Life Insurance As a Tool for Planned Retirement
A Insurance Article Contributed by Deepak Cutting
Life Insurance As a Tool for Planned Retirement;
The need for Life Insurance and investment in Annuities is demonstrated by several studies in this regard. As per a survey, a retiring person's income from social security and corporate pensions can account for only 56% of the retiree's needs. The remaining 44% must come from his savings and other investments made during his or her working life. People must take prudent action to cater for this gap in their needs and the resources available on retirement, while they are still working.
This is quite apart from the responsibility of catering to the needs of your dependant when your income may cease due to untimely death, which can be provided for by life insurance. The following relevant facts were brought out in this study;
*Only one in ten Americans are financially ready to face the reduction in income that accompanies retirement, at the age of 65.
*Life expectancies are increasing, with advancement in medicine and the chances of people surviving beyond the age of 90 are about 50% today.
*Inflation averaging at about 5% also reduce the net value of their savings.
*Social security benefits cater for only 16% of the income of couples earning between $50,000 and 100,000 and only 9.5% of the income of couples who earn $100, 000 plus in their working lives.
*The standard of living went down on retirement. About 20% of the retirees are 'just able to make ends meet'.
It is therefore imperative that adequate arrangements are made during your working life to cater to your needs after retirement, together with catering to the financial needs of dependant in the event of your untimely death, by arranging for life insurance.
How Much Money is Needed on Retirement and/or by Way of Life Insurance
This depends on how you plan to spend your retired life. A good beginning is to visualize the lifestyle you plan to lead once you retire, assess the funds that must be available to allow you to sustain that lifestyle and then plan your savings and other investments during your working life to provide you the money required, once you retire.
Your anticipation of the required funds must account for the decreasing (e.g. expenses incurred presently in travelling to your workplace and other work-related expenses) and increasing (e.g. money required for additional health care and cost of prescription drugs) monetary requirements, as you grow older.
Other considerations would be expected inflation, your need to care for aged parents and other family commitments etc. As a rough guide, retirees need between 70 to 90% of their income during their working life. If you are a woman, there are certain other additional considerations, such as;
· On average, women enjoy a life 6 years more than men.
· On average, the earnings of women are about 73% of that earned by men.
· Typically, women leave work to care for aged parents or children and this has implications in respect of retirement benefits for them.
· On average, women receive about 50% of the retirement benefits paid to men. This difference is more prominent when the husband predecease his wife.
These special factors applicable in case of women warrant a different approach where women are concerned.
Life Insurance;
Life Insurance, coupled with annuities, are a source of income that you cannot outlive. They help you save and make available a source of income on retirement. Life insurance premium and annuity provide the Income Tax free option to choose level of income you will like to have on retirement, funds for your nominees in case of your untimely death, a lump sum on retirement, or at a predetermined time in your life.
This is in addition to the life insurance policy covering the risk of your untimely death. Annuities combine with life insurance to provide a flexible and Income Tax free source of savings and provision for security in retired life.
