Now that the Dow is back up where people are feeling optimistic, or at least relieved to have regained some worth in their retirement accounts, it’s time to take a little preventive medicine to avoid that upset stomach the next time the bottom falls out. While I share that relief that some recovery has happened, and I can tell you that, and this is just me, I have no optimism at all about 14,000 just being a mile marker on the way to 16,000. The government has all but sealed the deal for our economy to stall and fall again and again.
So, while you’re not feeling abandoned and battered consider something small to offset that next roller coaster dip. If it never comes, that’s great. If it does you will at least be able to say you proactively planned for it. Each time the bottom has dropped out our financial world I have reminded people that an ounce of prevention really can feel like a pound of cure if you have investment term life insurance in force that is equal to about half of your nest egg. $1mm in retirement would be a good reason to carry $500k of life insurance.
Why term life insurance? What if the stock market bites the big one and never comes back? Well, you can buy permanent insurance, but with a market that is historically cyclical you would then be paying much more on the assumption that you are going to live a long time an die during a down market. What term insurance does is takes away the risk long en0ugh that you have appropriate planning in place. Financial advisers advocate less and less risk as we grow older, so as retirement protection there really is probably a point where most, if not all, of your retirement is in places that are safe and not endangered when someone in Italy or Greece sneezes. I just watched the news and the DOW dropped 250 points because someone is nervous about Italy’s election that was just held.
So avoid that feeling that comes when your money is at risk. Carry life insurance and know that even if you don’t survive until the economy rebounds, your retirement for your family will survive. I know Dave Ramsey will disagree, but I think there is a good reason for 10 year term insurance for this purpose. First, the majority of people that would benefit from this approach are older and have less time before their retirement accounts need to be more protected from volatility anyway. The other reason is affordability. There’s no sense adding the expense of a 20 year term when the need should really be shorter than that.
Bottom line. A little peace of mind to take the edge off of this bizarre period of time when our government and world financials seem completely dysfunctional. If you have any questions about how this might work for you, call or email me directly. My name is Ed Hinerman. Let’s talk.