Brian Gruss Licensed Insurance Planner

Empty Nesters Shouldn’t Say Good Bye to Their Life Insurance

The kids are all grown, and finally it’s just the two of you. Your life is changing, and you are making decisions about what pieces of your former lifestyle should remain the same and what should be altered. There are some items you will decide to let go, but make sure your existing life insurance coverage isn’t one of them.

Why do you need insurance at this time in your life you ask?  Here are ten reasons:

·   To accomplish financial goals – If your children are financially dependent on you because they are still in college, life insurance can help fund their education even if you aren’t around. Keep in mind that Social Security benefit payments for a surviving spouse and children cease when students finish high school.

·   To care for dependents – Life insurance will continue to provide for your parents and disabled adult children if you die before they do.

·   To buffer you from the Social Security “blackout period” – Social Security pays no benefits from the time the youngest child leaves high school until the surviving spouse applies for retirement benefits. This period is called the “blackout period,” and it can cause extreme financial hardship to the surviving spouse if there is no income stream. Life insurance provides much needed income.

·   To supplement reduced Social Security survivor’s benefits – If a spouse begins receiving Social Security survivor benefits earlier than the full-benefit age, their monthly benefit will be permanently reduced. In addition, because their spouse died early, salary increases that might have increased Social Security benefits were not applied to their record. A life insurance policy can help make up for these losses.

·   To supplement lost retirement savings – If a spouse died before retirement, they didn’t earn salary increases that might have increased employer pension benefits and/or IRA contributions. A life insurance policy can help make up for these losses too.

·   To meet commitments that were made at a time when there were two incomes – Financial commitments like mortgages or loans are based on the combined income of a two-paycheck couple. If each spouse has life insurance the survivor can continue to meet those commitments.

·   To pay for unexpected expenses – Funeral and burial costs, final medical expenses, estate administration and estate taxes aren’t always anticipated. Life insurance prepares you for these costs no matter when they happen.

·   To create a financial emergency fund – If a family doesn’t have an emergency fund equivalent to at least six months of income, they could be extremely vulnerable if one of the wage earners dies. This lack of funds could also impact the family’s ability to obtain credit. Life insurance can be the family’s emergency fund.

·   To supplement lost income if a spouse dies after beginning Social Security benefits – Each spouse receives a check for his or her Social Security retirement benefits. The earner with the larger pre-retirement income gets a benefit based on that income. The spouse with the smaller, or no pre-retirement income gets a benefit based on their own earnings, or half of their spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues, but the smaller one stops. Life insurance can make up for this income loss.

·   To provide for charitable causes – If you want to ensure your favorite charities get money after your death, you can designate some or all of your life insurance benefits to this purpose.

Tags: Adult Children, Benefit Payments, Blackout Period, College Life Insurance, Employer Pension, Empty Nesters, Financial Goals, Financial Hardship, Income Stream, Ira Contributions, Life Insurance Coverage, Life Insurance Policy, Pension Benefits, Retirement Benefits, Retirement Savings, Salary Increases, Social Security Benefit, Social Security Benefits, Stream Life, Survivor Benefits

Fill Up Your Buckets for a Stream of Retirement Income

If you’ve heard it once, you’ve heard it a million times: when it comes to retirement planning, diversification is key. Everyone knows how important it is to build up a healthy nest egg—but if you put all your eggs in one basket, you are putting your financial well-being at risk.

Look at it this way: if you throw all of your funds in one investment or market sector, what happens if that sector takes a nosedive? Your retirement savings will go down the tubes right along with it. However, if you spread your investment funds across a variety of different assets, you will greatly decrease your risk.

So, how can you possibly protect yourself from financial devastation and still save up plenty of funds for a comfortable, happy retirement? Simple. It’s time to fill up your buckets!

The art of bucket planning

As Americans are living increasingly longer lives, one of the greatest risks today’s retirees face is the possibility of outliving their income. That’s why financial experts recommend that retirees adopt what’s called “bucket planning.”

