Retirement Planners Knoxville TN

Preparing for Retirement?
Here’s Your Planning Guide for the Future

By: Byron Udell, JD, CLU, CFP, ChFC

Where do insurance products fit into your retirement plan? Obviously, life insurance is a key element in any sound financial plan. This is the case because if you should die prematurely before having built your retirement nest egg, there is no substitute to replace the income you would have earned during the balance of your career for the benefit of your spouse and children. The immediate and substantial lump sum your family would receive if you had life insurance would be a critical component to their future. To satisfy this element, most people choose term life insurance because it is extremely inexpensive and is now available with level guaranteed premiums for as long as 30 years. Example: A 40-year-old male non-smoker in excellent health can buy one million dollars of 30-year level premium term life insurance for less than $126 month. There are hundreds of carriers that offer term insurance, and the prices can vary greatly, so it pays to compare the rates of several companies online using an online service such as www.accuquote.com or www.term4sale.com.

But what if you die financially, not physically? Yes, a total or partial disability that causes your income to disappear is often more financially devastating than death. About 48 percent of all mortgage foreclosures are due to a disability of the breadwinner, yet only three percent are due to a death of the breadwinner. The odds of a disability lasting over 90 days, between age 30 and 65, is over 40 percent. As such, disability insurance needs to be another key component in your financial plan. Typically, you can buy coverage that will pay you about 60 percent of your pre-disability earnings, and if you pay the premiums personally, the benefits are paid to you income tax-free. Since the definition of disability is not ‘black and white’ like ‘life and death,’ the contractual provisions, specifically those defining disability, are critical. Seek the advice of someone who writes a multitude of carriers and who will understand the differences between the various contracts available. A good disability contract can be costly however, but not nearly as costly as not having it if you ever need it. Example: a 40-year-old healthy non-smoker should expect to pay over $3000 annually for a quality contract providing $5,000 per month of benefit payable to age 65 after a 90-day waiting period. For that price, the contract should also include a cost of living adjustment rider, which will increase the benefit based on the government published CPI figures.

What about savings? If you’re like most people, you may not yet be ready to risk your entire future savings in the stock market and all of its risks. But if you don’t, your savings may not keep up with inflation. And with safe, fixed rates on CD’s and other savings vehicles at 30-year lows, what choices are left?

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