Jeremy Kisner FAQ Section Hero

Insurance & Annuities

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Q: When do you recommend annuities for retirement income?

A: You may be a good candidate for annuities if:
• You and/or your spouse are in good health and have longevity in your family
• Less than 60-80% of your desired retirement income will be covered by guaranteed income sources (e.g., Social Security or Pensions)
• You have a few years until you need to begin taking income (This allows you to buy the annuity and let the level of guaranteed income grow.)

For more on this topic, read: Annuity – When Is It a Good Solution & Annuities for Long-Term Care.

Q: At what age can I drop my disability insurance?

A: Once you retire or reach age 67 you can drop your disability insurance. DI is one of the most overlooked forms of insurance for workers. Most workers do not believe they need the coverage, yet 27.5% of 22-year-old men and 26.4% of women will be disabled for some period of time prior to their Full Retirement Age (67). In addition, only 5% of disabling injuries and illnesses happen on the job, which means that 95% of injuries and illnesses are not covered by workers’ compensation. The financial impact of a disability can lead to all kinds of financial problems since over 50% of personal bankruptcies are caused by medical issues and related expenses. Read: Disability Insurance To Protect Your Income.

Q: Do retirees need life insurance?

A: The short answer is that it depends on your retirement plan and financial situation. You need to consider whether your surviving spouse or family will need the money, and whether the potential benefits of your policy outweigh the ongoing costs. It makes sense for many retirees to exchange their current policy for one that offers more appropriate coverage, costs, or benefits once retired. One attractive benefit of some newer policies are long-term care (LTC) riders that enable the policyowner to use a portion of the death benefit to pay for LTC.  To examine this topic more in depth, read: Life Insurance – Do Retirees Still Need It?

Q: Do some annuities pay for long-term care expenses?

A: Yes, long-term care annuities are growing in popularity because they do not require any medical underwriting and address the two most common financial concerns of seniors: lifetime income and healthcare costs. The annuity option has also become a more popular solution because traditional long-term care (LTC) insurance has gone from bad to worse. LTC insurance has gotten more expensive, fewer companies are offering it, and insurance companies have become incredibly picky about whom they will insure. Annuities have some downsides as well since they typically have fees, penalties for excess withdrawals, and are not good vehicles to build wealth. Read: Annuities To Cover Long-Term Care Costs.

Q: Do you recommend term or permanent life insurance?

A: Term life insurance is the least expensive and most appropriate option for most people. It provides a death benefit but does not have any cash value. Permanent or cash value life insurance makes sense for wealthier (higher income, higher tax-bracket) clients who want to use life insurance both for a death benefit and as an additional tax-free savings vehicle. Withdrawals can be taken at any time and are frequently used to supplement retirement income. Some permanent life insurance policies can also be used to pay for long-term care expenses.

Q: How do I make sure I don’t outlive my money?

A: If you are healthy and have longevity in your family, you should consider purchasing longevity insurance. A Deferred Income Annuity (DIA) provides guaranteed lifetime income that begins at a future date (say 20 years after the full retirement age) in exchange for a lump sum that you give to the insurance company now. This investment will look shrewd if life expectancy grows substantially due to medical breakthroughs. For more, read: Longevity Insurance = Deferred Income Annuity.

Q: How much life insurance do I need?

A: There is no universally agreed on formula, but a reasonable range of coverage is 5-15x your annual living expenses. For example, you may need 15x living expenses if you have young kids, debt, and minimal other savings/investments. You may only need 5x if you are older, with grown kids and significant savings. You may not need any life insurance if no one depends on you financially or you are already retired and/or your retirement is fully funded.

Q: What are the pros and cons of annuities?

A: Annuities are commonly misunderstood, misrepresented, and over-sold. Although they can have drawbacks such as fees, surrender charges, and limited growth potential, annuities can be a great solution for couples who want a steady cash flow during retirement years and are nervous about the stock market or fearful of outliving their own assets. To learn more about the pros and cons of annuities, read: Annuity – When Is It A Good Idea?

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