Midlife Look at Insurance Needs

Ray’s Take: Life insurance is an important part of most overall financial plans. Replacing the capital value of the significant providers is critical should they not be able to provide. Owning the right insurance for the right price at the right time in your life is a crucial element to your financial well-being.

 

It’s usually true when you’re young and want to have a way to provide for your family in the event something happens to you. But as time goes by and you have saved and invested, by your 50s or 60s you may no longer need some types and as much of the coverage you’ve had.

 

Further, you could be overpaying for what you do need and might be inadvertently underinsured against some other risks.

 

As you start your flight path towards retirement you should consider ways to reduce risk while still preserving wealth. It may be time to reduce focus on life insurance and put it on health insurance and liability protection. The right coverage is crucial since, according to the Center for Disease Control and Prevention, three out of every four people age 65 or older have a chronic health condition.

 

Long-term care is something to be evaluated. These policies can help shield funds you intended to leave to loved ones.

 

While life insurance may no longer play as important a role as it once did, it still doesn’t mean that you don’t need it in some form. Take a look at your existing policies and see if they can be adjusted to meet current life needs – or needs you anticipate down the road a few years. As your wealth grows and your working career winds down, your need for liability increases as your need for life insurance goes down.

 

Re-shop homeowners and auto insurance at least every three years. You may be qualified for discounts related to age or no claims that you’re not getting. We tend to let these types of insurance policies just automatically renew without doing a review.

 

Working with a good financial adviser can help you to figure out what types of insurance, and how much, can take you comfortably into your retirement years.

 

Dana’s Take: Who’s driving the bus in your life? You? Your family? The fickle wind of life’s circumstances?

 

The best way to ensure your life is healthy and happy is to make sure you take care of yourself first. That sounds extremely selfish. But it’s counterintuitive. If you are not nourished and happy, you don’t have those things to give others.

 

Address any issues head on. And if you need professional help to handle them, then be sure to get it. Pick the one change you see that you feel would make the biggest positive impact on your life and go after it. Self-care is your best insurance.

 

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Stash More Cash

Ray’s Take: On the surface it seems simple. Most of us know we need to save more cash – especially to bolster an emergency fund. And yet savings are at historic lows and many are a couple of paychecks away from serious financial problems.

 

We believe we can just sweep that “leftover” cash from the month to our emergency fund, but somehow it’s just not there. We have had a robust economy for a good many years and many have forgotten how things go when we hit “bumps.”

 

Most Americans are willing to work and pay their bills, and that’s certainly a good start. The next step is to learn to “PYF.” Pay yourself first. Building more savings, like retirement accounts and college savings funds, must be treated like your mortgage and utility bills.

 

To save a significant amount of money, you have to make more than an intermittent effort. You have to make a lifestyle changes.

 

It seems simple and obvious, but writing down everything you spend is a great way to get a handle on where your money is going and spotting ways to make some changes that will open the door to more savings opportunities. Whether you do the list old-school style and write it in notebook or use an app, that visual creates a psychological cause and effect.

 

My bank is very old-school about one thing – they only let me spend a dollar once. Once it’s gone to my savings goal or creditor, there’s nothing left for eating out, going to Starbucks or the latest I gadget. The key is to start working backwards with the budget. Don’t start with the depravation of something, look at everything you are spending toward.

 

Try automating deposits from every paycheck and use only cash. You don’t spend money you don’t see in your account and by using cash instead of your debit card, you are more aware of spending.

 

Financial planning includes achieving long-term goals, but it’s also about making sure you have what you need in the short term too. Those dollars will add up much more quickly than you think.

 

Dana’s Take: My debit card cracked in early December and I had to order a replacement card. Due to mix-ups, I had to go without a debit card until Dec. 23. As a result, my holiday shopping became very inconvenient. I had to write checks at the bank, old school, if I wanted cash. It was like living in the 1950s with no card access to cash.

 

Turns out, slowing down access to money proved to be a good thing. If I ran out of cash, I couldn’t spend any more. In short, I had to plan my spending. And guess what? Little impulse purchases disappeared.

 

Consider hiding your debit card and see how much you can save in a month. Maybe grandfather knew best, after all.

 

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Save More This Year

Ray’s Take: January is the time of year when many people make decisions about how they want to improve their lives in the coming year. Part of your plans for improvement should be to figure out if there are any places in your life where you can save more than you did last year (and the year before). 

 

One definition of insanity is to keep doing the same thing but expecting the results to be different. Coming up with some simple strategies now can help you end the year with a lot more put aside than you had at the beginning of the year.

 

It can’t be said often enough that planning and conscious spending are two tools that have the biggest impact on growing your retirement fund and savings account.

 

Automatic saving is a certain way to increase your savings account. If the money isn’t in your checking account, you’re much less likely to spend it. Put your credit cards in the freezer. Then put ALL discretionary spending in a “no sacred cow” pile and work backward. Alternate picks until there’s no available spending money left in the budget. You have just set your priorities. Are you expecting to receive an income tax refund? Make good use of that money by putting it into your emergency fund. 

