The Financial Realities of Longevity, Insurance When You're Newly Married, and The Problem of Money Paralysis
by Rita Wilczek on Jun 5, 2019
Thought you might find these articles of interest.
Regarding the 2nd article on insurance, for people with assets to protect, I would add a liability umbrella to extend coverage of your homeowners and auto. While you might be able to absorb the loss of your car, being sued for a million dollars is not something most of us could absorb. Umbrellas are a good value-typically inexpensive.
We’ve learned from all the flooding that you don’t have to live in a flood plain to be devastated by a flood. Ask your agent what the cost and benefits are for flood coverage. Also review what it would cost to rebuild your existing home to make sure your replacement cost is sufficient. Make sure you have coverage for sewer back up and all the toys you might own: snowmobile, ATV, boat, jet ski, etc.
If you live in California or another area with potential earthquakes, at least get a quote for earthquake coverage so you can make an informed decision to purchase or not.
We don’t work in property liability coverage but I’ve seen firsthand how damaging uninsured losses can be. Sometimes people who own a lot of property may get busy and miss a payment. Ask your agent for a phone or web meeting to review.
Lastly, if you are fifty plus, an illness or injury resulting in the need for care not covered by your medical insurance can be financially draining. Full time home care might cost $5,000/month while memory care might cost $8,000 to $10,000.
Work with your spouse and figure out how best to pay for potential uninsured losses.
Thanks and be well. Rita
The Financial Realities of Longevity
Your financial future is up to you and no one else.
Provided by Rita Wilczek
What will be your future? You know that solid retirement strategy takes your time horizon, an often unpredictable factor, into consideration. Your thinking must include an awareness of how long you must save for and what sort of expenditures may be ahead.
The most recent findings from the Centers for Disease Control and Prevention indicate that the average American male lives to age 76, while a female may live to 81. The numbers also take the quality of life into account, putting male and female Americans at “full health” for 67 and 70 years, respectively.1
What do these numbers tell us? Women live longer, for one. Based on your age and the age of your spouse, you can make estimates; you may live longer or less, but averages offer us a window that can be used to plot that retirement strategy. One reality unnoticed in these numbers is that some women may live on their own for many years; if a woman has spent many years as part of a household, living alone shifts the responsibility from two people to one, removing any extra income their partner or spouse contributed.
According to the Social Security Administration, single women aged 65 and up (including both the unmarried and the widowed) rely on Social Security payments for 45% of their total income. This compares to 33% for single men of a similar age and 28% for the married couples in that bracket.2
What does that come to in dollars and cents, per year? The most recent tally, based on a 2018 fact sheet, is $13,891. (Men: $17,663.) These are today’s numbers, but they underscore the importance for a retirement strategy that looks at your specific needs and goals – an approach that considers your future health expenses, your day-to-day expenses, as well as the things you want to do for enjoyment in retirement (travel, pastimes, family experiences, and more).2,3
How do you create a strategy that can adapt to life's events? While your future may be unknown, working closely with your advisor may help you to create an approach that's based on your unique goals, risk tolerance and take into account your ever-changing time horizon. Follow up by meeting with a financial professional who can help you put a strategy into action.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - time.com/5538099/why-do-women-live-longer-than-men/ [2/27/2019]
2 - ssa.gov/news/press/factsheets/women-alt.pdf [8/2018]
3 - washingtonpost.com/outlook/2019/05/14/why-gender-pay-gap-still-persists-what-we-can-do-about-it/ [5/14/2019]
Insurance When You're Newly Married
Assess the coverage for your new household.
Provided by Rita Wilczek
Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current, individual insurance coverage to determine if any changes are in order as well as consider new insurance coverage appropriate to their new life stage.
Auto. The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, you should review your existing policies and contact your respective insurance companies to obtain competitive quotes on a new, combined policy.
Home. Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance is required by the lender. While these policies have important differences, they do share the same purpose – to protect your home, your personal property, and your assets against any personal liability.
You should take special care of what is covered under the policy, the types of covered perils, and the limits on the amount of covered losses. Pay particular attention to whether the policy insures for replacement costs (preferable) or actual cash value.
Health. Like auto insurance, couples often bring together two separate, individual health insurance plans. Newly married couples should review their health insurance plans’ costs and benefits and determine whether placing one spouse under the other spouse’s plan makes sense.
