Objective information about financial planning, investments, and retirement plans

Life Insurance Over Age 50 – Approval and Savings Tips

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This is a guest post by Chris Huntley, President of Huntley Wealth & Insurance Services. All opinions and suggestions are his.

One of the most common misconceptions about life insurance is that you can no longer purchase it, or the premiums suddenly skyrocket, the day you hit 50 years old.

In many cases, the exact opposite is true!

In some instances, purchasing life insurance at certain “milestone ages” like 60, 65, or 70, can actually unlock huge savings for you!

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Having said that, purchasing life insurance over age 50 can be a bit of a balancing act, and you’ll need to understand some key factors about how age affects pricing and qualification.

Generally speaking, older age affects:

  • Your premium
  • The types of policies and term lengths you are eligible to buy
  • The health class you can qualify for

Let’s start with the obvious… How premiums increase as we age, and then move to savings opportunities.

The Cost of Waiting

Generally speaking, life insurance tends to become more expensive as you age.

As a rule of thumb, you will likely see the premium for a policy increase in the following increments:

  • Age 50 – 59 will see an increase of between 8 – 10% per year
  • Age 60 – 69 will see an increase of between 10 -12% per year
  • Age 70 – 79 will see an increase of between 12 -14% per year

So, if you are currently age 59 or 69, or approaching another birthday, you may not want to wait to apply for coverage.  Of course, you’ll also want to weigh that decision against the savings tips for waiting, which I’ll cover later.

Qualifying for Life Insurance Over Age 50

While in some ways, qualifying for life insurance over age 50 is easier, there are situations when it is more challenging.

For example, most life insurance policies require that you take a medical exam.

After 50 years of age, the medical exams become a bit more stringent. Your exam might include a resting EKG, even for a small amount of coverage.

If you’re over 70, you might also be required to take a “special senior” exam to test mental cognition.

I once had a 72-year-old declined for coverage because he couldn’t draw the face of a clock with the hands showing the time, 2:40.

The age when these and other tests apply vary, so if you are worried you might be disqualified, speak to an independent agent who can check the exam requirements by carrier, to find the carrier with the “easiest” medical exam requirements.

How Age Affects the Types of Policies Available

When it comes to term life insurance, and particularly the length of the term, those who are over age 50 should know that there are certain age cut-offs where certain terms are no longer available.

For example, in your 50’s, some companies may no longer allow you to buy a 30-year term.  Some carriers no longer offer it at age 50, while for others, the cut-off age could be age 55 or 57.

The same holds true for 20 and 25-year term.  As you get into your 60’s or 70’s you may not be able to buy 20 or 25-year term policies. The point to keep in mind is that ALL insurers have a cut-off point where they will no longer sell certain policies.

If you wait too long to buy your policy, you may no longer have access to the term length you desire and might have to opt for a much more expensive permanent policy, such as whole life or universal life instead.

Now that you understand how waiting to buy life insurance can affect the policies available to you and pricing, let’s discuss some savings opportunities for people over age 50.

How Key Birthdays Can Save You Money on Life Insurance

As stated previously, there are specific birthday milestones after age 50 that can end up saving you a lot of money on life insurance.

This can apply to individuals in a variety of scenarios such as:

  • “Big Boned” or Overweight Individuals
  • Individuals with High Blood Pressure and Cholesterol Levels
  • Individuals with History of Family Illness
  • And more

In all cases below, the savings come from being able to qualify for a better health rating.  As we age, many life insurance companies relax on some health and lifestyle concerns, giving us the opportunity to qualify for better health classes.

And since the name of the game in life insurance is getting the best health rate (better health rating = savings), you need to understand these tricks.

Life Insurance Savings Tips for “Big Boned” Individuals

Whether you’re a few lbs. overweight or more, this single tip can easily save you 25% to 50% on your life insurance premiums.

As it turns out, some companies offer more lenient height/weight guidelines to individuals as they get older, particularly for ages 60, 65, and 70.

For example, a 59-year-old male who is 5’9 and weighs 210 lbs. might qualify for an insurance carrier’s third best health rating.

