These days, retirement can last several decades so careful planning is essential. No matter how much planning you do though, it’s possible that life will still throw you a curve ball or two. In fact, it’s probable. But if you’ve got a back-up plan, unexpected developments needn’t turn your retirement upside down.
Your plan for retirement needs to be flexible enough to protect you from the unexpected. This is especially true when you’re thinking of your spouse’s long-term security as well as your own. First you need to ask yourself, “What can go wrong?” Following are just some of the things that can. Brace yourself:
- Early Death - Let’s just start with the question everyone wants to avoid. What if you die early? The premature death of either you or your spouse can create a host of financial problems, like lost retirement contributions, reduced medical and Social Security benefits and loss of capital.
- Health Challenges - Here’s something else to think about - accidents, injuries, illnesses or other circumstances could force you to leave your job sooner than intended. If your job ends prematurely, your regular income, benefits and retirement plan contributions usually end with it.
- Natural Disasters - We’re not done yet – natural disasters like tornados, floods, earthquakes, fires and hurricanes can hurt a whole lot more than your retirement plan. If your home and possessions are badly damaged, the costs can be extensive. Even with excellent insurance coverage, you’ll likely have significant expenses that aren’t covered.
- Claims from Potential Creditors - If you have debts, have co-signed a note or have been involved in an accident, it’s possible you could be sued. Even if you win, it’ll cost you money to defend yourself.
So what are the options?
Many of us will have three sources of retirement income: Social Security benefits, retirement plans and personal savings/investments.
Social Security serves millions of people. Because it serves so many, it generally can’t be customized beyond the existing Social Security rules and regs. Work-based retirement plans like 401ks, 403bs and IRAs are a second potential source of retirement income. Like Social Security, these accounts are designed and administered for many people, so their flexibility is limited. Your investments, savings and assets may be the best resources to form the core of your plan for retirement. With good planning, they can help you absorb some financial shocks during your retirement years.
Take a look at life insurance
Cash value life insurance can be a useful tool. It can provide both death benefit protection and, in case of an unforeseen event, can add a margin of safety to help protect your retirement assets and income1. Take care though - cash distributions prior to death will reduce the policy’s death benefits. Withdraw too much, and the policy could lapse entirely.
Have a back-up
Life insurance is just one of the tools available to help you build a back-up plan for retirement. Enlist a financial professional to help you in your planning and talk about other ways to help secure your financial future.
1Income tax free distributions are achieved by withdrawing to the cost basis (premiums paid) then using policy loans. Policy loans and partial withdrawals may vary by state, generate an income tax liability, reduce available surrender value and death benefit or cause the policy to lapse.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal advisor or financial professional for specific advice about your individual situation.
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