 As you look toward retirement, you might be wondering: how much insurance do I need to minimize risk and maximize my budget? Knowing how much (or what kind) of insurance you need is always a topic of discussion no matter what season of life you’re in. However, it’s especially critical for retirees to hone in on what their “ideal” insurance coverage looks like. Let’s Talk Life InsuranceMany retirees believe that, because they’re retired and don’t have very many (if any) dependents, life insurance is no longer something they require. This might be true for some people but, as is the case with almost all things financial, it depends on your unique situation. Life insurance can act as a buffer against any debt you owe in case you pass away, or it can replace income coming in from a side hustle or part time job. In other cases, life insurance can protect a spouse or children who aren’t financially independent from you. In these cases, rather than viewing life insurance in a traditional “income replacement” way, you might want to look at how much you’d want to provide your loved ones with, outside of your other assets, after you pass away. Life insurance coverage as a retiree can help to cover outstanding medical costs, or the cost of a funeral and burial in the event that you pass away. Although nobody likes to think about the worst case scenario, life insurance can help provide the funding to get your loved ones through an already challenging time. The last thing you want is to leave them to make difficult financial decisions about your arrangements while they’re mourning. Finally, life insurance can act as a unique legacy building tool for retirees. For some, gifting life insurance to a charitable organization is an option if they’d like to have donations be part of their estate planning. Medical InsuranceMany retirees aged 65 and older qualify for Medicare. However, if you retire early, there are other health care options you’ll need to consider. In some cases, your workplace may have an ongoing healthcare option for retirees. Alternatively, you might consider COBRA coverage. In most cases, though, when you don’t qualify for Medicare yet - your best option is to find health care coverage either through a spouse who is already employed, or through the healthcare marketplace provided by the Affordable Care Act. This is only true if you can’t access health care through your employer because you have fully retired and are no longer working. When you do qualify for Medicare, there are even more things to consider. If you don’t enroll for Medicare Part B and Part D when you become eligible at age 65, you could be subject to penalties. It’s wise to talk through your insurance options in retirement with a financial planner who can help you find the best solution for your individual medical needs and budget. You might also want to look at long term care or disability insurance as a retiree. While it’s not ideal for everybody, it might make sense if you are planning to retire early and will need to wait several years for Social Security benefits to kick in. Insurance as a Financial Planning ToolLooking to life and medical insurance, many retirees use their insurance coverage as a way to build out a death benefit or “nest egg” for family and heirs. This is largely because insurance is a good way to transfer wealth and assets to your heirs without having tax implications. Knowing your options, and how much coverage you need to adequately protect your spouse, family, or heirs, is a critical component in your financial plan.
Discussing how insurance can fit into your financial strategy with a fiduciary financial planner ensures that you’re getting honest, valuable information you need to make the best decisions for you. This is something that Wisely Advised helps our retiree and pre-retiree clients with regularly, and I’d love to walk you through what options could work for you. Let’s schedule a time to talk today! Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
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 Do you want to help your kids save for college? You’re not alone. According to Fidelity Investment’s 10th Annual College Savings Indicator Study, almost 70% of parents intend to cover any tuition costs their kids accrue in full. But only 29% of parents are on track to reach that goal. College is insanely expensive. The average cost for an in-state public college for the 2017-2018 school year was $25,290. The average 2017-2018 annual cost for a private college is almost double at $50,900. The cost of college has grown so much in the past several years, and the student loans that many people take out to cover the cost of a college education are threatening to put the next several generations into a debt spiral. Knowing this, it makes sense that as a parent or grandparent, you want to help the children of your family pay for college in full and start their post-college lives on good financial footing. But what’s the best way to save for their college education? 529 Plans529 plans are a tax efficient way to save for your children’s college education costs. Anybody can contribute to them, which makes them a great way for parents, grandparents, and other family members to help the next generation through school. 529 plans are set up to be used exclusively for qualifying education costs. In the past, they’ve been largely dedicated to college savings, but the new tax code has freed them up to also be used for primary and secondary private school costs - which is a benefit for families who are facing this additional education expense. A 529 plan is funded with after-tax money, but grows tax-free. This means that any return you gain on investments in your 529 account aren’t taxed, and any withdrawals for educational purposes aren’t taxed, either. This can be an excellent way to grow your contributions from the time your kids are young. Roth IRAsRoth IRAsAlthough a 529 plan is a more traditional college savings route to take, you have other options. One of those options is a Roth IRA. Although people usually see Roth IRAs as a retirement savings vehicle, they can also be used to cover education costs. Like a 529 plan, Roth IRAs are funded with after-tax dollars. Their withdrawals are also tax and penalty free so long as your funds have been growing for five years since your original Roth contribution. Roth IRAs pack an additional punch due to their flexibility. While 529 plans have to be used for education-related expenses, a Roth IRA can also be used as a house down payment or as part of your retirement savings. This means that even if your child decides that college isn’t a fit for them, or you over-save, you can still access your funds tax and penalty free. Move Forward With a PlanHaving a college savings plan might seem intimidating when you look at big-picture savings goals, but if you start early and break up your goals into mini-milestones, they become much more achievable. No matter what savings strategy you commit to, make sure that it fits into your overall financial plan.
Not sure what strategy works best for you? I can’t blame you. Saving for college can be headache-inducing. Contact me today; I’d love to help you talk through your options. Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here. |
MEET TONY
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends. Archives
November 2019
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