However, if that same individual was 60 years old, he could qualify for the carrier’s best rating.

Since health classes increase premium by approximately 25% per class, the 59-year-old would have to pay about 50% more than the 60-year-old at the same weight!

If you’re overweight at all and over age 50, it would be worth your time to speak to a knowledgeable independent agent who can shop the market for the company that can offer you the best rate at your age, height, and weight.

Savings Tips for Individuals with High Blood Pressure/Cholesterol Levels

The same lenient guidelines over age 50 apply to those with higher blood pressure and cholesterol levels.For example, let’s use an actual chart from one life insurer for blood pressure. They will give the give the top health rating for:

  • Ages 0 – 60 for blood pressure: 140/85
  • Age 61+ for blood pressure: 150/85

If you are an individual who is age 55 and has a blood pressure reading of 145/83, you would not qualify for the top health rating. But the same individual, who is 61 with the same BP reading would qualify for the top health rating.

The same approach applies to cholesterol levels, and other lab levels.  You can even get more favorable underwriting over age 50 if you’ve had a history of cancer or heart disease in your family.

How to Find Affordable Life Insurance After Age 50

As you can see, every insurer has their own underwriting guidelines for those after age 50, and it’s a bit of balancing to determine when you should apply for coverage.

For example, if you are 58 years old and have a few health conditions, or are a bit overweight, you’ll probably pay more now to purchase life insurance than you will if you wait until you’re 60.

You might even be tempted to hold off any purchase until you hit that milestone age.

However, I never recommend that my clients wait.  A lot can happen if you “chance it”, and wait a year or two to buy coverage.  First of all, you could die without coverage!  Secondly, no one can predict your health down the line and whether you’ll still be insurable.

Best practice is to buy the coverage you need now, and then every year or two, check with your agent for savings opportunities.

Just be sure to use an independent life insurance agent.

Chris Huntley is President of Huntley Wealth & Insurance Services, a life insurance agency based in San Diego, CA, where he specializes in helping individuals with high risk medical issues.  He has been in business for 10 years and is licensed in 48 states.  He also owns eLifeTools, a site dedicated to online marketing for insurance agents.  Chris can be reached on Twitter: @mrchrishuntley

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner. Don’t miss any future posts, please subscribe via email. Please check out our resources page as well.

My Top 10 Most Read Posts of 2015

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I hope that 2015 was a good year for you and your families and that you’ve had a wonderful holiday season. For us it has been great to have our three adult children home and to be able to spend time together as a family. We saw the movie Sisters on Christmas day and I highly recommend it.

My Top 10 Most Read Posts of 2015

Hopefully you find many of the posts here at The Chicago Financial Planner useful and informative as you chart your financial course. Whether you do your own financial planning and investing or you work with a financial advisor my goal is to educate and provide some food for thought.

In the spirit of all of the top 10 lists we see at this time of year, here are my top 10 most read posts during 2015:

Life Insurance as a Retirement Savings Vehicle – A Good Idea?

7 Tips to Become a 401(k) Millionaire

4 Signs of a Lousy 401(k) Plan

Is a $100,000 a Year Retirement Doable?

4 Reasons to Accept Your Company’s Buyout Offer

401(k) Fee Disclosure and the American Funds

Is My Pension Safe?

My Thoughts on PBS Frontline The Retirement Gamble

7 Reasons to Avoid 401(k) Loans

YOU RECEIVED A PINK SLIP AND SEPARATION AGREEMENT – NOW WHAT?

I continued to write elsewhere as well, most notably Investopedia and Go Banking Rates.

I want to thank you again for your readership.  I invite you to contact me ( or thechicagofinancialplanner at gmail dot com) to ask any questions that you might have, to tell me what you like or don’t like about the site and to suggest topics that you would like to see covered here in the future. Don’t miss any future posts, please subscribe via email.

I wish you and your families a happy, healthy and prosperous 2016.