Disability. Married couples typically combine their financial resources and live accordingly. This means that your mortgage or car loan may be tied to the combined earnings of you and your spouse. The loss of one income, even for a short period of time, may make it difficult to continue making payments designed for two incomes. Disability insurance replaces lost income, so that you can continue to meet your living expenses.1
Life. Central to any marriage is a concern for each other’s future well-being. In the event of a spouse’s death, a lifestyle based on two incomes may mean that the debt and cash flow obligations can’t be met by the surviving spouse’s single income. Saddling the surviving spouse with a financial burden can be avoided through the purchase of life insurance in an amount that pays off debts and/or replaces the deceased spouse’s income.2
Liability. Personal liability risks can have a significant impact on the wealth you are beginning to build for your future together. Consider purchasing umbrella insurance under your homeowners policy to protect against the financial risk of personal liability.
Extended Care. Extended care insurance may be a low priority given other financial demands, such as saving for retirement. Nevertheless, you may want to have a conversation with your parents about how long-term care insurance may protect their financial security in retirement.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - chicagotribune.com/business/success/terrysavage/tca-disability-insurance-can-protect-you-from-unthinkable-20190410-story.html [4/10/19]
2 - chicagotribune.com/business/success/terrysavage/tca-disability-insurance-can-protect-you-from-unthinkable-20190410-story.html [4/10/19]
The Problem of Money Paralysis
Not making a move may not always be the best move to make.
Provided by Rita Wilczek
A decision not made may have financial consequences. Sometimes, we fall prey to a kind of money paralysis, in which financial indecision is regarded as a form of “safety.”
Retirement seems to heighten this tendency. If you are single and retired, you may be fearful of drawing down your retirement savings too soon or assuming investment risks. Memories of this-or-that market downturn may linger.
Even so, “paralysis by analysis,” or simple hesitation, may cost you in the long run. Your retirement may last much longer than you presume it will – perhaps, 30 or 40 years – and maintaining your standard of living could require some growth investing. As much as you may want to stay out of stocks and funds, their returns often exceed the rate of inflation, which is important. Creeping inflation can reduce your quality of life in retirement by subtly reducing your purchasing power over time.
Retirement calls for distributing some of your accumulated assets. Some new retirees are reluctant to do this, even when some of that money has been set aside for goals or dreams. Frugality suddenly reigns: a long vacation, a new car to replace an old one, or a kitchen remodel may be seen as extravagances.
We cannot control how long we will live, how much money we will need in the future, or how well the economy will perform next year or ten years on. There comes a point where you must live for today. Pinching pennies in retirement with the idea that the great bulk of your savings is for “someday” can weigh on your psyche. What does your retirement dream amount to if it is unlived?
If you fear outliving your money, remember that certain investing approaches offer you the potential to generate a larger retirement fund for yourself. If you seek more retirement income, ask a financial professional about ways to try and arrange it – there are multiple options, and some involve relatively little risk to principal.
There is one situation where waiting may be wise. If to file for Social Security until age 65 or 70, your monthly Social Security benefit will be larger than if you had filed earlier in life. Why? Social Security has what it calls “full retirement age,” or FRA – the age at which you can receive the full Social Security benefit you are entitled to, based on your earnings record.1
If you were born in 1960 or later, your FRA is 67. If you were born during 1954-59, your FRA is 66 (and it gradually increases toward 67, depending on your birth year within that date range).1
Most retirees claim Social Security benefits in their early sixties (eligibility begins at age 62). In a way, they are shortchanging themselves by doing so. Because they are claiming benefits before reaching their FRA, their monthly benefit is smaller than it would be at age 66 or 67 – in fact, it may be as much as 30% smaller. On the other hand, those who claim after their FRA at age 68, 69, or 70 receive monthly benefits that are larger than they would get at age 66 or 67. Roughly speaking, for every year you delay claiming benefits beyond your FRA, you will increase the size of your monthly benefit payment by around 8%.1
Your approach to investing has been created with your retirement in mind. A practical outlook on investing and decisions to work longer or claim Social Security later can potentially help you amass and receive more money in the future.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - fool.com/retirement/2019/05/13/many-are-making-a-tragic-social-security-mistake-a.aspx [5/13/19]