 

Review your contributions to your retirement plans. Are you on target for the amount you’ve projected that you’ll need? Can you increase any of your contributions or start a different account for a need that wasn’t apparent last year? Increases now will pay big dividends in the future. Money you don’t see is more difficult to spend.

 

Make it a point to become familiar with the new tax laws that just passed and see if there are things you need to adjust, depending on if you are retiring within the next five years or so. Some of the new laws sunset rather than stay permanent.

 

Sitting down with a financial adviser and a tax expert could lead to changes in your retirement planning that you didn’t know you needed to make. 

 

Dana’s Take: January. A new year. Time for new goals and getting rid of old bad habits. 

 

This month is the biggest one of the year for making resolutions to change. Lose weight. Save more. Go back to school. The options are endless. And should be. Reflection is good for everyone. Sitting down quietly and really thinking can open our eyes to things we want or need that we didn’t notice in the hectic rush of day-to-day living where we are moving from one thing to another almost mindlessly, trying to keep our schedule.

 

When was the last time you made an appointment with yourself to just sit down and reflect on life and your circumstances? 

 

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Powers of Attorney: A Big Part of the Plan

Ray’s Take: There are multiple moving parts to a good estate plan and various powers of attorney are an important element. Power of attorney basically gives someone else the right to act on your behalf; there are two types of powers of attorney.

A medical power of attorney names someone to make medical decisions for you if you’re unable to make them yourself. It can be very broad and general powers or very specific powers they may have.

A financial power of attorney allows someone to manage your financial affairs. You can limit it to certain functions or make it all-encompassing. This is different than your power of attorney for personal care; you need to have them both in your financial planning process.

Spouses just assume they will be able to act for each other if such trouble strikes, but that’s not necessarily true. For example, you would not be able to make any financial decisions relating to investments or retirement accounts held solely in your spouse’s name without a power of attorney.

When it comes to health care decisions, under the Health Insurance Portability and Accountability Act (HIPAA), health care providers can only talk with and release information to authorized representatives.

Once you’ve decided to execute these powers of attorney, sit down with the person to whom you are giving the authority. It can be a difficult conversation, but it’s crucial that this person understands your wishes and agrees to act on your behalf.

In many cases they can and should be different people. Not everyone is good in financial matters. Not everyone can keep a cool head in the face of life-and-death decisions at the hospital. Having this conversation in advance can spare your family from having to make difficult decisions on your behalf – often on short notice and in a state of emotional distress.

The potential cost of not having these documents in your plan could be very high in the event you become incapacitated.

Dana’s Take: At age 18, your child is an adult in the eyes of the law. And that means you no longer automatically have access to their medical or financial information or have the right to make medical decisions on their behalf. Increasingly protective privacy rules, while they are beneficial in the big picture, limit your powers as a parent.

For example, if your child goes to college in another town, or even out of state, and a medical emergency arises, most likely the medical staff will not discuss your child’s condition with you. When your child turns 18, make arrangements to have him/her execute both of these powers of attorney. Hopefully you will never need it, but better to have it in place just in case.

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Estate Planning For Unmarried Couples

Ray’s Take Times change. And more couples put off getting married for numerous reasons. People are marrying at a later age and sometimes not at all. Older Americans who have been widowed or previously divorced are deciding to cohabit instead of marrying.

While there are many good reasons to make these choices, it is important to know what rights you are giving up when you choose not to marry. 

For example, legally married couples are allowed to leave their entire estate to the surviving spouse, free of estate taxes. Everyone else is subject to pay tax on amounts over the exclusion amount. State laws generally award assets to biological relatives unless there is a will or other beneficiary documentation in place. 

Additionally, should there be a medical crisis, without the proper power of attorney in place, biological relatives will make all the decisions. Be sure to title any property appropriately so that your loved one isn’t turned out of the home in the event of your death.

There is a common misperception that if you live together for a certain number of years you are married in a common-law union with all the rights of a couple that was married by license. That is not true.

Without additional planning, if one person in an unmarried couple dies, the survivor is not entitled to any benefits, notice in a probate proceeding or continuing support that is afforded to legally married spouses. 

Know the costs and benefits of your choices and do appropriate planning around them. Laws vary from state to state, so it’s important to be aware of how they work in the state where you live. If you haven’t created an estate plan, your state has a default plan for you. A good financial planner can help you create a plan that works for you.

Dana’s Take The average age for marriage is now at an all-time high: 27 for women and 29 for men, according to the 2012 American Community Survey. 

According to Pew Research Center, of all Americans ages 18-29, only 20 percent are currently married, compared with 59 percent in 1960. Delaying marriage leaves time for developing careers, exploring alternatives and developing as an individual before tying the knot.

Ray and I married after age 35, so I get it. But if you’re committed enough to share a home, wouldn’t you want to protect your partner in the event of your death or illness? In the case of your unexpected disability, wouldn’t your spouse feel more committed to care for you than a roommate would? 

For numerous legal, financial and emotional reasons, legalize that union. A lavish wedding is not required, just a trip to city hall.

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