Time and again, we are told of the importance of having an emergency fund. It makes sense, especially for retirement. After all, retirees are likely to have unexpected costs creep up, just like everyone else does. But according to a BankRate survey, even a small unexpected expense could be a struggle for many households.
In the survey, nearly 60% didn’t have enough savings to pay for emergency expenses. Almost half (45%) said they or immediate family had incurred a major emergency expense in the last 12 months. Among high-income households and college graduates, nearly half lacked enough savings to handle emergency costs.
While emergency expenses can affect anyone, they may create harmful setbacks for retired households. Many retirees live on a fixed income. Without the fallback of healthy earned income, like that in the working years, they could find unexpected expenses to be disruptive. All of this underscores the practical wisdom of having financial cushioning for emergencies.
So, what’s a target amount to have in an emergency fund? And what are some ways you can build up emergency reserves? Here’s a quick look at some strategies. Read More
Although it’s been around for nearly 30 years, a MEC, or a modified endowment contract, can still be confusing. Let’s straighten it out. A modified endowment contract is a unique type of cash value life insurance. A life insurance policy becomes a MEC when the policy has been funded more than federal tax laws permit.
Upon changeover, a MEC loses some of the favorable tax treatment it had as cash value life insurance. For tax purposes it’s now treated like a non-qualified annuity. While the cash value does stay intact and grow tax-deferred, you will be taxed on the cash value growth upon taking withdrawals.
Depending on state laws, cash value withdrawals may be subject to state income tax, along with the federal income tax you must pay. If taken before age 59.5, an early withdrawal penalty of 10% may apply, as well.
Because of these potential tax implications, it’s important to understand MECs, their features, and their potential consequences. Here’s a look at a MEC and how it may affect a life insurance policy. Read More
Sure, many people stress over money issues. From mortgage payments and other bills to household spending and transportation costs, more than a few financial stressors are taking a toll. But retirement is quite different from the earlier stages of life. What may be Americans’ top money stressor as they venture into their retirement years?
According to a recent survey by Allianz Life, a top economic worry is inflation. Nearly one-third, or 32% of Americans said that they are “panicked” or “very worried” about inflation and its effects on their retirement.
It’s good that retirement investors are aware of inflation, but many underestimate it as a significant risk. In the survey, 64% said they don’t have a plan to address inflation. Among the 36% who do, 51% indicated “being more frugal with their money” would be their plan of action. And what about when it comes to actual planning? The Society of Actuaries reports that 45% of retirees and 28% of pre-retirees neglect inflation in their retirement plans.
Because inflation can be a real dealbreaker for retirement lifestyle – especially as lifespans increase – here’s a look at the power-punch that inflation can land over time. Read More
Generally, many people think of life insurance as a “peace of mind” option. It’s a means to provide dependents, such as a spouse and children, with financial support after the primary on the policy is deceased.
That said, there are many different types of life insurance policies that are used for a variety of financial planning strategies, including retirement, tax-adavantaged wealth building, and estate transfers. While most people begin to pay into life insurance at a younger age, if you are over 70, it may still make sense to purchase a life insurance policy. In fact, depending on your goals and situation, a life policy may be a pretty helpful addition to your overall financial strategy.
Let’s get into some important things to consider if you are thinking of buying life insurance at 70 or older. Read More
People who own annuities have something that not only can take care of their financial needs, but also provide money even after their death. In addition to benefits for owners, an annuity can be a valuable inheritance for beneficiaries, like spouses, or other persons. Certain benefits can become available to beneficiaries when a contract owner passes away.
As the contract holder, you may setup your annuity in ways that will take care of your loved ones, even when you are not with them anymore. The amount of money available after your death will depend on the type of death benefit offered by the specific annuity you have. Let’s get into more details of what happens to an annuity when someone passes away. Read More
Like other people, you probably hold a Social Security card. But unless you are close to retirement, you may not know that much about Social Security benefits. As a large governmental program, Social Security has many rules and moving parts that can affect you.
Social Security plays an important role for retired households. Among elderly beneficiaries, 48% of married couples and 71% of single persons receive half or more of their income from Social Security. As you near retirement, you may have questions of your own. Learning more about Social Security will help you get the most out of your benefits.
