Social Security
You’ve probably paid into it for most of your life; don’t forget to include it in your financial planning. The income you receive from Social Security when you reach the eligibility age (age 65 for full benefits, rising to age 67 for those born in 1960 or later) is based on a percentage of your earnings averaged over most of your working lifetime. If you die, your spouse may be entitled to your benefits. Social Security is intended to supplement other pension and savings plans. In general, workers with average earnings can expect Social Security benefits of about 40 percent of his or her lifetime average wages. Each year near your birthday, the Social Security Administration sends out a report of your work history and anticipated benefits. Always read this report carefully and contact Social Security if there are any errors. You can also check the record of your earnings and get a statement of your anticipated benefits by calling Social Security at 800-772-1213 or visiting their website: www.socialsecurity.gov.
Insurance: Protecting You, Your Family, and Your Assets.
As any financial planner will tell you, insurance is an important part of building and protecting your financial freedom. Unexpected events — disability, illness, and accidents — can spell financial disaster for you and your loved ones if you don’t plan ahead.
Life Insurance can provide financial protection for your loved ones, in the event of your death. It’s important if you are married, and even more important if you have dependent children. Your income can be considered your family’s most valuable asset. Your income is used to obtain the necessities of life and, of course, provide the creature comforts. The need for that income continues, whether or not you’re here to provide it.
Although the primary purpose of life insurance is protection, certain types of life insurance may provide benefits for you and your family while you’re still living. Whole life and universal life insurance policies, for example, may accumulate cash value on a tax-deferred basis. The accumulated cash value can be used to supplement your retirement income or help pay for a child’s education. Cash value withdrawals may be taxable and will not only reduce the cash value, but also the death benefit amount.
Term life insurance offers protection for your loved ones for a specified period of time - usually from one to 20 years. If you stop paying premiums, the insurance stops. Term policies pay benefits if you die during the period covered by the policy, but they do not build cash value.
Health Insurance coverage helps pay the cost of medical care due to illness or injury. Without health insurance, you run the risk of being financially drained by a serious illness or accident. Many people have access to group coverage through their employers. And in many cases, employers subsidize health benefits. Health insurance may also be available at group rates through professional associations and affinity groups. Coverage can also be purchased individually, but if you have access to an employer-subsidized plan, it’s probably your most cost-effective option.
Disability Insurance replaces a portion of your income when you can’t work due to illness or injury. Most policies replace 50 to 70 percent of income. Any benefits from a disability policy you purchase yourself are tax-free. If your employer provides the insurance as a benefit, however, you will pay tax on the payments you receive if you become disabled. If your employer provides a 60 percent disability policy, you may want to consider a supplemental policy covering an additional portion of your income. Disability income insurance is an often overlooked form of protection; check with a financial professional to determine if it’s appropriate for you.
Long-Term Care Insurance is designed to help pay for nursing home care; home health care; and/or assisted living if you become cognitively impaired or need assistance with certain activities of daily living such as eating or dressing. Long-term care insurance can protect you, your family, and your assets. The cost of this insurance varies with age - in general, the older you are, the more it will cost. Cost will also be based on the maximum daily benefit you choose and other variables. Long-term care insurance can be particularly important to a married couple. Without it, if one spouse needs long-term care, the other may suffer financial hardship to pay for care for their spouse.
Homeowners Insurance protects your financial investment in your home. A basic homeowners policy provides compensation for damages to your home and its contents due to specifically named risks such as lightning, theft, fire, smoke, wind, and explosion. Another important benefit of homeowners insurance is liability coverage that protects you, and family members who are part of your household, if someone finds you legally responsible for injuries or damages, either on or off your property. The extent and amount of coverage needed depends on your situation, but if you can afford it, it is wise to insure your home for 100 percent of its replacement cost. If you rent your home, consider a renters policy that covers your possessions (e.g. furniture, stereo equipment, jewelry).
Auto Insurance is more than vehicle coverage for loss or repairs after an accident. It is a financial safety net that can help you offset various accident-related costs including medical expense due to injury to yourself or others; lost wages due to injury; and benefits to survivors when an accident results in death. Additionally, auto insurance helps to protect you from the financial impact of lawsuits if you are judged legally liable for an accident. Most states require purchase of basic auto insurance coverage.
Before purchasing any type of insurance, educate yourself and compare coverage from at least three insurance companies. A qualified financial advisor can help you determine the types and amounts of insurance coverage are right for you.
Choosing insurance is an important decision, best made with the help of professionals who understand your personal and financial situation. Consult a qualified insurance agent or financial planner to find out how insurance fits into the "big" picture of your financial future.