Open Enrollment Exploring Your Employee Benefits

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This post was written by Katie Brewer, CFP®.  Young, smart financial planners like Katie bode well for the future of the financial planning profession. Her bio and contact information are provided at the end of the post. This post is timely for those of you who are in the midst of open enrollment via your employers and Katie offers some solid tips to consider.

Is that email from HR about open enrollment buried in your inbox? If you wait until the last minute and then race through your choices, you’re not the only one. Almost half of all employees spend 30 minutes or less choosing their benefits every year. And 90% of employees choose the same benefits every year, even though your family and your benefits are constantly changing.

Employee benefits are a large part of your compensation, and it pays to make the right choices for your family. Forty-two percent of employees believe they waste up to $750 a year due to open enrollment mistakes. We’ll explore a few common employee benefits so you can feel confident that you’re making the right choice for you and your family during open enrollment.

Save for Your Future with Your Employer Retirement Plan

Many employers offer a retirement plan to help you save for a comfortable life in your later years. The name of the plan will depend on your employer. Do you have a 401(k), Thrift Savings Plan (TSP), 403(b), or SIMPLE IRA? All of these plans allow employees to contribute to a retirement account on a tax-deferred basis.

You’ll also want to look into the details to see if your employer offers a Roth option. With these plans, you pay tax now, but you’ll be able to take your contributions — and all your earnings — out tax free. It’s nice to have options about how to take money out in your retirement.

Some employers also provide a generous match to employee contributions. If your employer provides a match, you’ll want to take advantage of it. If you get a 50% match on your contributions, that’s a huge return on your money that’s tough to get anywhere else.

Protect Your Income with Disability Insurance

If you review your benefits package, you’ll probably also see some mention of long-term disability insurance coverage. This group coverage is an inexpensive way to make sure you are protecting your income. If you rely on your salary to pay your bills and save for your future, you need insurance to protect against a loss in income. Understanding the finer details will help you make the best choice for your policy.

First, what’s the elimination period (or waiting period)? You’ll want to have enough cash in your emergency fund to bridge the waiting period if you need to file a claim.

Second, is there a way to easily increase coverage? It’s a good idea to cover at least 50% of your income.

Third, do you have the option to pay tax on the premium? If so, that’s usually a good choice. It’s very inexpensive, and it means you’d receive your disability payments tax-free when you need the money the most.

Some employers offer short term disability coverage as well. You should have an emergency fund that will help you ride out any short periods away from work. But if you’re still building up your emergency fund, it can make sense to pay for a short term disability policy.

Look After Your Loved Ones with Life Insurance

Another common employer benefit is to provide some amount of life insurance for employees. It’s usually on the order of 1 to 2 times your annual salary. For most families, this is not enough.

Your employer might offer the option to buy additional life insurance without needing a medical exam at a reasonable cost. If you have medical conditions that make it difficult to get life insurance, this is a great way to increase your coverage.

Now that you know how much life insurance you have, you can also purchase your remaining life insurance on the open market. This is usually a better option as you can take it with you if you leave your job.

Cushion Your Budget with Health Insurance

Health insurance is an important part of your benefit package. You might have several options to choose from, and what plan is the right one for you will change as your family changes.

A low deductible and small co-pay plan with a wide range of specialists is important if you or your spouse are facing health problems.

If you are in good health and have the financial means, a high-deductible health plan might be the right choice. This plan has a high out of pocket deductible, but you’ll pay less in premiums, and you can take advantage of a health savings account.

Health savings accounts (HSA) are a fantastic way to build wealth. With a HSA, you contribute pre-tax money into the account to be invested. The money rolls over from year to year so you can build a balance. You can withdraw the money, including any earnings, tax-free on qualified medical expenses. Very few things are completely income tax-free! This is different than a Flexible Spending Account (FSA) or Health Reimbursement Account (HRA), so make sure you know exactly what type of plan you have.

You might also have the option to participate in a health care Flexible Spending Account (FSA). With a FSA, you put away pre-tax money to cover healthcare costs like co-pays, deductibles, and medications. These plans are “use it or lose it,” so be careful about how much you put in the account. While there’s usually a grace period for spending your funds, you can’t rollover much (if any) to the next year. If you’re at the end of your FSA year, check your balance so you aren’t wasting money.