Because Social Security is a major income source for many people, when you claim benefits might be one of your most important retirement decisions. However, moving through the ins-and-outs of this program can be daunting. To help you get started with planning for your benefits and other income sources, here are answers to seven top Social Security questions. Read More
Whether you are in your 40s or approaching retirement, long-term financial planning should be on your mind. If you want to enjoy a comfortable lifestyle, but you will no longer receive income from a full-time job, you will need to think about cash-flow from other sources, including Social Security, lifetime savings, a retirement portfolio, and maybe some other sources.
While each individual situation will require a specific approach, it’s a good idea to get a general idea of some retirement planning fundamentals. Two primary aspects of financial planning for retirement are wealth preservation and income certainty. Not only should a financial plan match retirement expenses and costs of living with income streams, it also needs to account for how income-producing assets will last as long as you need them to.
Say your risk tolerance tilts toward the conservative spectrum, or where appetites for stomaching financial losses are low. Then you may want to evaluate retirement strategies that provide the emotional comfort of knowing where your money will be coming from, month-to-month, to pay household bills and expenses. We call this Safe Money retirement planning – or making assurances that the money you can’t afford to lose is under the “lock and key” of contractually guaranteed protections.
Of course no retirement success springs up overnight. So, here’s a quick look at 4 simple steps to help you reach more long-term financial wellness and peace of mind. Read More
As we inch closer to our retirement age, it becomes more important for us to have more control of our money and the future. This is true for a variety of reasons. But for many of us, more control means a greater sense of financial security.
However, financial peace is hardly a happy accident. Rather, it comes from careful planning and following a well-laid-out strategy built for retirement, a plan that emphasizes income, safety, and protection. In simple terms, we can call this sort of plan a “Safe Money Strategy.”
Building a solid safe money strategy, however, is not as simple as it may sound. For one, the financial needs for each of us are different, especially at the near-retirement and post-retirement phases of life. And as the life expectancies of people in the U.S. have increased, retirement planning has certainly become important like never before.
There was a time not so long ago when our grandparents lived comfortably throughout their retirement years, relying mostly on their employer pension, Social Security, and perhaps other income sources. However, the golden days of pensions and other employer-sponsored income vehicles are long gone. Now our approach to retirement planning must be different, as it’s more of an individual responsibility than ever. Read More
In a few ways, a Roth IRA and life insurance share some similarities. They both receive tax-advantaged treatment in the IRS code. They enable efficient wealth transfers from one generation to another, and they can provide a tax-free legacy. But despite these similarities, Roth IRAs and life insurance are very different.
For one, a Roth IRA is a retirement plan while life insurance is, well, just that – an insurance product. Yet some people have been asking which of these options might be the “better” retirement planning vehicle.
However, it isn’t an “either-or” question, but rather a matter of what makes sense for each person based on their individual needs, goals, and overall financial picture. That may include planning situations in which a life insurance policy is used as a tax-advantaged growth and income vehicle alongside a Roth IRA. And maybe even some other retirement accounts!
Nevertheless, it’s important to understand the differences between a Roth IRA and life insurance – including ways the rules may apply differently to them. With that said, here’s a quick look at these two options. Read More
“What is safe money?” That is a question that many Americans are asking. And it’s not surprising why. From retirement presentations and dinner seminars to weekend financial talk shows and radio commercials, safe money is a common theme in many public forums.
Generally speaking, a broad definition of safe money is “the money you can’t afford to lose.” Since everyone has different needs, goals, and situations, this concept means different things to every person. For some, safe money could be lifelong savings they have built up and need to preserve. Or it might be accumulated wealth that needs to be protected from risk, as it will be a source of retirement income.
For others, it could be a stockpile of money they will need at a certain time, like funding their children’s college education, paying off the mortgage, or buying a luxury item for which they saved a long time. Yet for some other Americans, safe money might be a future account balance – a sum of money that they want to grow safely and efficiently.
So, the answer to “what is safe money?” is it depends. Your own needs, goals, and situation provide the financial context of its meaning. But boiling down to the essentials, safe money is about security and protection… money that is safe and as free from unnecessary risk as is possible. Read More
