Certified Financial Planner® at Raisonné & HammerPrice Corporation
Why is life insurance an important component to estate planning?
Life Insurance policies offer multiple benefits. These include tax-advantaged death benefits, diversification, guarantees, and liquidity for the beneficiary. It always makes sense to look at your personal situation and discuss your needs with your financial advisor to insure that these benefits fit into your financial goals.
How can you maximize the use of life insurance in estate planning?
The benefits of life insurance completely depend on your personal situation. A trusted advisor is key in determining what makes sense for your situation. Whether your goal is to cover your estate taxes, your final expenses, business ownership transition, avoid probate, pass money tax-free, or a host of other goals, life insurance can help you meet these goals. While life insurance may be overlooked by many advisors, it offers a wide range of benefits for those who are looking to maximize benefits for their heirs upon their passing.
When is the right time to use an irrevocable life insurance trust?
An irrevocable life insurance trust or "ILIT" gives the insured a level of control that most life insurance policies do not. If your goal is to control the eventual outcome of a life insurance policy upon your passing, this is one of the best tools to do so. The specifics can be quite complex and depend on your personal goals and a skilled advisor is best positioned to help you in structuring these trusts to achieve your goals.
Is it better to have debit or credit? Why?
I believe that if you have to choose one, a credit card is the best choice. There are so many options to get paid back or rewarded for spending that you will be doing anyways. Competition is fierce between the card issuing banks and that means consumers can get cash back, points or miles that can be worth thousands of dollars per year, particularly if you take advantage of valuable credit card sign-up bonuses. The key to success — and I can’t stress this enough — is to make sure you always pay the card on time and do not carry a balance. Otherwise, the benefits that you earn will disappear.
How can consumers strike a balance between using a debit and credit card?
These days almost everyone accepts credit cards. Given the rewards that credit cards provide, it makes sense to use them for spending whenever possible. For those people that have problems with their spending habits, it makes sense to pay the credit card off more frequently. I generally pay all mine off once per week to make sure I stay current. I have a good friend who goes as far as paying his credit card off daily to ensure that it pulls from his bank account like a debit card while he still benefits from the cashback of the credit card. For those who don’t trust themselves with a credit card, this is a great way to strike a balance.
If an older adult was not able to save heavily before retirement, what’s the first tip you recommend for earning income in retirement?
First off, you are not alone! Many people feel like they need to save more for retirement. Older adults may have more anxiety if they feel their income-earning opportunities are behind them. Luckily, there are more options than ever before to make extra income. Gig opportunities are widespread and a great way to choose your own hours while earning extra income. Many of these jobs allow you to work from home.
Many employers are understaffed and offer part-time work options if you are looking for a more traditional employment opportunity. While having a specific skillset in demand is always a plus, many employers will value an older adult's experience and worldview.
Opportunities to earn income in retirement are greater than they have ever been. Remember, you bring experience, reliability, and motivation to succeed, which are skills employers are looking for regardless of age!
How do you recommend an older adult calculates their life expectancy when financially planning for retirement?
It generally makes sense to plan for a longer life expectancy when financially planning for retirement. It is much better to plan for an extended life and not attain it than to plan for a shorter life and run out of money. This more conservative approach will give you a better chance of having the resources to support yourself throughout your golden years.
While you have to consider personal and family health during the planning process, this conservative method provides a buffer that can provide peace of mind to help you better enjoy your retirement.
CEO & Principal Advisor at Raisonné & Hammer Price Corporation
What are the pros and cons of buying health insurance plans with cheaper premiums?
It's similar to choosing when you should start taking your Social Security income. You don't know how long you will live but you can still make an intelligent choice and an intelligent estimate based on self-awareness and projections, etc. If you're very healthy and expect to have a long life expectancy then waiting will likely be more lucrative. If you're in good health when choosing health insurance, the lower premium, for the time being, may be a better fit. The premiums have an inverse relationship with other out-of-pocket costs for using the healthcare services. So a low premium normally means a higher deductible and higher co-insurance if you have an unexpected visit to the hospital etc. However, you can also buy affordable, supplemental policies to also cover those emergencies which can still save you money overall. If you're not in great health, or if your family history has had many health challenges, then you may wind up being better off with a higher premium since it will normally include better overall coverage and lower deductibles, lower coinsurance, etc. It does not always work out in those simple terms, but in general, that's a good starting point when deciding. Some Medicare Plans not only have cheaper premiums, some actually credit you money back each month to cover other costs. These plans are mainly for people that feel as though they are in good health. One major factor to be careful of is that if you don't get a higher premium Medicare plan right when you become eligible (during that brief window), you may not qualify for one of the higher premium plans later if you become unhealthy. They have to approve you as a Guaranteed Issue when you are first eligible for Medicare, but after that, they can deny you coverage for that particular higher premium - a better coverage plan. With Health Insurance, peace of mind for you and your family also has to be factored in. Health Insurance should really be called Life Insurance and Life Insurance should really be called Death Insurance. They are misnomers. Health Insurance is all about your Life and Living it Well.
If I’m not eligible for Medicaid or Medicare, what other options are there for cheap health insurance coverage?
In order to get cheap health insurance outside of Medicaid and Medicare, you mainly need to qualify for a government subsidy through an ACA (Affordable Care Act) plan (Marketplace / ObamaCare). They are all synonyms for the same thing. Choosing Health Insurance is actually more complex and more customized than choosing an Investment Strategy and it's something that is definitely worth going through a professional advisor. You rarely ever have to pay the advisor anything for spending hours helping you and for helping down the road as well. The advisor gets paid by the Health Insurance company and some Advisors are licensed with dozens of companies to choose the right one with your doctors, etc.
Can I still get quality coverage if I buy a cheap health insurance plan?
Yes, but if you're too young for Medicare, then it's not likely unless you are in a situation where you are needing some financial assistance due to various circumstances that life may, unfortunately, throw at you. Many Medicare plans are very affordable with high-quality coverage. Medicare can also be very confusing and you again will likely want to take advantage of speaking with an advisor for free. Cheap is not a word that the Health Insurance companies would want you to use which is fair and accurate. Insurance is not cheap, it's either affordable or expensive, it won't break, it's not plastic. It's a written financial contract that you want to speak with an experienced financial professional about. Lack of Health Insurance is the #1 cause of bankruptcies and when you speak with thousands of different clients, you see in real life the large number of people that suddenly have cancer, suddenly have a stroke out of nowhere. It's real and you want to be properly financially prepared. Preparedness is the Prime function of both Financial Planning and Expansive Planning which includes Insurance Planning, Economics, etc.
How can seniors determine what type of life insurance policy is the best fit for them?
It's important to review your goals when purchasing a life insurance policy. It will generally be much different for a senior than it would be for a newlywed or parents with young children. Talk with your financial advisor and discuss your overall goals. Consider how your other assets will help you achieve this, and use life insurance as a tool to help you achieve your objectives.
Why might the best type of life insurance policy be different for older seniors versus younger seniors?
Life insurance policy costs and terms are generally higher and more stringent for older seniors versus younger seniors. Older seniors, particularly those interested in working in their retirement years, may consider taking a job offering a group life insurance benefit to employees. This benefit alone could offer much value for a senior looking to add more life insurance. This strategy will help supplement the cost of the life insurance benefit.