Being able to retire comfortably means making the right financial moves before you leave the workforce. When you no longer have a steady paycheck coming in or live on a limited retirement budget it’s important to have a few financial safety nets in place. Make sure to factor the following into your monthly budget as you enter retirement.
Final Expense Insurance
No one likes the thought of leaving their family with debt. If life insurance isn’t an option (see below) you can still get funeral costs covered with final expense insurance. A final expense insurance policy can also be used as a supplement for your life insurance plan if you want additional coverage for a funeral or memorial services. Typically, final expense policies are less than $20 a month.
The application process isn’t as in-depth for final expense insurance as it is for life insurance. In most cases a medical exam isn’t part of the application process. However, there are currently a lot of options when it comes to final expense insurance. An online resource like PolicyZip can help seniors get quotes and compare final expense insurance plans.
This traditional form of insurance provides a monetary benefit to beneficiaries upon the death of the policyholder. The proceeds can be used for a number of things including debt payoff and supplemental income for surviving spouses. For that reason, life insurance is highly recommended for the breadwinner in the family.
There are three common types of life insurance: whole life insurance, universal life insurance and term life insurance.
Many people choose whole life insurance because the money you put towards premiums builds the cash value of the policy. The policyholder can borrow against this cash value just like they would any other asset. Other benefits of whole life insurance include benefits that never decrease, premiums that never increase and the policy can’t be cancelled due to age or illness. Guaranteed issue (GI) is a type of whole life insurance that doesn’t require a medical exam, however the percentage of the benefits paid depend on how long the policy has been active.
Universal life insurance is also active until the policyholder passes away, but there is one key difference. Most universal life insurance policies don’t build in cash value and can’t be borrowed against. There are three primary types of universal life insurance: guaranteed, indexed and variable. Whether or not the policy builds in cash value depends on the type of universal life insurance you select.
Term life insurance refers to policies that are only active for a certain number of years. If the policyholder is still living at the end of the term there will be no payout. This type of life insurance is more affordable, but there’s no guarantee you’ll get benefits in return for the premiums.
As a side note, a lot of people say they don’t need life insurance. This may be true. If you are a senior one policy you definitely do need supplemental medicare insurance. Medicare doesn’t cover a lot of expenses, and in the event of a catastrophic health care situation you’ll want coverage. Check it out here => supplemental medicare coverage.
An individual retirement account, commonly referred to as an IRA, is a financial tool that’s specifically designed to help people save for retirement. IRA accounts come with a number of financial benefits before and after reaching retirement age. The amount you put into the IRA account is tax deductible and the income earned through the IRA is tax-deferred until money is withdrawn.
There are two primary types of IRAs: Traditional IRAs and Roth IRAs. With a traditional IRA, contributions are made with pre-tax dollars and the amount is deductible. Taxes aren’t taken out until the account is closed or money is withdrawn. A Roth IRA is paid with after-tax dollars and no taxes are taken out when money is withdrawn.
If you’re close to retirement you can still open an IRA account, however, this financial tool provides the most benefit when it’s established in your younger years.
An unexpected expense or emergency can happen at any time, and the financial tools above may not provide assistance. Without money set aside for savings these types of unforeseen events can cause serious financial stress. The conventional wisdom is that retirees should save 10-12 times their annual income in order to retire comfortably. Retirees should also consider improving their internet security, data loss or identity theft can be particularly problematic if the elderly don’t have skills or time to respond.
If you’re planning for retirement or need help budgeting in your senior years, talk with a financial expert. He or she can help you create a budget and savings plan that will ensure you live comfortably during your golden years.