Generational Wealth Transfer and ACP

January 12, 2024
3 min
Dr. Rick Aizpuru, VP Clinical Solutions

The recent NBC News article, "Generational Wealth Transfer: Baby Boomers Can't Save Gen X, Millennials," sheds light on the struggles that younger generations face in building and preserving wealth. While financial planning is crucial, a critical yet often overlooked aspect is advance care planning, which can play a pivotal role in mitigating medical expenses and safeguarding well-planned financial nest eggs.

The article highlights the difficulties faced by Gen X and Millennials in accumulating wealth comparable to that of the Baby Boomer generation. Rising living costs, student loan burdens, and economic uncertainties have placed substantial roadblocks on the path to financial prosperity for younger generations. As these challenges persist, it becomes imperative to explore avenues that can protect the financial legacy one works hard to build.

One significant and unpredictable factor that can erode even the most carefully crafted financial plans is the burden of medical expenses. As individuals age, the likelihood often countering health issues increases, potentially leading to substantial medical bills. Advance care planning involves making decisions about future medical care in advance, including specifying preferences for treatment, appointing a healthcare proxy, and addressing end-of-life wishes. According to the Bureau of Labor Statistics, people under the age of 65 reported spending an average of$5,209 per year on their health care in 2022, while those over 65 reported$7,540 annually. The study showed that some 60% of lifetime health care spending — a majority, for the average person — happens after age 65. According to Fidelity’s annual retiree healthcare cost estimate, a single 65-year-old could need about $157,500 after taxes to cover their health care expenses in retirement, and a couple could need $315,000.

Advance care planning empowers individuals to have a say in their medical treatment, even if they are unable to communicate their preferences in the future. By documenting preferences regarding life-sustaining treatments, organ donation, and other critical medical decisions, individuals can ensure that their healthcare aligns with their values. This proactive approach not only provides peace of mind but also helps in avoiding unnecessary and costly medical interventions that might not align with an individual's wishes.

One of the hidden benefits of advance care planning is the protection it offers to well-planned financial nest eggs. Unexpected medical crises can quickly deplete savings and investments if not addressed in advance. By clearly outlining the desired level of medical intervention and care, individuals can prevent unnecessary and costly procedures, preserving their financial resources for the benefit of their heirs.

Advance care planning goes beyond healthcare decisions; it includes legally binding documents such as a living will and durable power of attorney for healthcare. These documents provide clear instructions and appoint trusted individuals to make medical decisions on behalf of the individual if they become incapacitated. This legal framework ensures that financial matters are managed according to the individual's wishes, preventing potential disputes, and safeguarding the estate.

The generational wealth transfer dilemma outlined in the NBC News article underscores the importance of a comprehensive approach to financial planning. Advance care planning emerges as a crucial component in protecting well-planned financial nest eggs from the unpredictable nature of healthcare costs. By proactively addressing medical preferences and legally securing these decisions, individuals can navigate the complexities of the healthcare system, mitigate medical expenses, and leave a legacy for future generations. As we contemplate the financial landscape ahead, safeguarding both health and wealth through advance care planning is an integral part of securing a prosperous and well-protected future.