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We’ve all heard it many times before: Get an early start on your retirement planning to boost your odds of success. However, many overlook a critical component of such planning – life insurance. One reason is that many rely too heavily on employer-sponsored, or “group,” life insurance. While group life insurance is convenient, over-reliance on group life insurance may be detrimental to your retirement plans. Here’s why:
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When you retire, the insurance you receive through your employer typically retires with you. If this was the majority of your life insurance, you may find that you are now underinsured. Purchasing additional insurance at this point may be prohibitively expensive or even impossible due to health issues.
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Some have estimated that the average professional today will have five to seven different employers throughout his or her career. Most group insurance cannot be carried from one employer to the next. This lack of portability can have devastating consequences. Those who experience a job-eliminating disability, perhaps due to cancer or heart disease, may find themselves without life insurance as well. As noted above, finding other coverage may be expensive or, worse, impossible.
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The cost of group life insurance coverage can be more than you think. It’s important to consider all the costs of your group policy: taxes charged on the cost of life insurance over $50,000 as well as whatever your employermay charge you for coverage. The total of these amounts may be more than the cost of an individual policy.
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Upon comparison, a healthy person may find it more cost effective to have an individual policy. Insurance companies typically offer lower rates to healthier individuals, Group insurance doesn’t offer the same discount.
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Social Security and pension income may decrease significantly upon the death of the primary recipient. This can have an obvious impact on retirement income stability and emphasizes the need to maintain life insurance well into retirement.
It’s important to consider these points when planning your retirement to make sure you’ve got the right type and amount of insurance to meet your needs.
Courtesy of Ameriprise Financial Services, Inc.
Thomas E. Planinsek, Financial Advisor
Suite 103B Berkshire Center
Route 30 East
Greensburg, PA 15601
724-832-0855
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