Bucket planning is the act of spreading money across various pools income to ensure you have a lifetime stream of income. This strategy is growing increasingly popular in the retirement planning field. As a matter of fact, approximately 52 percent of financial advisors recommend the bucket planning method to their clients, according to Gallant Distribution Consulting.

Collect your buckets

There are a few different bucket planning methods. Some financial advisors recommend three buckets while others say you should fill up four. However, the most basic bucket planning strategy includes the following three pails:

Bucket #1: This bucket holds into low-risk investments, such as short-term Treasury bonds. This pool provides a stream income for the first five to seven years of your retirement.

Bucket #2: This pail should be filled with indexed annuities, which offer guaranteed income with an upside potential if the markets do well. This bucket will provide income for years 8 through 15 of your retirement.

Bucket #3: This is the bucket for long-term investments that will provide a guaranteed stream of income in your later years.

Another version of bucket planning includes investing in three or four different fixed or fixed indexed annuities, each which has a unique set of terms and benefits.

In either strategy, each bucket represents a different stage in your retirement. The primary objective of your first two or three buckets is to create an annual income stream during your first 15 years of retirement. When those 15 years are up, the last bucket still holds plenty of guaranteed annual income that will last throughout your lifetime. Because you have a bucket of income set up for each retirement phase, your cash flow will never run dry.

An endless stream of income

Bucket planning has skyrocketed in popularity because it can create an endless stream of income that you won’t outlive. If you set up your buckets properly, you won’t lose money, you’ll always be accumulating money and you’ll always have a guaranteed stream of income. That means you’ll live a comfortable and financially stable retirement without having to worry about outliving your assets.

In other words, if you fill up your buckets, you won’t run out of money before you—well—kick the bucket.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.

Tags: Buckets, Distribution Consulting, Diversification, Eggs In One Basket, Financial Advisors, Financial Devastation, Financial Experts, Investment Funds, Lifetime Stream, Look At It This Way, Market Sector, Million Times, Nest Egg, Nosedive, Pails, Retirement Income, Retirement Planning, Retirement Savings, Risk Investments, Treasury Bonds

Avoiding Financial Ruin with Disability Insurance

You likely already have life insurance to protect your family against the financial adversity they could face after your unexpected death. And you’ve probably insured your home, cars, and other personal possessions against the financial loss that can result from fire, theft, or damage. But what have you done to protect yourself and your family against an injury or sickness that affects your ability to work? Do you have disability insurance?

The reality of how long you and your spouse could stay afloat if one of you were to lose your income due to a disability is sobering. On one income you may no longer have the ability to pay your mortgage, car payments, and other bills. If you are without disability insurance, tapping into home equity, retirement savings or credit cards can offer a temporary solution with damaging long-term consequences. Disability insurance offers an affordable method to maintaining your lifestyle without creating additional debt for your family.

There are many different ways to obtain disability insurance. You may have group coverage at work, through unions or membership groups and, depending on the nature and cause of your disability, you may also qualify for workers’ compensation, Social Security, and veterans’ benefits. Without the benefit of group insurance, individual coverage is a must.

There are many different types of disability insurance contracts and several definitions of disability. Consider whether you contract includes:

• A favorable definition of total disability that is consistent with the risk of your occupation and, at a minimum, ensures the payment of benefits in the event you suffer a “loss of income.”

• A non-cancelable, guaranteed renewable clause that states the insurance company cannot cancel the policy or increase the premium until a certain age (as specified in the policy).

• Benefits that are payable until age 65 or later.

• A waiting period consistent with your overall financial plan. The longer you wait to receive benefits after your disability, the lower your premium. You can purchase coverage that provides benefits on the 31st day of disability or up to two years later. Whichever option you choose, make sure you can handle the financial exposure.

Tags: Car Payments, Certain Age, Disability Insurance, Financial Adversity, Financial Ruin, Fire Theft, Group Coverage, Group Insurance, Home Cars, Insurance Contracts, Insurance Disability, Many Different Types, Many Different Ways, Membership Groups, Personal Possessions, Retirement Savings, Temporary Solution, Term Consequences, Unexpected Death, Veterans Benefits