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What Insurance Should You Have As A Retiree? – Finger Financial Five #76

“Everybody wants happiness, nobody wants pain, but you can’t have a rainbow without a little rain.” – Anonymous 

Had a client who got a call from a new insurance agent. Wasn’t long before he was presented with all the reasons he needed more life insurance.  That got me thinking….

How should retirees think about insurance? 

First, what is insurance? In its basic form, insurance is a transfer of risk. How? Well, let’s say you have fire insurance on your home.  Your house burns down, the risk to pay to rebuild is on your insurance company rather than you.  You “transferred” the risk of having to rebuild your home to the insurance company.

When thinking of insurance, think of protection from financial ruin or severe pain — like paying to rebuild a home after a fire. 

What other types of insurance can protect you or your spouse from financial ruin? 

Health insurance of course! You don’t ever really know when you may need medical care – and the cost can be extreme. For retirees younger than 65 years old, many “bridge the gap” to Medicare by purchasing health insurance in the marketplace.  I have seen some retirees be very fortunate that their former employer allows them to keep their health insurance until they qualify for Medicare.  

Long Term Care is insurance that pays for some of the expenses when the person cannot perform the Activities of Daily Living (ADLs). These are:

  • Getting into/out of bed or chair
  • Toilet hygiene
  • Bathing
  • Dressing
  • Personal hygiene
  • Eating
  • Walking
  • Safety or emergency responses

Purchasing long term care later in life can be expensive, so it is important to look at options as early as you can. 

My dad had a stroke and needed care for three years until he passed away. He did not have LTC. Having someone to give my mom support and a much-needed break was expensive.  Fortunately, he was able to “self-insure” and did not leave my mom in dire straits. 

What about life insurance for retirees? It depends. The death of one spouse may or may not cause a financial issue for the survivor. Some spouses take their pensions as “Life Only” meaning they will get a higher amount during their own lifetime, but when they die, the surviving spouse gets nothing. In this case, some life insurance might make sense.  

However, in many cases, life insurance probably isn’t needed.  For example, a couple might have a long-standing insurance policy in which they have paid premiums for many years. If the annual cost is high and the surviving spouse will be fine financially with or without the death benefit, it might be time to do a deep dive into insurance cost reduction. Some options include:

  • Surrendering the policy — check if any penalties or taxes will be assessed. 
  • Reducing the death benefit and no longer paying premiums.
  • Converting the policy to insurance that may be more useful like Long Term Care.

Insurance companies make money off the premiums you pay.  As you can see, sometimes that is needed (to protect you from financial ruin) and sometimes it isn’t (insuring your cell phone) …

If you have any questions feel free to email me at [email protected] or CLICK HERE to set up a phone appointment. 

On the lighter side, I was in Starbucks this weekend.  It was packed. People standing in line like zombies staring at their phones waiting for their caffeine fix. I noticed a young couple talking to each other.  You could tell they were in love.  The way he looked at her.  The way she looked at him. The coffee could have taken days, and it would not matter to them at all. They would just continue to enjoy their company. I couldn’t help but smile.

We spend a lot of our life waiting. Let’s not forget to look up and notice the world and especially who we spend it with.

Hope all is well with you and your family.

Jeremy 

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so you will have more clarity and peace and make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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