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DO INSURANCE AND RETIREMENT MIX?Posted by Roth-IRA-401k on: 2006-01-30 13:31:23 in category:
Retirement Headlines [ Print | Permalink / 0 Comment(s) ] DO INSURANCE AND RETIREMENT MIX? Insurance is a financial instrument that no one really wants, but no responsible adult can do without. Of all the challenges we face in retirement, few are likely to give you more concern than handling your finances prudently. So much of what happens is unpredictable. It’s these unexpected events that can rob our income and assets and derail even the best laid plans. That’s especially true when considering how long you’ll live and your quality of life. Hopefully you won’t be blessed with living a long life coupled with the horror of outliving your money. Although you may improve your situation by taking good care of your health and living within your means, you should be adequately covered against unforeseen losses by the right kinds of insurance. Many think of insurance as just a product that only costs them money. Another way to look at it is a luxury that you can’t afford to do without. If you regard it as a vehicle to manage the various risks we all face in our day to day life—risks that if not guarded against could cause financial hardship—you may think of certain types of insurance as necessities while considering others only as optional. During retirement there are three major risks: risks to health, longevity and to our property. Some of these risks are ones should be addressed before the age of retirement. Medicare supplement (Medigap) or Medicare Advantage insurance. This necessary coverage helps you to pay Medicare deductibles and the portion of hospital and medical charges that are approved by Medicare but not paid by it in a year when your total hospital and/or medical charges are high—something that can happen when you get older. Those who are willing to pay more to have a greater choice of services generally choose a Medigap policy. Those who prefer to save money and use a limited pool of medical service providers might prefer to use the Medicare Advantage program. Prescription drug coverage. At a time when your need for prescription drugs may grow, be sure that you have insurance to cover a substantial share of those costs. In some cases, a retiree will have the choice of using a prescription drug plan offered by a former employer. In other cases, a retiree’s only choice will be to sign up for the new Medicare Part D drug The latter is a voluntary program, however, so don’t hesitate to sign up if that’s your only option Long-term care (LTC) insurance. This insurance is necessary, and designed to help you to meet the high costs of nursing facility, assisted living and/or home care that you might incur if and when you are not able to handle the activities of daily living such as bathing and dressing. Many disregard LTC because of its perceived high cost. However, there are ways to obtain LTC coverage at a greatly reduced cost, making it well within the reach of most retirees. While LTC insurance might not be for everyone, it is very important to evaluate such insurance while you are young and healthy, generally in your early 50s. The cost of this coverage is based on your age and health at the time you apply for coverage. By waiting to consider LTC insurance, many people risk the onset of health conditions that may subject them to higher risk classes with higher premiums, or, even worse, may make them uninsurable for LTC insurance. One of the biggest mistakes made when purchasing LTC insurance is to inadequately cover for inflation of LTC costs. LTC insurance can be purchased as an employee benefit, through an association or individually. Group plans often provide discounts or underwriting concessions. Additional life insurance. If you have sufficient life insurance coverage—under a group and/or individual policy—and/or financial assets to provide for your spouse and/or other beneficiaries, including enough to help them during the first year after your passing, you probably won’t need additional life insurance coverage. If not, shop among strong insurance companies for the plan that best meets your personal needs and is priced reasonably. In retirement, of course, you must maintain and budget for other insurance policies—such as for your home and cars—because retirement does not change your need to protect yourself against the risks of fires, floods, natural disasters, accidents, or other potential causes of losses. However, you should examine these policies to see whether you should add or delete anything—or raise or reduce the values of specific items such as jewelry or electronic equipment. You may find that you are still paying a premium for an item that you disposed of years ago. It’s always a wise move to reevaluate your insurance needs as you transition into retirement. Andy Barkate CRPS, CSA is the President of California Financial Network, a local Investment and Retirement Planning firm, with offices in Bakersfield, Lancaster and Ridgecrest.. Your questions and comments are welcome at 661-631-4355, 800-914-6837 or e-mail abarkate@calfinancial.com. |
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