Be On the Lookout for Other Benefits

Many employers also offer a dependent or daycare flexible spending account (FSA). This lets you put away pre-tax money to pay for expenses related to caring for dependents like kids or an elderly parent. Many parents use a dependent FSA to get a tax break on day care. If you decide to skip the FSA, you might be able to claim a credit on your taxes instead.

Some employers also offer the option of pre-paid legal services. If your family needs estate planning documents or other legal services, this can be an inexpensive way to get these papers in place. Other employers offer free or reduced tuition to college or training programs. Benefits like these can add up to a significant sum.

There’s such a wide variety in employee benefits that it’s difficult to name all the possible benefits you might receive. Read the fine print of your package to make sure you’re taking advantage of every benefit you can.

Make this year the year that you take the time to understand your employee benefits. Employee benefits are an important part of your compensation. Be sure to get what you deserve by making the most of open enrollment.

Katie Brewer, CFP® is a financial coach to professionals of Gen X & Gen Y and the President of Your Richest Life. She has accumulated over 10 years of experience working with clients and their money. Katie has been quoted in articles in Money, The New York Times, Forbes, and Real Simple. Katie resides in the Dallas, Texas area, but works virtually with clients across the country. You can find Katie on Twitter at @KatieYRL and email her at info@yrlplanning.com. 

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner.

Buying Life Insurance – 5 Questions to Ask

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This is post was written by Ike Devji, a Phoenix, AZ-based asset protection attorney and one of my oldest online friends.  I have spoken with Ike many times for advice on client-related issues and had the pleasure of meeting him in person a couple of years ago when he spoke to my financial advisor study group during a meeting we held in Phoenix.  Here Ike offers some practical advice to anyone who is considering buying life insurance.

Knowing the right questions to ask before buying life insurance is a key issue for consumers, especially considering the significant investment often involved and the exit costs involved in buying the wrong policy.

Covering all the options and nuances available in the life insurance marketplace in anything less than book form is nearly impossible. Here are 5 questions to ask before buying life insurance.

What is my annual premium and can it change?

This is the amount the insurance will cost you every year. In some cases the premium is fixed and in other cases it can change based on variety of factors such as the performance of the stock market and other indices. Make sure you understand your obligations before buying life insurance.   What you will lose or be left with if you don’t make what the policy expected and what was actually illustrated?

What does the policy illustration tell me?

I see lots of bold promises and spit-ball estimations of future performance made by insurance agents. The policy illustration is all that matters, so any conversation about what could happen if the policy exceeds the expectation that the illustration creates is moot; don’t engage in it and instead ask about the “minimum guarantees” if one exists at all. That’s the minimum you’ll earn in the policy if the worst happens. Remember, the column on the far right in most illustrations is the “perfect world” scenario, so look at and have the others explained as well.  Be sure to challenge all assumptions made in the policy illustration, as the saying goes if it sounds too good to be true it just might be.

Does this policy have a cash value?

The cash value is the amount of premium that builds up inside the policy and that may be available to the policy owner in the future. Some policies, like term insurance, have no cash value, while others have it immediately and some build it up over time. Be clear if yours does and exactly when it will be available if you need it and under what terms.

Roger’s comment:  Note that term insurance may be the appropriate vehicle for your needs.  Every situation is different; make sure that you are clear as to your reasons for buying the policy.  Life insurance is often a poor performing, high cost investment or retirement savings vehicle.  It may behoove you to pay only for the death benefit that you need and use more traditional investment vehicles for your investing and retirement savings needs.

Is my policy protected from creditors?

Know what the laws in your state of residence are and if your policy and both the cash value and “death benefit” (dollar amount paid upon your death) is protected by law or not. Asset protection of liquid assets is always a key focus of my concern. If the law is not in your favor, some simple trust planning can often protect your policy from both estate taxes and more active threats.

How long will my policies last, what is my exit strategy?

