The Important Decision at Retirement
Presented by David Corwin Did you know that, at retirement, you might have to make a difficult decision that could negatively impact your future financial security and that of your spouse? At retirement, you will have to decide how your pension benefit will be paid out for the rest of your life: Should you elect to receive the maximum retirement check each month for as long as you live, with the condition that upon your death, your spouse gets nothing? OR Should you elect to receive a reduced retirement check each month, with the condition that upon your death, your spouse will continue to receive an income? Did You Know… * The decision you make will determine the amount of pension income you receive for the rest of your life? * This decision is generally irreversible? * In making this decision, many people unknowingly purchase the largest death benefit they will ever buy and one over which they have no control? If you are married, federal law requires that, in order to protect your spouse, you must elect a “joint and survivor” annuity payout option for your pension benefits. This guarantees that your surviving spouse will continue to receive at least one-half of your pension income. This concept is sound, except that you have to pay for a joint and survivor annuity payout option: * Your pension benefit is reduced for as long as you live. * If your spouse dies before you, your pension benefit cannot be restored to its unreduced amount. * All pension payments cease when both you and your spouse die. Let’s look at the results of the three most common pension benefit options, using a hypothetical example: Life Income Option: If you receive your pension benefit under the life income option, you receive the maximum lifetime pension payment. If you die first however, your surviving spouse receives nothing after your death. Joint and One-Half Survivor Option: If you elect the joint and one-half survivor option, you’ll receive a lower lifetime pension payment. On the other hand, if you die first, your surviving spouse will continue to receive a lifetime pension benefit equal to 50% of your pension benefit prior to your death. Joint and Equal Survivor Option: With the joint and equal survivor option, you’ll receive a significantly lower lifetime pension payment. Your surviving spouse, however, will continue to receive 100% of your pension benefit if you die first. In making this important decision, you should evaluate the risks associated with retirement income protection funded with life insurance: * Your income after retirement must be sufficient to ensure that the life insurance policy premiums can be paid and coverage stay in force for your lifetime. Otherwise, your spouse may be without sufficient income after your death. * If your pension plan provides cost-of-living adjustments, will upward adjustments in the amount of life insurance be needed to replace lost cost-of-living adjustments after your death? * Does your company pension plan continue health insurance benefits to a surviving spouse and, if so, will it do so if you elect the life income option?Part of the Plan
Presented by Richard Mangiameli When considering retirement income planning, life insurance and annuities should be part of the plan, because they may provide the most direct and efficient way to reach ones retirement goals.Health Care in Retirement
Presented by David Corwin In 2012, men reaching age 65 had an average additional life expectancy of 17.8 years, while woman reaching age 65 could expect to live an additional 20.4 years on average. While estimates vary, a couple retiring at age 65 without private health insurance from a former employer can expect to pay significant out-of-pocket health care costs during their retirement years. For example, estimates show that a 65-year-old couple who retired in 2013 needs about $220,000 to cover medical expenses throughout retirement, a 38% increase from the $160,000 first estimated for those retiring at age 65 in 2002. This estimate applies to retirees with traditional Medicare coverage and does not include costs of dental care, long-term care or over-the-counter medicines. About one-third of individuals that turned 65 in 2010 needed at least three months of nursing home care, 24% more than a year, and 9% more than five years. The national median daily rate in 2013 for a private room in a nursing home was $230, an increase of 3.6% from 2012. The average length of a nursing home stay is 835 days. At a median daily rate of $230, an average nursing home stay of 835 days currently costs over $192,000. With all those statistics in mind, the rising cost of health care in the United States has become one of the primary risks to a financially secure retirement. While lower (than in 2012), this year’s estimate is still daunting for many retirees, and it will consume a considerable amount of a couple’s retirement savings. It is extremely important that health care costs are factored into retirement savings strategies today so that retirees can be prepared to pay their medical bills throughout retirement. With health care costs expected to continue increasing faster than inflation, the time to plan for your future health care needs is now… before you retire. Your ability to enjoy a financially secure retirement can be enhanced by planning for future needs such as:- Long-Term Care Services • Are you familiar with the variety of long-term care services available? • If it becomes necessary, what type of long-term care services would you prefer? • How will you pay for any needed long-term care services?
- Advance Directives • Have you communicated your medical care wishes in the event you suffer a catastrophic medical event? • Have you named someone else, a spouse or family member, to make medical decisions for you in the event you are incapacitated?
- Paying for Health Care in Retirement • Do you know what your out-of-pocket health care costs might be after you retire? • Are you aware that Medicare, while it covers many health care costs, has significant limitations? • Are you familiar with the various types of insurance that can help pay health and long-term care costs not covered by Medicare?