Protection of Your Hard-Earned RetirementMany articles discuss debt, what it is, how to get out and stay out, how to learn to spend cash instead of using credit cards and how to give up the bad debt habits developed over a lifetime. More articles discuss your retirement accounts, what the mutual funds really look like internally, how to choose investments based on your tolerance for risk and different strategies for investing in today's economy.
What is only lightly touched on is protection of your lifestyle today and in Retirement. In the recent past, one year ago, I would have recommended today's protection begin with a cash reserve of 3-6 months of cash to carry your debts of mortgage, taxes, utility bills, food, and gas for your car. Added up this amount may total $10,000. The economy may be coming back or it may be a bubble that could burst into a new down market or bear market therefore, saving in a cash reserve today doubles the amount of money you need to protect your lifestyle for 6-9 months.
Obviously, if you don't have a cash reserve trying to get thousands of dollars into a cash reserve fund may be really difficult. In financial planning programs, I usually encourage my clients to consider 60 months of saving to come up with the money. Does not having the time to save mean you should not start to save? Absolutely not! Primarily, because you may not lose your job or have emergency expenses that will drain your savings.
You need to start somewhere to protect your lifestyle. So while you are paying down any credit card debt try to save some money in a bank account. Increase the savings as your debt decreases always keeping in mind that purchases must be managed as well to keep from being overburdened again, with debt. If necessary save some money into another account for those items you feel are essential to buy.
This is also a good time to review your life insurance or disability insurance available through your employer. You are probably aware of your health insurance benefits and may not have decided to take advantage of the insurance opportunities that are yours for very little money through your employer. Talk to your Human Resources department or your benefit manager to find out what your costs are, what coverage you will have and the possibility of covering your spouse and children. Protection of your lifestyle depends on making sure you will not go into debt through the use of credit cards to manage your bills while you are unable to work.
If you are retired or soon to be retired, you may want to evaluate your benefit package to see how it is impacted once you are retired. Start with your health insurance. Medicare does not become available until you are 65. You will need to have coverage until then. Check with your employer based program. Understand the benefits and consider changing your health benefits to two single plans instead of a family plan as long as there are no dependents. College-age students may benefit from their School Health Plan and save you money as well.
Once you quit working disability benefits, through your employer, may not be necessary. Private plans may give you coverage until age 65. If you are considering working a part-time job, consulting, etc. you may want to call your agent and discuss continuing your plan. Understand exactly what your coverage will be, when it will start, how much you will receive and the taxable nature of your coverage.
For all of you looking to protect your lifestyle in retirement reviewing your life insurance and discussing long-term care insurance with an advisor would be very beneficial. Make sure any term life insurance held by your employer will still be a benefit for you after retirement. It usually decreases and becomes a nominal amount of coverage. Know it ahead of time. Make sure the amount will cover any existing debt, mortgage included.
Long Term Care is nursing home coverage. Do not confuse this with the health care benefit of coverage for acute illnesses, often found in many health insurance benefits. Few companies include this new benefit for their employees, You will need to purchase these plans, privately. Many people feel that the expense for nursing home coverage is way too expensive. Unless you are on Medicaid, you could lose your home, your social security benefits, your pension and your income from annuities and retirement funds without Long Term Care Coverage. Protection of your lifestyle for yourself and your family are most important.
There are Long Term Care benefits available through many agents and insurance companies. The New York State Partnership is one plan to consider because it initially, covers your admission to nursing homes, assisted living programs and many begin with home care coverage. The most important part of these plans is to make sure that the decisions for coverage begin with your doctor and not with the insurance company or their case managers. Nursing home costs today in our area average about $60-75,000 per year. Policies covering these costs usually include a 5% cost of living increase to keep pace with the growing inflationary costs of coverage.