[Editor's Note: This piece, originally entitled “Perspective changes when diagnosed with a chronic illness or cancer,” is written by “Bobby,” an anonymous physician with whom I have no financial relationship. I hope you enjoy it.]
I had it all planned out. With the help of what I had read on WCI, I knew when I would retire (late 50s, early 60s on a full government pension). I was going to delay Social Security until age 70 by living off my government pension and withdrawals from my HSA, Roth IRA, and TSP (government 401K) that I have fully funded for years.
Unfortunately, I was then diagnosed with Non-Hodgkin’s Lymphoma at the age of 38.
Initially I was given positive news in the way of treatments available and the high likelihood of success and a long life. I am now six months since diagnosis, and my treatments have caused complications and I am now facing a bone marrow transplant, which has a mortality rate of greater than 10%. I write this to review the possible ways in which I may change my financial plan going forward, and potentially as a reminder to folks that having your financial life in order prior to something bad happening is important.
I already had a 30 year, million-dollar term-life policy that I had bought when it was just me and my wife. Now I have 2 children under the age of 3 and had not increased my life insurance. Oops. It is now too late to get a good term policy that is not crazy expensive. Thankfully, I work for the federal government and was able to recently sign up for FEGLI (Federal Employees Group Life Insurance) as they had a rare open season last Fall. I guess this is a reminder for all to make sure when you do have life changes to update your term life insurance as your needs change as it is too late for most when you are diagnosed with a major illness.
Health Savings Account
I have been saving every penny in my HSA for the past few years and investing in Vanguard funds (I use PayFlex through my federal Aetna policy). Now I am spending my out of pocket maximum via my health plan (which is $6,850), which I can still pay for out of current funds, but I wonder if I should just go ahead and use my HSA. If I don’t use it, it will go to my wife who can use it in retirement as well, so I will likely keep my plan as it is for now and keep saving. One of us can always use this money down the road. I am debating using it to free up current funds for trips or other experiences to undertake while I am still feeling fairly well. I don’t know that there is a right or wrong, just something to think about.
Buying a House
My wife and I had bought a 2 acre lot, came up with plans for our “Dream Home,” and were working with a contractor to come up with a contract for building a home when I was diagnosed. We halted plans to build for now. We already own a home that is sufficient for our family, but wanted to move to a town with better schools by the time our children are of school age (so we have at least a couple of years). The resulting mortgage would be almost $1500 more than what I am paying now, and we will have to see in the next 2 years how my treatment is going to help decide if we go forward with our plans. If I am not able to work, will we still be able to meet all of our needs with this new mortgage given our only income may be disability insurance benefits?
As a government employee, I have accrued sick leave from the day I was hired. I thought it was a lot, but after many trips to the doctor and several admissions, that sick time is dwindling quickly. I am able to ask others to donate leave as well, so that will hopefully cover me if I run out of leave during my treatments.
I am also covered if I am no longer able to do my job permanently in what the feds call Disability Retirement. Hopefully I don’t get there any time soon.
This does leave a gap. What if I run out of leave and out of leave that others donate, but I’m not to the point of Disability Retirement and should be able to be back in a few months? Worst case scenario is that I use my emergency fund (That’s what it’s there for, right?). I had never really looked too closely at disability insurance, as initially I was in the military, and then I knew there was sick leave and some form of disability with the government job. So bottom line here is that make sure you know what kind of disability insurance you have and make sure it covers the scenarios that you can’t plan for. I know I have read some good posts on here about disability insurance.
I acknowledge that I have been bad in this regard. I am several years out from residency and still have just under 200K in federal loans (2.625% interest rate and will be lowered to 1.625% in 2 years thanks to a loan benefit from Sallie Mae after so many on time payments. I had my loans in deferment for several years during my military time and during an MBA program that I did as well. I also have 25K in private loans at a 3.75% interest rate. I had gone through a divorce and my previous spouse was a spendthrift and racked up quite the credit card bills.
Bottom line, at this point in time I was getting ready to tackle my student loan debt. Now I definitely want to whittle down that private loan as it has the higher rate and is quite manageable. I really don’t have much benefit to throw money at the federal loans at this point. First of all, the rate is super low and will lower by a point in 2 years. If I die, my remaining federal loans will be forgiven and will not have to be paid by my estate, saving a lot of money for my family in the long run. Of course, everyone’s situation is different. I got my loans at a time of low interest rates and PSLF was not around at that time otherwise I likely would have done that working for the government and all. My situation may be unique, but I am also glad I left my federal loans federal as they will be forgiven if I were to die (something to consider if you consolidate privately).
[Editor's Note: Most private student loans are also forgiven at death, but read the fine print. They may be assessed against your estate, which is essentially the equivalent of having your spouse co-sign for them.]
Social Security Plan
I was all for planning on having all the money I needed and planned on delaying taking SS until I reached the age of 70. Now I hope to reach the age of 62, and will likely start taking SS at the age of 62. The “break even age” is somewhere around the age of 78 – meaning that if I die before 78, then I would have gotten more out of SS by starting at 62 than if I had started drawing at 70. The opposite is true if I make it past 78. Now there are other things to consider including spousal considerations as well, but in my scenario, I believe taking my SS at age 62 will be best.
This isn’t a lot of new information, but a reminder to think about things and plan for the worst case scenarios while you are still healthy, as that can help you if your health takes a turn for the worse. Hopefully I will be able to give you all an update when this posts to WCI in several months and let you know how I am doing.
What do you think? How would your financial plan change if you were diagnosed with a potentially terminal illness? What if you knew the illness was terminal? Comment below!