Again, this goes back to the illustration and specifies how long the coverage will be in place at a specific cost and what the death benefit will be through the term of the illustration. In some cases, keeping the policy alive may have significant increased costs while in others you may be able to reduce the death benefit to keep the premiums level or to stretch the policy for a longer period of years. Find out how flexible your policy will be in the future and weigh that as part of your risk-and-liquidity analysis.

Find out what happens if you can’t or don’t want to continue to make premium payments. With term insurance you usually lose what you paid; that’s OK, think of it the way you might car insurance. Other policies that were structured to have a future cash value or that have a current cash value early on however may have significant “surrender penalties.” Know what happens if you walk away and what options the policy may provide, including the specific surrender penalties that may be imposed in the policy. Do you have a need for life insurance in retirement for example?  The carrier could, for instance, keep all the cash value you built up if you don’t keep it for a minimum number of years.

This list just scratches the surface and is deceptively simple. Our goal here was to introduce some of the key concepts and questions you must be familiar with, so you can do your own due diligence when buying life insurance, whether a simple term policy or a complex premium-financed strategy with a triple-reverse galactic split dollar that includes a trip to the Bahamas to read the policy.

Roger’s comment:  Life insurance is a versatile and often complex financial tool that can have uses in estate planning, asset protection, as a business succession tool, and it can provide a death benefit to your family.  Make sure you fully understand why you are buying life insurance, don’t just succumb to a slick sales pitch.

Attorney Ike Devji has a decade of practice devoted exclusively to Asset Protection and Wealth Preservation planning. He works with a national client base including 1000’s of physicians and business owners often through their local attorney, CPA or financial advisor. Together, he and his associates protect billions of dollars in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to executives, physicians and other professionals nationally. See his work in WORTH, Advisor Today, Physician’s Practice and at www.ProAssetProtection.Com. 

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation.  

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

Meaningful Family Conversations for the Holidays

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This post was written by fellow NAPFA-Registered fee-only financial advisor Megan Rindskopf.

With Christmas less than a week away and the streets abuzz with holiday spirit, it is easy to get consumed by the busyness of the holidays. We encourage you this season, amidst the shopping shuffle and the corporate holiday parties, to pause. Take time this year to reflect on the people and the relationships that are most important to you.

Every family is different and there is no one-size-fits-all solution to a family’s situation – whether family members are estranged or everyone is “thick as thieves,” take the opportunity this year to have meaningful conversations with your loved ones. Reflect on memories – appreciate the tough moments that have made your relationships stronger and be grateful for the memories that make you laugh. Most importantly though, share your thoughts and feelings with the ones you love, because we never know how short life might be.

As you enjoy the company of family and friends during the holidays, pause for a moment to consider the following: 

If something happens to me, will my loved ones be taken care of?

While this thought may seem a bit morbid around the holidays, in reality, what better time than when we are surrounded by family and friends to remind us to have the appropriate insurance coverage in place to protect the ones we care about most.

If you or your spouse become disabled, do you have the right coverage(s) in place to make sure you can still support your family? Retirement, college and other savings goals become much more difficult to accomplish when your income stream is greatly reduced or eliminated entirely.  Proper disability insurance can help supplement the loss of income associated with a long term disability. My colleague Cheryl Sherrard was recently quoted in Financial Planning Magazine regarding group disability insurance. Click here to read the article (free registration may be required).

If you or your spouse become ill and needs skilled nursing care, do you have Long Term Care insurance or adequate additional resources in place to cover in-home care or a skilled nursing facility?  Equally as important – have you had those conversations with your family members so they know what type of care you desire in the event a long term care need arises? It is important to have these discussions before an issue arises.

If you or your spouse passes away unexpectedly, do you have the right life insurance in place to support your family? Depending on your family and financial situation, you may or may not need life insurance coverage. It is important to understand both the amount and type of life insurance you need, in order to assess whether any adjustment is necessary. Work with a financial professional who knows you and thoroughly understands your needs and your goals when assessing your family’s needs.

Do I have current estate planning documents and have I communicated my wishes to my family?

