Written By: Marvin Hurwitz | Retirement Benefits Specialist in Baltimore, MD
If you are retired or planning for retirement, you should consider some basic benefit plans to make sure you enjoy your retirement years and fulfill your retirement dreams. While building a nice nest egg during your working years is vital, it’s also important that you prepare for the both the certainties and the “what ifs” in your life when your employment income ceases.
You may be able to count on your Social Security payments, your retirement savings such as IRAs and 401(k) or 403(b) plans, regular savings and possible other income to carry you through the next 20, 30, or 40 years. The problem is we all have an idea of what some of our essential expenses will be, but it is difficult to predict the “what ifs.”
What if inflation, now about 2-2.5% annually, rears its ugly head and increases to previous levels of 4-7%? Will your bank CDs that are paying less than 1% or possibly 1.5% (for a 5-year CD) be sufficient to generate the kind of income you need? What if a major health event occurs in your household and you or your spouse require extended care because of a chronic illness? What about taxes? Are you prepared to sell some of your stocks, bonds or mutual funds to help pay for unexpected medical bills and pay taxes on your gains?
If you’re like most people, you probably have some of these and other concerns about your retirement. Since people have different needs and goals, all of these issues may or may not be relevant to you. Chances are you may have already addressed some or most of them, but it’s always a good idea to keep them in mind and pass them on to others you know who may have overlooked a benefit he or she may want to consider.
Here is a checklist of solutions to six concerns retirees and others frequently express.
- Medicare Supplement: If you are 65 and older, your top priority is to protect yourself against the ever rising costs of medical care. Medicare Parts A and B cover most hospital, doctor, laboratory testing and other expenses. But not all expenses. Medicare supplement insurance, sometimes called Medigap plans, fill in the gaps by providing benefits not covered by basic Medicare. Start investigating the various options when you turn age 64. You can actually apply for some of these plans 3-6 months before your 65th birthday.
- Guaranteed Lifetime Income: If you’re dissatisfied with the current low interest rate environment, look into a safe, guaranteed way to grow your money with fixed annuities or fixed index annuities. You decide when you want to start a guaranteed, predictable monthly income that you can never outlive. Fixed index annuities (FIAs) give you the opportunity to receive a decent interest rate based on the performance of a stock or bond index. You can lock in your gains every year if the index rises. If the index goes down, there is no loss. Most FIAs offer a fixed rate option in addition to the market-linked options and all have guaranteed minimum rates after a surrender charge period
- Long-Term Care: Once you are comfortable knowing your basic hospital and doctor bills are covered and you have set up a plan that guarantees you a lifetime income, you should turn your attention to setting up a written long term care plan. This is one of the “what ifs” in life. None of us know if we will ever require care in our home or in a facility for a chronic illness. The costs of these services are staggering and can devastate your savings and your retirement dreams. In addition, many families are faced with severe physical, emotional and financial stress if a close relative requires long-term care. Traditional long-term care insurance may be one solution but there are other alternatives available to help pay for some of these expenses—even plans that have no pre-existing health limitations.
- Legacy Planning: Leaving a legacy to a loved one is important for many people. Historically, life insurance has been the most popular way to accomplish this goal and it continues to be the best option. Death benefits can be passed on to your beneficiaries tax-free. Many of the newer policies offer living benefits either built into the policies or as riders for an additional cost. Some include accelerated payments for terminal illness or chronic illness. And some contain extended benefit riders for long term care. We even have annuities that offer provisions for enhanced death benefits and long-term care.
- Memorial Fund: Another way to ease the burden of your family in a difficult time is to set up a memorial fund for final expenses. This fund is usually in the form of a small amount of whole life insurance, usually between $5,000 and $15,000. The average cost of a funeral in the U.S. is $10,800, according to the latest survey conducted by the National Funeral Directors Association. Memorial funds can be designed to cover the funeral plus other final expenses such as unpaid medical or legal bills, credit card debt, car loans, taxes etc.
- Other Supplemental Benefits: Even with five of the benefit areas in this checklist, there still remains a need for other frequently used services. For example, we have low-cost plans that provide benefits for dental and vision care. Other plans pay lump-sum cash benefits for specific diseases such as cancer, heart and stroke. These types of plans complete the “circle of retirement.”
About Marvin Hurwitz: Founder of Hurwitz Financial Services in Baltimore, MD. He has been helping retirees and individuals nearing retirement establish plans designed to achieve their retirement goals since 1981. Before setting up his own unique advisory service in 2003 he was Senior Financial Planning Advisor for VALIC where he provided financial and retirement advice to retired and soon-to-be retired educators and health professionals in Maryland. He also served as Long-Term Care Coordinator for VALIC’s Maryland office. He can be reached at 410-486-3419 or at his e-mail address at firstname.lastname@example.org. Check out his web site: www.retirementwhiz.com.
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