Insurance Needs For An Empty Nester

By Bill Gordon, AIF®

Raising the children and sending them on their way has been priority number one for some time.  Now that you’re moving to the next stage in your family life, it’s imperative that your financial life follow suit.  Your financial priorities now shift to preparing for retirement.  It’s likely that you are at the peak of your earning power and focusing on building your wealth.  Protecting that wealth is critical.

The preservation of your assets will not be solely a function of your investment strategy but will include a comprehensive insurance approach to protect you against an array of financial risks, most especially health care.

Make sure to consider these insurance options.

Home Insurance. Your mortgage may be paid off, so homeowner’s insurance may not be required by your mortgage lender, however, it remains important to have coverage against property loss and exposure to personal liability. You’ve also accumulated more belongings that you may want to protect.  It is a good idea to review your coverage to make sure it is inline with what you would like to protect and that you are getting the best price for that coverage.

Health Insurance. There are several key health insurance issues facing empty nesters who are approaching retirement.  Especially if you are planning on retiring before the age of 65.  At 65 you will be eligible for Medicare, but prior to age 65 the responsibility will fall on you.  If your spouse is still working, consider being added to their plan.  If you do not have a spouse or they are not working, you may purchase coverage through a private insurer or HealthCare.gov (or your state’s program).

At 65 you can enroll in Medicare.  There are many parts to understand when it comes to Medicare and it’s a good decision to speak with a professional who specializes in that field.  You may be familiar with Part’s A and B for hospitalization and doctor’s visits, but also familiarize yourself with Part D of Medicare.  Part D, the Medicare Prescription Drug Plan, can help you save money on prescriptions.

Additionally, you may want to consider other Medigap insurance, which is designed to pay for medical care not covered by Medicare. Medigap plans are bought through private insurance companies and best purchased within the first six months of turning age 65 since no health exam is required during this period.

Disability Insurance.  Protecting your biggest asset is key to a healthy financial life.  While working, your ability to earn money is normally your biggest asset.  As you get closer to retirement age, those last couple years of earning and saving can solidify your retirement plan.  Look into protecting your ability to earn with disability insurance.  Once you retire, you can consider cancelling your disability policy.

Life Insurance. Reviewing your life insurance policies at this stage of your life is critical.  Your need to cover financial obligations that drove your life insurance needs while you were raising a family may have evaporated.  However, you may find new needs arising, from estate issues to creating a legacy.  Life insurance can be a tool to utilize when planning for the transfer of wealth.  Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. You should consider determining whether you are insurable before implementing a strategy involving life insurance.  Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Long Term Care Insurance. The need for long term care is a giant wildcard when it comes to retirement planning.  If this cost is paid out of pocket, it has the capability to deplete a retirement nest egg very quickly.  With the expense of children in the rearview mirror, you can now turn your focus to buying protection against, potentially, the most significant health care expense you are likely to face in retirement.  Long term care can be expensive and mitigating the risk allows you to keep control of your finances.  There is a myriad of different options when it comes to way to protect yourself from long term care cost.  Be sure to know all the different options and find the best suited option for your family.

Maybe you have some of these protections in place and just need to review, or maybe you need to implement them.  Regardless of where you fall, it benefits you to speak with your financial professional about how to protect your assets now that you are moving to this new empty nest lifestyle. 

Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a Registered Investment Advisor, member FINRA / SIPC. Other advisory services offered through Redwood Financial Network Corp, a Registered Investment Advisor and a separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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