It is imperative to have the essential legal documents in place to protect against the unexpected. In order to avoid family turmoil once you are no longer living, it is also helpful if you have discussed your wishes with the friends and family members involved. While these conversations can be difficult to initiate, they can bring clarity to a situation and help reduce family conflict once you are gone. If the conversations are too difficult to have, a hand-written letter or video can accompany the Last Will and Testament explaining your decisions.

If you are unsure if your documents are still adequate, consult your estate planning attorney to see if you need to establish new estate documents or update your existing documents.

The holidays present opportunities for family members to spend quality time together and create lasting memories. Show your gratitude this season by making sure your loved ones are properly protected financially and by having open, honest conversations with your family members before issues arise. Being proactive for the benefit of those you love is the best gift you can give this season.

Megan Rindskopf is a Financial Advisor for Clearview Wealth Management in Charlotte, NC. As a NAPFA-Registered Financial Advisor and CERTIFIED FINANCIAL PLANNER™ professional, Megan helps individuals and families reach their goals through a holistic and customized approach to financial planning. Much of her time is spent helping young, high earning professionals prioritize competing demands so that they may successfully achieve financial clarity and independence, along with a healthy work-life balance for the long term. Clearview Wealth Management is an independent, fee-only Registered Investment Advisor firm that cares deeply about each relationship and is committed to lifelong partnerships with clients and their successive generations. Megan can be reached at mrindskopf@cvwmgmt.com, or connect with her on LinkedIn. If you would like to learn more about Clearview Wealth Management and the people they work with, check out their website at www.clearviewwealthmgmt.com 

Thanks to Megan and her firm for these excellent thoughts and tips for addressing these difficult issues.

As always please feel free to contact me  at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

Photo credit:  Flickr

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Do You Have a Back-Up Financial Plan?

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English: Green Bay Packers starting quarterbac...

In a recent Monday Night Football game against the hated Bears, Green Bay Packer star Aaron Rodgers went down with down with a game ending injury.  The second-string quarterback was Seneca Wallace who was at best an NFL journeyman with at best a checkered career.  Needless to say the Packer’s high-octane offense came to a grinding halt and the Packers lost a key divisional game.

Seneca Wallace in this fan’s opinion was not a credible back-up plan, but rather a joke and an insult to loyal Packer fans everywhere.  Regular readers of this blog know that I stress financial planning as a starting point for almost every financial endeavor you might undertake.  Part of a sound financial plan involves planning for the curve balls that life sometimes throws at us.  Here are some components of a solid back-up financial plan.

An emergency fund 

This represents very liquid savings that are set-aside for emergencies such as job-loss, the need to replace your furnace on the coldest day of the year, unforeseen medical expenses, and other unexpected events that have a way of popping up in life.  This is not money that is invested in stocks or mutual funds, but rather in a money market fund or a similar vehicle.  Liquidity and little or no risk of loss are key.  For example a CD that ties up your money for a period of time and assesses a penalty if you need it early is not a good vehicle for this money.  The rule of thumb is 6-9 months of expenses, your actual need will vary and you should look at your own unique situation.  If you don’t have enough right off the bat for an adequate emergency fund, accumulating this money should be a top savings priority.

Insurance

Regular readers of this blog know that I have a healthy skeptiscm of many insurance and insurance-based financial products and many of the folks who sell them.  However insurance is a key component of a financial plan for most people.  The key is finding a competent financial professional who will assess your needs and sell you the insurance product that is right for the risk that you need to insure.  I assist my clients in finding and working with insurance professionals of this type.

Life insurance is a basic component of a financial plan for many folks.  Insurance replaces some or all of your future income for your family or other beneficiaries in the event of your death.  It can help pay off the mortgage, send your kids to college, or fund the retirement for a surviving spouse if you haven’t had time to accumulate sufficient assets.  Even in the case of a non-working spouse it can replace the “services” he or she provides in terms of child-care and the like.  Life insurance can also be used as an exit strategy for a closely-held business or to offset the impact of losing a key employee.  All too often life insurance is sold for purposes other than providing a death benefit.  This is often in the form of some sort of policy that builds cash-value and for uses such as a supplemental retirement vehicle.  For many folks inexpensive term insurance is the best deal, be very leery of a pitch for whole life, Variable Universal Life, and the myriad or other cash value policies out there.  These are very lucrative for the agent, not always so for you.

