When it comes to planning your retirement, a lot of agents will highly recommend that you invest in a permanent life insurance policy. In truth, this may not be the best move for you. The permanent life insurance policy is intended for individuals who have obtained a net worth of at least $11.7 million threshold as of 2021, in which federal estate taxes will kick in after death. Most individuals looking into a life insurance policy while planning for retirement should consider buying a simple term life policy with a death benefit and investment in any other disposable income in tax-advantaged retirement accounts.
Building an emergency fund is the first way to put savings from term life insurance to work. This emergency fund should be equal to three to six months’ worth of living expenses. Having this emergency fund is crucial to help cover any big, unexpected bills that may come along. With those potential obstacles curved by the emergency fund, you will now confidently be able to keep regular retirement contributions on track. Did you know that disability insurance can help protect your income (and retirement savings) if you are unable to work?
We just mentioned that disability insurance can help protect your income, including your retirement savings, if you cannot work. Disability insurance has the main focus of replacing lost income if the individual cannot work. When it comes to life insurance, many people may have some form of disability coverage as an employee benefits, but that doesn’t always mean it is a great benefit. One other form of disability insurance is Social Security Disability Insurance (SSDI), although the benefits are modest and can be difficult to qualify for. One last alternative is acquiring a disability policy from private insurers. There are a variety of life insurance policies out there such as an own-occupation and an any-occupation policy. An own-occupation policy covers someone who can no longer work in their previous field due to a disability, while an any-occupation policy covers someone who can no longer work at all.
The end goal in mind is reaching retirement with a comfortable insurance policy and fund. If you are already planning for your retirement, a tax-advantaged retirement account, such as a traditional or Roth IRA is usually recommended by financial advisors. This is also assuming that you are meeting the income limits are other requirements set by these two IRAs. Another potential way to increase your retirement funding is by maxing out your 401(k) or a plan that is similar at your place of work if you aren’t already doing so. If you are unable to qualify for these types of accounts, don’t worry as you can always look into investing outside of a retirement account with the lack of tax benefits. One last option for you could be an index fund from a mutual fund company or brokerage firm.
If you have any questions or need more information on preparing yourself to plan for retirement, contact your local agent today.