There’s nothing like a global pandemic to force you to focus your attention on your preparedness for the future. The volatile market combined with job loss or interruption is making it necessary to reevaluate your retirement readiness.
✔ Life Insurance
“Life insurance? What does life insurance have to do with retirement readiness?”
Most people don’t think of life insurance as a retirement tool, but it’s important to consider what will happen to your family’s retirement plan if you die prematurely. Can your spouse still retire without the benefits your income would have provided? Life insurance can replace the income you would have earned and the savings you would have contributed throughout the remainder of your working life.
If you are a business owner, life insurance can provide your partners funds they can use to pay your spouse for your share, which can free up your partners to keep operating. Alternatively, life insurance could provide your family with a lump sum that would give them time to sell the business and replace the income lost due to your death.
Questions? Ask A Trusted Advisor.
How to Use Life Insurance In Your Retirement Plan
Obviously, the first step in this plan is to purchase the life insurance. It’s hard to know what kind you need. It’s hard to know if you have enough. And it’s hard to know if you need any at all. Insurance companies have made it even harder by coming up with bewildering names: whole life, term life, universal life. Some life insurance policies have a cash value while others do not. Some invest that cash value in the stock market while others pay a fixed rate of interest. Some insurance policies combine all of these ideas.
A recent study by life insurance advocacy group LIMRA discovered that most Americans thought a 20-year $250,000 level term life policy for a healthy 30-year-old costs about $400 a year. In reality, annual premiums for such a policy typically run about $150. No wonder, as LIMRA noted, that 83% of consumers forego buying life insurance. I see this misperception all the time.
One tip to save money on life insurance is to purchase it before your next half-birthday. Premiums are lower if you purchase your life insurance before you are within six months of your next birthday (your rate will be lower if you are 29 and five months old vs 29 and seven months old).
How much life insurance do I need? Use our life insurance calculator to find out.
In addition, some people are paying for insurance that is not right for them.1 This is why it’s important for you to sit down annually with an insurance professional to review how your policy works and how it will help you to protect your family. It is imperative that you make sure the policy is owned by the right person or entity. It is also vital to review a cash value policy periodically to ensure it will provide the benefits you need.
Benefits of a Life Insurance Policy Review
Life insurance is less expensive than you think. Click the button for an instant life quote.
Don’t forget long-term care insurance
Another piece that you may not realize belongs in your retirement plan is long-term care insurance. According to Morningstar, only 11% of adults 65 and older had long-term care insurance, while 52% of people turning age 65 will need long-term care services in their lifetime.
Regardless of the setting (your own home, a nursing home, or an assisted living facility), long-term care can be quite expensive. In 2019, the median annual cost for an assisted living facility was $48,612 while the average cost for a private room in a nursing home was $58,400. The median annual cost for a home health aide working 44 hours per week for 52 weeks per year was $52,624.
Recovery at a nursing home followed by a hospital stay is usually covered by health insurance and Medicare, but daily living assistance due to age or health often falls to an individual to pay on their own. Long-term care insurance can help keep your savings account intact and lessen the burden on family members and caregivers. While premiums for long-term care policies are traditionally somewhat expensive, purchasers can choose from different coverage options, including inflation protection, longer elimination periods, and nonforfeiture options.
With rising costs of long-term care, we recommend that everyone make a plan for how they will fund their care.
At Eide Bailly, we review policies for our clients to help prevent these and other issues from ruining your plan. This is a complimentary service, and well worth the time. We have found a wide variety of issues with policies that we’ve reviewed, and we understand their impacts.
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