Wednesday, November 28, 2012

Retirement and Life Only Pension: Part 2

When planning for retirement, challenges can arise. In the previous blog post we discussed the issues that may arise with life only pensions. In some cases, a life insurance policy purchased prior to retirement can be a great solution. Life insurance policies can potentially provide the security you need to cover several scenarios.

       If the retiree pre-deceases their non-working spouse, the non-working spouse should have enough life insurance in place to purchase a pension, annuity or investment that will give them income for the rest of their life. 
       If the retiree and non-working spouse both die, the life insurance policy should be structured so that their children or heirs can benefit.
       If the non-working spouse passes away first, the retiree has several options.  They can keep the life insurance policy and use it for charitable estate planning, which would include gifting for charities, their community or their children or heirs.  They can also cash it out and, in our example, increase their income from $700/month to $1,000/month plus depending on whether there's any cash value in this policy. 

Wednesday, November 21, 2012

Retirement and Life Only Pensions: Part 1

When it comes to retirement planning, most people just want to provide for their loved ones.  In this blog series, we’ll discuss some ways you can make sure they’re taken care of.

A life only pension is a pension that is designed to pay out for the rest of your life only. These benefits apply whether or not you’re married. If you take a life only pension from an institution and you are married, have a significant other or children, “life only” means it will pay only for the rest of your life and that's it. If you pass away the next day or you never collect, it will be absorbed back by the institution and nothing will be paid to your spouse, children and/or heirs.

Friday, November 2, 2012

Product Performance vs. Personal Discipline

As a financial planner, I often hear people talking about the latest investment portfolio or the latest product on the market. While product is important, I believe that the most important piece of financial security is personal discipline: how you handle your life circumstances and how you will react to inevitable market volatility.

What does this mean? Well, imagine you found a magical product that earns 10% a year. You still could have other areas that need to be taken care of, such as insurances in case of death or becoming disabled, health insurance, auto insurance and having emergency cash set aside to allow that magical 10% product to grow uninterrupted.