Important Things to Consider
A terminal diagnosis can change life in ways that no one anticipates. Priorities may shift, long-term plans can feel uncertain, and retirement decisions that once seemed distant may suddenly require immediate attention. Both the individual receiving the diagnosis and their spouse or family members often find themselves facing difficult questions about income, healthcare costs, and long-term financial security. You may have had clear goals in mind, but a new medical diagnosis requires that you reassess your financial plan. While this can be an incredibly difficult and emotional period, thoughtful planning can help reduce stress and provide peace of mind that your resources will be carefully managed to support your needs.
Here are things to consider as you review your retirement plans after receiving a terminal diagnosis:
Pause first before making big decisions.
After receiving a terminal diagnosis, it is understandable that you might feel pressure to act quickly, but rushing financial decisions can create unintended consequences. Impulsive choices may lead to anything from improper asset management to tax complications. Taking a moment to slow down allows for clearer thinking. This is also an important time to speak with your financial advisor and let them know about your medical diagnosis so that they can guide you through the next steps.
Reevaluate retirement goals.
Income stability and managing resources to cover healthcare costs become high priorities after a terminal diagnosis. You may also have personal goals that are important to you. This is a time to have open conversations with your loved ones so you can decide what is best. Perhaps you had been planning to retire to a warmer climate or travel. It may now suit your needs better to stay in your current home, but maybe you and your spouse can still take a trip. The progression of illness and timeline will influence these decisions which are highly personal. Your financial advisor can help you to review your current financial strategy and make any necessary adjustments that will support you and your family through this period of time.
Understand your income sources.
What resources do you have available? Review pensions, Social Security, retirement savings, and any annuities you may have so that you can understand your benefits and payout options. Life insurance policies may have an accelerated death benefit (ADB) that you can use. If you were working at the time of diagnosis, you may have access to employer-sponsored disability benefits, paid leave, or other resources.
Review healthcare and long-term care costs.
Medical expenses can add up quickly. Take some time to review your insurance coverage including Medicare and any supplemental policies you may have. You may need to plan for copays, deductibles, prescriptions and any medical expenses that are not covered by insurance. Your financial advisor can help you to review your policies and to get a clearer picture of how much in-home care, hospice, or assisted living facilities may cost.
Review your investment strategy.
Each individual who receives a terminal diagnosis will have their own end-of-life journey and timeline. It is important to discuss this with your financial advisor so that a personalized plan can be created to rebalance your investments to align with your current needs and to support your loved ones’ financial future.
Be aware of tax implications.
As you adjust your plans to meet your current financial needs, accessing the funds in your investment and retirement accounts may allow you to comfortably pay your bills and focus on spending time with your family. Terminally ill individuals who meet certain criteria may be eligible for penalty-free withdrawals from retirement accounts under the SECURE 2.0 Act; however, the money you withdraw may still be taxable and can impact your beneficiaries. This can be very confusing landscape to navigate without the guidance of a financial professional. Your advisor can help you to review your accounts and to plan withdrawals carefully to avoid unnecessary taxes.
Depending on the amount of medical expenses you incur, you may be able to itemize and write off unreimbursed healthcare costs for you, your spouse, and dependents — but only the portion that exceeds 7.5% of your adjusted gross income (AGI) counts. This can include things like insurance premiums, doctor visits, prescriptions, dental/vision care, and even certain travel costs for medical treatment. Try to maintain receipts, travel logs, etc.
Update your estate plan.
A terminal diagnosis often makes estate planning an immediate part of retirement planning. This is an important time to review and update key documents such as wills, trusts, beneficiary designations, and proper asset titling to ensure they reflect your current wishes. Powers of attorney, healthcare proxies, and medical directives are equally essential, as they allow trusted individuals to make financial and medical decisions if you are unable to do so. Taking these steps can help ensure assets pass smoothly, reduce confusion or delays, and give both you and your loved ones confidence that your wishes will be honored.
How Your Financial Advisor Can Help During This Time
Receiving a terminal diagnosis can leave you feeling powerless, as though many aspects of life are suddenly beyond your control. In this moment of uncertainty, your financial advisor can help provide guidance and support for both you and your loved ones. They can hold your hand through difficult decisions and serve as a trusted, objective partner who can help bring clarity to an overwhelming situation. By listening carefully to your concerns and understanding your priorities, your advisor can help you develop a plan that reflects what is truly best for you and your family.
If you would like to learn more about how we can help you, please contact us.
