How Insurance Can Help You Retire in Comfort
When we think about retirement, we usually think about our IRAs, our 401(k), social security, and other savings vehicles. But one essential component to retirement savings that often gets overlooked is insurance. Now you might be thinking, “Insurance is something I pay for, and I don’t get that money back.” In response, we’d say: “It depends on the insurance you get.”
There are essentially two types of insurance that can help you when you find yourself at retirement age. They are life insurance and long-term care insurance. Let’s take a look at each and discuss why you may need them to hit your retirement goals.
Life insurance is one of those things people don’t like to think about. And according to a recent study, more than 40 percent of Americans don’t have any. Yet, life insurance is essential to protecting assets. Why spend a lifetime of saving for retirement, only to have that suddenly wiped out by an accident, leaving your heirs either nothing or in debt? The truth is that living without life insurance increases your financial risk.
Yes, purchasing life insurance is a cost, but it’s surprisingly affordable these days, and you can basically use it to protect your financial assets should something happen to you down the line.
So, what type of life insurance should you get? There are basically two types:
Term life insurance: Purchased for periods (i.e. terms) of 5, 10, 15 or 30 years, this type of insurance provides a death benefit, but only for the period specified in the policy. This is the least expensive type of insurance to buy, and it mainly covers your heirs in case you pass away unexpectedly.
Permanent insurance: These are types of policies that cover you for life, not just a set period. In addition to providing a death benefit, Permanent insurance policies have a cash value component, which can be used in several different ways in the future. The most common is using the cash to help offset the rising cost of insurance in future years to help avoid premium increases.
Long-term Care Insurance
Another type of insurance that often gets overlooked is long-term care insurance, or LTC insurance. This product helps you pay for services you tend to need in later stages of life (i.e. well past retirement age), such as in-home case, adult daycare, assisted living, nursing home care, and others. The most common type of policies have premiums that are paid on a regular basis, and are not returned if the insurance is unused. However, there are some policies that are a combination of long-term care and life insurance.
How does LTC help you save for retirement? Well, for one, it can come in handy in the later stages of life, especially if you haven’t saved enough. Elder care costs are continually growing, and this can help you hedge your savings against those increases. People are living longer these days, and LTC insurance can help defray the costs needed to maintain life past a certain age.
Additionally, policies cost far lower if you purchase LTC insurance when you’re younger, which means you can spend the money today to recoup the benefit further down the line when you don’t have a regular income. If you wait until you’re ready to retire to purchase this, though, you likely will miss out on those cost savings.
Of course, everyone’s situation is a little different, and its best to take a personalized approach to retirement planning. We’re happy to help you explore how insurance can help you retire comfortably.
Walter Ziffer offers ERISA 3(21) and 3(38) plan business services and financial planning through KRPG Advisors, LLC, a registered investment advisor.
Securities and advisory services (Third Party Money Manager Platforms) are offered through H. Beck, Inc., Member FINRA/SIPC. H. Beck, Inc. is not affiliated with (k)RPG, LLC nor KRPG Advisors, LLC.