Expected Contingency: 4 guidelines for women looking into planning their retirement

Women, on average, live longer than men—this is a plain truth (http://ti.me/8T7Ll),  a fact that must be taken into consideration when planning for retirement.  Running out of retirement funds partway through is not only a risk, it’s an unfortunate reality for many women who’ve outlasted their investments. With this in mind, here are a few general guidelines for women looking into planning their retirement.


1. Start early.

Not only is there still a distinct wage gap between female and male earners, women are also faced with the fact that, in all likelihood, they will end up with a good bit of extra time that they will be needing those retirement funds. This makes it an absolute imperative to start planning for retirement early in order to counteract these two factors working in tandem.


2. Plan for extra time.

As noted in the first point, women are still anticipated to outlast men by a good margin, about 5 to 10 years. Many in the younger generations can expect that to remain, alongside the average age increasing due to advancements in technologies. While planning for a retirement portfolio that will last forever is out of the reach of most, being realistic about longevity is extremely important, and making a conservative estimate may leave you in dire straits down the road. Plan for longevity.


3. Know your caregiver options.

Women with male partners will likely outlast their significant other.  While they will be there to administer care, unfortunately they afterwards find themselves bereft of any similar assistance themselves. Having a caregiver plan will help you sail smoothly throughout the entirety of your retirement and ensure that you have a helping hand as you age.


4. Know your personal risks.

There are a lot of statistics floating around about longevity, but statistics and averages are just that.  As individuals they’re helpful as general guidelines, but are completely ineffective as rules. Knowing not only your family’s medical history and risks associated (or lack of risks which may contribute to a greatly extended retirement) but also knowing your own financial tendencies, will help you get a better grasp on how to manage your money and what factors you should alert your financial advisor of when making a long-term retirement plan.

Extended life shouldn’t have to be something you look at as a downside. Taking steps in the immediate future to ensure that you won’t be too strongly impacted by the unique problems you’ll encounter as a woman facing retirement, will help you make the most of those extra years.
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Make Sure That You’re Covered Long-Term

We’ve all heard the horror stories about the investor who did everything right, who had the right job, maxed out their 401k, diversified their portfolio until comfort in retirement was assured, only to have the rug swept out by a debilitating illness.  For this exact reason, insurance companies have created a product called long-term-care insurance.


Since Medicare doesn’t pay for most nursing home costs, and Medicaid doesn’t ante up until your assets are almost depleted, investors who have wealth that they want to pass on to loved ones need to protect it.  Long-term-care policies do just that, In fact, many insurance agents will tell you that as you near retirement age, long-term-care insurance becomes a real priority.  That priority was much easier to satisfy before the policies became losers for the insurance companies, leading insurers like Manulife Financial to ask state regulators for average rate increases of 40%, and other insurers like MetLife, to stop selling new policies entirely.


As baby boomers who already have long-term-care insurance get older and file more claims the premiums are bound to continue to rise, and if you get into a difficult financial spot and let your policy lapse you’ve lost your entire investment. So, what are the options for someone who wants to protect themselves, but doesn’t want to get skinned doing it?


What are your options

First, it’s important to deal with an insurance agent who is knowledgeable in the products that he is selling, and is able to explain the options of different policies and the merits of each.  There is a huge price range across different providers, and agents who only sell one product aren’t going to be able to give you the benefits of that variety.


As the premiums for long-term-care climb, many providers are addressing the rise in cost by offering custom options.  For instance, instead of unlimited coverage, you can shave some money off your premiums by limiting care to three or four years. According to the Centers for Disease Control and Prevention (www.cdc.gov/nchs/data/databriefs/db91.pdf) the median stay in a nursing home is 671 days.


So, cutting down on the stay that you’re allowed could be a smart option for limiting costs.  Some policies also allow you to reduce the annual inflation adjustment from 5 to 3 percent to cut those costs even more.


Options in insurance

Another option for investors who are unable to get long-term-care insurance, or find the costs too prohibitive, are the new, combo products being offered by insurers like Hartford Financial Services group, Prudential Financial, and MetLife.  These permanent life policies and annuities feature accelerated death benefits, or living benefit riders.


What this means to you is that the death benefit of these life insurance policies can be tapped in the event of a diagnosis of chronic illness, and used to pay for care. Many investors like these policies because, unlike traditional long-term-care coverage, if you never need the care, the policy will pay your heirs just like a traditional life insurance policy.  The living benefits of the combo products are usually limited to the death benefit for the policy, though, whereas long-term-care policies will pay all qualified expenses for whatever duration of stay the policy covers.
The decision between these two flavors of insurance is a personal one, but for investors who want to feel safe in their retirement, and who want to make sure that the fruits of their hard work can be passed down to their loved ones, some type of coverage is important.  Talk to your financial advisor to see which one gets you closer to your retirement goals.


Life Insurance Ain’t What It Used to Be

It Isn’t Your Parent’s Kind of Life Insurance


Life Insurance, like medicine and technology, has evolved to the extent that it hardly resembles what it looked like just a decade ago. The basics have remained the same, a death benefit, premiums, and an inside cash value that accumulates over time. What has dramatically changed is the way in which cash values earn return. The latest generation of “index linked” policies combine the security of guaranteed cash values with interest linked to a stock market index. Let’s revisit the changes that have occurred over the past decade.


The history of the change goes back into the mid 1990’s in the annuity industry. Prior to this time, investors interested in tax deferred annuities had two choices available. Fixed annuities offered a guaranteed principal with interest rates determined by the insurance companies. Variable annuities used market based sub accounts, similar to mutual funds which offered higher growth potential but no guarantees to the principal. The first Equity Indexed annuities (EIA) offered principal guarantees like fixed annuities while the return was tied to a market index like the S&P 500 or the Dow. The expectation was that over time, the indexed linked returns would out perform fixed rate annuities with no risk to losing principal.


The history of cash value life insurance policies has been quite similar to that of annuities. The original form of whole life insurance offered fixed premiums and guaranteed cash values which grew over time. In the 1980’s variable universal life policies were introduced that tied the growth of the cash values to mutual fund based sub accounts. Returns were potentially higher but without any guarantee of principal. Market downturns caused investors to be wary of losing the cash values of life insurance as this could put the death benefit at risk.


Like the evolving of the EIA, the Equity Indexed Universal Life (EIUL) offers unique advantages to the policyholder. Premiums are flexible which allow investors to increase deposits into the cash value side without increasing death benefits. Sophisticated market indexes credit higher returns than similar equity indexed annuities. Principal guarantees offer protection against market losses. Truly, this “state of the art” innovation has made life insurance the investment of choice for many accumulators.


Find all of this a bit confusing? That’s where an experienced professional can help you sort through all the complexity and guide you. Contact us today with your questions.