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Chronic Illness: Planning for Early Retirement

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When Jolie Carnahan-Girondi was 42 years old, her life was progressing according to plan. She was busy raising 2-year-old twin daughters, leading a thriving tax planning and business consulting practice outside Pittsburgh and teaching online business courses at two universities.

Then, without warning, she was hospitalized with a serious cardiac infection. The condition — idiopathic presumed viral cardiomyopathy — often leads to chronic heart failure. It is the cause of nearly half of all heart transplants in the United States, according to the Myocarditis Foundation.

Carnahan-Girondi was given a 50 percent chance of survival. Suddenly, the woman who had helped hundreds of people develop plans to secure their business and personal finances was forced to rethink everything she thought she knew about her earning capacity and retirement goals.

From illnesses like cancer and Parkinson’s disease to chronic pain from accident-related injuries, there are many reasons why individuals might consider working less — or retiring early. So how can financial advisors help these clients make the right decisions about retirement planning during a health crisis?

“An unexpected illness doesn’t force an individual into ‘retirement’ in the traditional sense,” says Brenda Smith, CFP, a financial life strategist in New York City. “Retirement is a time to make choices in lifestyle, encore careers or ‘rewirement,’ while planning more leisure and the pursuit of passions. A chronic illness forces many of the same decisions as those posed by retirement, but the future calls for more off ramps than on.”

Smith notes that, while both events require people to take stock, illness inspires a different emotional set and a sharper focus on planning for legacy.

Smith advises individuals facing chronic or life-threatening illness to consider the following:

  • Make sure wills, power of attorney and health care proxies are up to date and fully executed. This allows those responsible for the client’s care to discharge these documents correctly. If the illness could cause incompetence, the client should establish a durable power of attorney or trust, if assets warrant.
  • Discuss changing needs in the months or years ahead.  What physical, emotional and financial challenges will the client and their family face? Should the client change residences or adapt his current home? Financial planners can help establish a budget for short- and long-term needs.
  • Accelerate Social Security payments. Eligible individuals may receive retirement benefits as early as age 62. Those benefits will, however, be as much as 30 percent less than the amount to which they are entitled at full retirement age.
  • Think differently about assets. After years of earning, saving and accumulating assets, clients may want to shift mindsets to spending down assets.

Four years after her diagnosis, Carnahan-Girondi has changed the way she thinks about work, retirement planning and assets. For two years after her medical crisis, she temporarily cut back on her work hours as she regained strength and moved to a much smaller house. but she never considered early retirement.

Today, she works — and spends — more than she did before her diagnosis. Carnahan-Girondi and her husband save for their children’s college, max out his 401(k), contribute to her SEP and have a year of cash reserves.

“Otherwise, we live life,” she says. “I don’t throw caution to the wind, but I’m not going to die with a big pile of money and have never had fun.”