You may be juggling kids at home or college, plus the demands of your job. Now that you’ve been in the workforce for quite a while, you don’t have as much time as you once did to recover from unexpected setbacks. You need to take additional steps to protect what you have.
At this point, the years ahead will most likely to be the most productive and highest earning of your life. However, like many families, you may be using a significant amount of your savings to put your kids through college just when it’s time to be aggressive in saving for retirement.
What would happen if you died suddenly? Would you children have to drop out of school? Would your spouse or partner be forced to drastically cut back on the family’s lifestyle? And what about retirement plans? Life insurance proceeds can allow them to pay off the mortgage, continue to pay for college, and if invested wisely, provide a stream of income to your spouse or partner for the future. To find out more about life insurance and if you need coverage, use our Interactive Planner.
Disability insurance is also a must. It will replace a portion of your income if you are unable to work due to a disabling illness or injury. Why is that important? Think about how long you could make ends meet if your paycheck suddenly disappeared. A LIFE Foundation survey found that a majority of those working wouldn’t make it more than a month before serious financial sacrifices would have to be made. Plus, if you were having difficulty meeting everyday expenses, how would you continue to fund your retirement needs?
Many larger companies and some smaller ones offer some disability coverage to employees through a group plan. If you need more, it may make sense to buy additional coverage through your employer’s group plan, if available. Buying your own disability insurance policy independently is also option worth considering. Unlike group coverage, privately owned insurance stays with you even when you change jobs. To find out more about disability insurance and if you need coverage, use our Interactive Planner.
One of the biggest threats to your retirement plans is the cost of long-term care. The median cost of a private room in a nursing home is almost $84,000. Home care can cost close to $20/hour. If you or your spouse become chronically ill or disabled, it’s easy to see how your savings could be wiped out. Medicaid, a government program, only kicks in once your assets are significantly depleted, and you may not get exactly the care you’d like. That’s why long-term care insurance should be a serious consideration in your financial planning at this stage. To find out more about long-term care insurance and if you need coverage, use our Interactive Planner.
Savings and Investments
Many workers from our parent’s generation could count on a financially secure retirement thanks to a guaranteed lifetime pension from their employers. That’s no longer the case. These days, workers must take responsibility for their own retirement. By this point you should have quite a bit of savings tucked away in a 401(k), IRA, or some other type of tax-deferred retirement plan. If not, it’s never too late to get going.
Most of these plans have a so-called “catch-up” provision that allows you to contribute extra money. For example, the $17,500 maximum annual contribution to a tax-deferred retirement plan rises to $23,000 once you turn 50. Make sure your retirement investments are well diversified. Many workers unwittingly allow their own company’s stock to take up a dangerously large portion of their retirement accounts. Companies often encourage this by offering their stock for sale to employees at a discount or by using it to match retirement plan contributions. But if you’re receiving a regular paycheck—not to mention health insurance and other benefits—from a company, a great deal of your personal financial security already rides on the fortunes of that firm. Don’t compound that risk by making its stock a large part of your retirement portfolio.