Tip 3: Protect income
The third critical area of focus for a secure retirement is protect income, says Robert Fishbein, a vice president in Prudential's Tax Department. Start by consideringhow much insurance protection you have and whether it is what you need to protect your income. Life insurance, health insurance, disability insurance and long-term care insurance are all ways that we protect our income or assets.
Life insurance can be used for estate planning purposes, but its fundamental value proposition is protecting your income earnings potential so dependent family members will not be destitute upon your premature death. In the context of retirement planning, think about the fact that after you die you will no longer be able to generate income that would have supported the retirement dreams of your spouse.
Disability insurance works similarly to life insurance but in the context of an injury or sickness that precludes your working. You will need income for both the period that you can’t work as well as for the period that you would have retired. And even if the disability insurance does not provide enough to continue saving for retirement, if it allows for your retirement assets not to be raided, then it is helping improve the odds that you will have enough income for the future.
Health insurance helps to minimize the risk that your current income will be consumed by unanticipated or extraordinary health care costs. Health insurance also protects you from a retirement planning perspective since such costs can have an impact on your ability to save or force you to use assets that otherwise could be preserved for retirement.
Long-term care insurance helps to minimize the risk that your assets will be depleted by a chronic illness or disability. Like health insurance, the presence of this protection means that you may not have to raid other assets to pay for the costs of a chronic illness.
You should evaluate where you stand in terms of protecting your income and then take action if you need to make adjustments to increase or decrease coverage.
The next tip will teach you how to Diversify.
Life insurance, long-term care insurance, and disability insurance are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Each is a Prudential Financial company that is solely responsible for its own financial condition and contractual obligations. Our policies and contracts contain exclusions, limitations, reduction and terms for keeping them in force. A licensed financial professional can provide you with cost and complete details. The availability of other products varies by carrier and state. All guarantees are based on the claims-paying ability of the issuing company.