Retirement Planning – Consider Dependents
Retirement planning is one of those things that we must do long before we get to retirement time. Did you know that more people have more spendable income at age 25 than they do at age 65. Why do you think that is so? We work hard all our lives and try to fulfill our everyday financial needs and the needs of our loved ones. When it comes to retirement planning somehow we tend to fall short. It is all about preparation. Don’t you agree?
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We should each take some time with our spouses at the beginning of each year to set goals and to plan where we want to go, and what we need to do to get there, in the year ahead. Included should be some detailed planning for retirement. People who have sufficient income at retirement follow certain basic habits which help them get to that point. A minimum of 10% of income must be saved each and every year…a lot more if you are able. You can put the money in a company pension plan that consists of a 401K plan, mutual funds, money market, an annuity with a life insurance company, or whatever is the best investment for your retirement planning at the time.
If you begin at age 25 and save and invest constantly up until age 65 you will be amazed at what you will accomplish. Okay, now we arrive at retirement age and it is time to get our pensions. Husband and wife, both worked outside of the home and have their separate retirement plans no problem, right? It is alright until one dies and there is the loss of that persons income. Will the survivors retirement income be sufficient to live on? Can the bills be still be paid? You can solve this problem years prior to retirement by proper retirement planning.
Let us suppose the spouse with the larger income anticipates a retirement income at age 65 of $50,000 per year. S/He gets to retirement and begins getting the income. Two years later s/he dies. What happens to the survivor? You did some good retirement planning so the survivor has their own retirement income. The problem is that this income may be insufficient to allow that surviving partner to continue living in the manner to which they have become accustomed.
The solution is to take a pension for a few hundred or few thousand dollars less and use the difference to buy a life insurance policy sufficient to continue the full retirement income after you die. Term life insurance can be used for this purpose but you must bear in mind that this type of life insurance is more difficult to get at older ages. If you intend to use term insurance you should buy it as soon as possible. Remember also that for retirement planning purposes you don’t know how long you will live after retirement. It may be a year or two or it may be to age 100 and the term period may run out. The great thing is that you can convert your term policy at a later date. You will, however, be converting at the attained age, and that means a higher premium than you would have paid if you converted when you were younger.
The situation where one spouse works and the other stays home and does the hardest work raising the children is even worse. Proper retirement planning which would provide a good income for the “stay at home spouse” is imperative.
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