Disbility insurance is perhaps more important than life insurance in that it provides coverage for an event that is more likely to occur than death.  This is “lifestyle” insurance and I generally urge folks who have access to it via the workplace to buy as much Long-Term disability insurance as possible.  These policies are not always great in that their definition of disability and own occupation is often broad.  Private policies will often have a narrower definition of your own occupation for purposes of paying a benefit, but these policies can be expensive.  On the other hand I’ve seen several high earning professionals over the years become disabled and having proper disability insurance has been a financial life-saver for them and their families.

Property and casualty and liability insurance comes in various forms and can help insure against all sorts of events that can occur on your property or in the course of doing business.  These range from personal polcies such as umbrella coverage against the UPS guy falling and hurting himself while delivering a package to your home to having sufficient auto liability coverage for yourself and perhaps younger drivers using your vehicles.  Professionals such as doctors, financial advisors, and lawyers need professional liability insurance to protect them.  Details on these and other types of liability coverage (both personal and professional) are beyond the scope of this article, but they are none the less a key part of a back-up financial plan.  One successful judgement against you or your business can bring financial ruin without proper insurance and asset protection planning.

Long-Term care insurance provides coverage for long-term health problems that can plague us later in life.  This might include a nursing home stay or home health care.  This insurance is complicated and expensive.  Whether or not buy Long-Term Care insurance, which features to buy, and many other decisions requires research and perhaps professional guidance.  The reason to consider this type of coverage is that the cost of caring for a loved one with a long-term health situation can be staggering and can wipe out the finances of a family.

Estate Planning 

Estate planning is all about ensuring that your assets pass to your desired beneficiaries in the manner that you intend.  A will naming a guardian for minor children is a must for parents.  Retirement plans and insurance and annuity products are passed on via a beneficiary designation so make sure these are up to date.  A trust may or may not be in order depending upon your situation.  An often overlooked factor are items such as a medical power of attorney and other similar documents that designate who can handle your affairs and/or make decisions for you in the event that you are incapacited.  Few of us will have to worry about paying estate taxes, but these other issues can be huge and if not handled properly can cause major financial headaches for your family and loved ones.

Accumulate wealth and become financially independent 

This is along the lines of “… the best defense is a good offense…”  Saving and accumulating wealth and building financial independence represent the best financial contingency plan.

Contribute to your 401(k) or similar retirement plan.  Investing for retirement via salary deferral is painless and doesn’t require you to do anything except make an election to have the money withheld from you paycheck.  Obviously you will want to make good 401(k) investment choices and you will certainly want to make good decisions with your 401(k) account when leaving a job.

Starting a business or investing in one is another way to build wealth.  Business ownership if managed properly can be a great way to accumulate and pass on wealth to your heirs.

If you’ve saved and positioned yourself properly over the years you’ll be like several of my clients who couldn’t wait to receive a buyout offer from their employer so they could retire and/or otherwise move on with their lives.

The items listed above are not meant to be an exhaustive list, but they do represent a good starting point to help you prevent a potential financial catastrophe.  I want you to be better prepared then the Green Bay Packers were at quarterback.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your financial planning and investing questions including your financial back-up plan. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.

Photo credit:  Wikipedia

Do I Need Life Insurance in Retirement?

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My fellow Baby Boomers and I have been told that life insurance is generally not needed once we retire. The thought was that we would have accumulated sufficient assets and our dependents are grown and self-sufficient.  This is great in theory, but may not hold true in practice.  Here are a few thoughts as to why you might need life insurance as you approach retirement.

Universal Life Insurance Company

An estate-planning tool

Life insurance can be used to help your heirs pay any estate taxes that might be due. At the federal level, the exemption is scheduled to fall to $1 million in 2013 and the estate tax rate is scheduled to increase. In addition there may also be estate taxes at the state level to consider. Life insurance can be used by your heirs to pay the estate taxes and allow the rest of your assets to pass to them as you intended.  There are many considerations in using life insurance as an estate planning tool, including how the policy is owned.

