Retirement Insurance Planning: Protecting Your Financial Health as You Age
Why Insurance Planning for Retirement Matters
“Old age is no place for sissies,” Bette Davis once famously observed.¹ The same challenges that have made seniors wiser and stronger throughout their lives also come with unique new challenges as they age.
As you get older, the potential for cognitive decline increases — ranging from occasional forgetfulness to more serious conditions like dementia. Long-term illness can drain the time and energy needed to manage your financial affairs, and even declining vision can make everyday financial tasks harder to handle.
The good news: with the right retirement insurance planning, you can protect yourself and your family from the financial consequences of deteriorating health. Insurance often plays a central role in that protection.
Here’s how insurance for retirement planning can help safeguard your finances across three key areas: health care, wealth management, and estate transfer.
Planning for Healthcare Costs in Retirement
For many retirees, healthcare costs take up a growing share of the budget with each passing year. Retirement healthcare planning should account for the gaps Medicare leaves behind.
- Medigap insurance can help cover the costs Medicare doesn’t pay, which can add up quickly over time.
- Long-term care insurance for seniors (also called extended-care insurance) can be structured to pay for nursing home care and home health care services — two costs that Medicare typically does not cover.
Managing Your Wealth in Retirement
Your comfort level with actively managing investments often changes with age. For many seniors, the day-to-day responsibility of managing money becomes less appealing — or simply harder to keep up with.
If that sounds familiar, it may be worth considering the role annuities can play:
- Annuities for retirement income can be structured to pay you income for as long as you live, helping relieve the concern of outliving your savings.²
- Some annuities also include extended-care benefits, allowing you to address both income security and long-term care planning with a single decision.
Transferring Your Estate
Like many seniors, you may want to leave something behind for your children, grandchildren, or a favorite charity. Life insurance can help you pursue these goals — for example, by:
- Creating an estate for your heirs
- Equalizing an estate transfer among multiple beneficiaries³
The Bottom Line
No insurance policy can prevent the health challenges that come with aging. But thoughtful retirement insurance planning can help mitigate the financial consequences of those challenges — giving you and your family more security and peace of mind.
If you’re approaching retirement in Fort Myers, Florida or elsewhere, working with a fee-only fiduciary advisor can help you evaluate which combination of Medigap coverage, long-term care insurance, annuities, and life insurance fits your specific financial picture.
Frequently Asked Questions
What is retirement insurance planning?
Retirement insurance planning is the process of using insurance products — such as Medigap, long-term care insurance, annuities, and life insurance — to protect your finances against the costs of aging, health decline, and estate transfer.
What’s the difference between Medicare and Medigap insurance?
Medicare provides basic health coverage for seniors, but it doesn’t cover everything. Medigap insurance is designed to cover many of the out-of-pocket costs — like deductibles and coinsurance — that Medicare leaves behind.
Does Medicare cover long-term care?
No. Medicare generally does not cover nursing home care or ongoing home health care services. This is why many retirees consider long-term care insurance for seniors, or an annuity with extended-care benefits, to help cover these costs.
How can annuities help with retirement income?
Annuities can be structured to provide guaranteed income for as long as you live, which can help protect against the risk of outliving your retirement savings. Guarantees depend on the financial strength and claims-paying ability of the issuing insurance company.
Can life insurance be part of estate planning?
Yes. Life insurance is commonly used in estate planning to create a legacy for heirs or to equalize how an estate is divided among multiple beneficiaries.
When should I start retirement insurance planning?
It’s best to start well before retirement, since factors like age and health can affect the cost and availability of insurance products such as long-term care coverage and life insurance.
- BrainyQuote, 2017
- The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out money in the initial years of the contract. Withdrawals and income payments are taxed as ordinary income, and a 10% federal income tax penalty may apply to withdrawals made prior to age 59½ (unless an exception applies).
- Several factors affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and face income tax implications. You should determine whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy depend on the ability of the issuing insurance company to continue making claim payments.
This material is developed from sources believed to be providing accurate information. It is not intended as tax or legal advice and may not be used to avoid federal tax penalties. Please consult a legal or tax professional regarding your individual situation. The opinions expressed are for general information only and should not be considered a solicitation for the purchase or sale of any security.
