors now must try to reposition themselves financially for an unexpected future. The tenuousness of the reprieve makes the task more challenging.
Cancer goes into remission, for example, but can recur. HIV drugs extend life but don’t cure the disease. And the drugs used to battle both can be debilitating. “The problem with the drugs for HIV is that they are experimental,” says Drivanos, noting these drugs are also known to cause both liver and heart damage.
Moreover, just because someone is no longer dying doesn’t mean they are able to live a full life and return to work. Because a return to work often means dismantling a carefully constructed safety net, people should be brutally honest about how they feel and whether they can handle a regular 9-to-5 day.
Typically, the safety net includes disability benefits, health-insurance benefits, Social Security and perhaps Medicare. These benefits often are so valuable that it can be hard to figure out an exit strategy.
Coming up with a way out often means both homework and compromise. Start by sitting down and reviewing your various insurance plans and benefits, says Mark Scherzer, a New York attorney who specializes in individual insurance issues.
Your disability policy, for example, may let you to go back to work part time and still retain some benefits.
Such a step is also less risky, he says, if your policy covers “recurrent disability.” This means that if you go back to work but become disabled by the same condition within a certain period of time–let’s say, six months or a year–you can renew your claim.
Social Security also offers a trial return-to-work program, which allows people to work for as long as nine months on a full-time or part-time basis before jeopardizing their benefits.
Make sure you understand whether your disability ends when you return to any employment or only when you return to work in your own occupation. “Group coverage tends to be a combination–for the first two years it tends to be your own occupation, then it goes to any occupation,” explains Ms. Drivanos.
This distinction can make a big difference to many. Those who can’t physically return to their old jobs may be able to find something else that they’ve always wanted to do and still retain benefits. Indeed, many have no desire to return to their old professions. Having faced their own death, they want to grab the proverbial brass ring and try something new.
But people who make that kind of switch may jeopardize their health coverage. By changing jobs, they may lose benefits provided by their old employer and face a waiting period before qualifying for new health insurance.
Life insurance also needs attention, she says. People on disability often get a waiver of premium. Once they are no longer disabled, they must resume policy payments or risk losing the coverage.
Budgeting is an important part of any new strategy. Doing a basic cash-flow analysis will provide a clear picture of how much money is coming in and how much is going out. Then, if necessary, people can adjust their lifestyle to reflect the fact that there is going to be a day after tomorrow.
An investment portfolio for the living is also far different from the cash-heavy approach typically taken by the dying. Many terminally ill people move to cash so that they have the money to pay medical bills and other expenses.
“Someone who is not terminal can lengthen their maturity and take a little more risk,” says Jull Peetluk Feinstein, a Northport,N.Y., financial adviser.
Some may already have significant assets from selling life-insurance benefits or tapping their retirement funds. But often such assets are invested with no look to the future.
“They have done whatever they wanted with it,” says Swift, noting one client put all his life insurance money into real estate that produced little income. Another wanted to invest it all in a single stock, and a third simply put it in the bank. Now, he says, these people need to use those assets to create the income needed for them to live.
That doesn’t necessarily mean just creating a diversified stock portfolio. “In some cases that means making an investment in themselves,” Swift says. Going back to school, getting a graduate degree or other professional training may pay off better in the long run, he says.
“It is important to reclaim your dreams,” he says. “Part of coming back to life is being able to reinvest in yourself.”