A bridge to “final” retirement

Retirement continues to evolve for Baby Boomers and will be different than the retirement our parents experienced. By this I mean that many of us will continue to work into what were traditionally retirement years, either because we want to stay active and connected or out of financial need (or sometimes both). Perhaps working a few more years will allow you to amass the nest egg that you need to be able to retire “cold turkey.” If you die prior to being able to accumulate enough assets, life insurance can fill the financial gap for your surviving spouse.

Assistance for a child with special needs

If you have a child or grandchild with special needs, life insurance can be a means to provide funds for his or her care after you are gone.

A means to fund charitable intentions  

You can leave a charitable bequest by making the organization the beneficiary of your life insurance policy.

A tool to help pass on a business

Life insurance can be used to fund a buy/sell or similar business succession arrangement. The life insurance proceeds can be used to buy out your heirs and to allow the business to go to the remaining owners.

If you die this business ownership interest will be a part of your estate and could be subject to estate taxes. Life insurance can be used to pay those taxes and allow the business to remain in the family if so desired.

As a supplemental retirement plan

Cash value life insurance is often touted by life insurance agents and commissioned financial representatives as a supplemental retirement savings vehicle.  They tout the ability to borrow against the policy’s cash value in retirement without having to pay the money back.  Besides potentially reducing the policy’s death benefit, you have to manage the amount borrowed.  Additionally you need to ensure that that all premiums are paid as required to ensure that you don’t trigger an unintended taxable event.

Further you really need to understand the underlying growth assumptions in the policy illustrations you will be shown.  Often the rate of growth of the underlying investments is unrealistic and this can lead to a need to fund the policy to a greater extent than you had planned while working in order to build the level of supplemental retirement assets you had intended.  While this can be a viable strategy, make sure that you understand all of the underlying assumptions before heading down this path.

Whether or not to own life insurance during retirement will be dependent upon having a risk to insure against. It can be easy to be sucked in by life insurance agents portraying it as an investment or a tax shelter. While everyone’s situation is different, in my opinion, life insurance should be viewed as a death benefit. This should drive your decision, whether this involves keeping a policy in force or purchasing a new policy.

Questions about your need for life insurance or about retirement planning in general?  Please feel free to contact me.

Please check out our Resources page for more tools and services that you might find useful.

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Friday Finance Links October 5, 2012

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Looks like there will be a bit of a nip in the air this weekend; fall is upon us here in Chicago.  Can winter and snow blowingThumbnail for version as of 14:19, 5 September 2012 the driveway be far behind?  Good excuse (like I needed one) to plant myself on the couch and catch the Packers on Sunday.

Here are some articles and blog posts that I suggest for your weekend personal finance reading: 

Personal Finance Blogs

Phil Taylor looks at the issue Should You Payoff the Mortgage (s) Early? at PT Money.

Hank Coleman tells us Why Your Stay At Home Spouse Needs Life Insurance at Money Q&A.

Kevin Mulligan discusses the Disadvantages of Target Date Retirement Funds at Cash Money Life.

Posts from Fellow NAPFA members

Don Martin shows us the Best Way To Buy Bonds at FiGuide.com.

Anthony Farella writes about 401(k) Disclosure Coming To Your Statement at FiGuide.com.

Other articles from around the web

Chuck Jaffe provides 6 reasons to dump a bad mutual fund at Market Watch.com.

Kimberly Palmer tells us How to Market Your Business Online at usnews.com.

Aaron Pressman discussed Vanguard’s recent decision to switch index providers Vanguard dumps MSCI indexes from 22 funds to cut costs at MSN Money.

Phillip Moeller says that Estate-Tax Changes Would Affect More Than the Super Rich at usnews.com.

In case you missed it here is my latest post for the US News Smarter Investor Blog Using the “Four Percent Rule” for Retirement Planning. 

Here’s wishing everyone a great weekend.  

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