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Life and Health

How to Prepare Financially for Long-Term Care

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One in four Americans over the age of 65 receives long-term care annually reports the U.S. Department of Commerce. You too could require care. Prepare your finances now for this possibility.

    • Know Your Options

      Long-term care is defined as assistance performing daily living activities for longer than 90 days. Those daily living activities can range from household chores and paying bills to eating and bathing.

      You can receive long-term care at home with an in-home aide, in an assisted living facility, at a nursing home or through hospice. Care can range from an hour a day to around-the-clock.

    • Calculate the Cost

      The cost of long-term care can be expensive. Combined costs account for 10 percent of the total healthcare costs in the U.S. In fact, a private or semi-private nursing room room can cost over $6,000 per month while a one-bedroom assisted living apartment averages $3,200 per month.

      You typically can’t pre-pay a facility for long-term care, but you can begin to calculate how much money you’ll need to save. With careful planning, you can accumulate adequate resources to cover the cost of your future care.

    • Create a Financial Plan

      Now’s the time to begin planning financially for your long-term care. You can choose from a combination of several payment options.

      The first option is a long-term care insurance policy. It allows you to choose the benefits and length of care you receive. The policy’s cost depends on your policy details and your age and health when you buy the policy.Your insurance agent will help you evaluate your specific circumstances as you choose the right long-term care insurance for your needs and budget.

      Medicare and Medicaid are additional options that may cover some of your long-term care.  Medicare is health insurance for elderly and disabled Americans, and it’s provided by the federal government. Medicaid provides care for low-income seniors, and each state determines its cost, services and eligibility.

      You could also cash out your life insurance policy or retirement accounts as you pay for your long-term care.

      Many consumers rely on private savings, too. They can supplement other options and allow you to afford the long-term care you need, want and deserve.

    • Start Planning Now

      You can plan for long-term care any time, but it’s better to start when you’re in your late 40s or early 50s. At this age, you’re healthy enough to qualify for long-term care insurance and have adequate financial resources to add long-term care into your overall retirement savings strategy.

Chances are high that you’ll eventually need some sort of long-term care. Understand your options and consider your preferences as you plan financially for the future.

Protect Yourself with Disability Insurance

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In the event a disability that causes an inability to work occurs, Disability insurance works to replace a portion of your absent income. Although it should be obvious why Disability insurance is critical protection, many workers assume that they don’t need private Disability insurance since Social Security disability benefits are available. What many fail to understand is that eligibility for Social Security disability benefits hinges on the severity of the disability.

If the injury or illness doesn’t cause severe disability, the worker will not be eligible. Even if severely disabled, Social Security benefits will not begin for six-months and rarely are sufficient to fully cover living expenses. Disabilities that continue for an extended period of time can easily deplete savings before a return to work is possible. For these reasons alone, Disability insurance is the most reasonable method of financing a long-term disability.

The maximum coverage through private long-term Disability insurance is 45% to 70% of your salary, depending on how much you earn per year. The cost of the premium is largely based on how risky your job is; for example, physical labor is considered more risky than a professional employment. Age, overall coverage, and your health history are also factors that will affect policy pricing. The income provided by the policy while you’re disabled isn’t taxed if the policy is purchased on your own versus through your employer.

You might choose to supplement an employer disability plan with your own Disability policy. If so, you will want to know the amount of coverage offered, how long the benefit period will last, and what the waiting period will be so that you can coordinate the coverage appropriately.

There are six key provisions that you’ll want to look for when purchasing a Disability insurance policy:

What is considered a disability by the policy? 

Some policies might consider a disability as an inability to complete the main duties associated with your occupation. Other policies might consider a disability as an inability to perform any duties from any job. So, be sure to understand the disability provision as it relates to your specific occupation.

Does the policy have a non-cancellation clause?

A policy with a non-cancellation clause means that the provider can’t increase your premiums or cancel the policy until you’re 65-years-old. The only exception is if you don’t pay your premiums on time.

Does the policy include residual disability payments? 

These are payments that you’ll receive if you’re partially disabled and must take a lesser paying job. The benefits will be proportionate to the wage difference between your previous job and new job.

What is the benefit waiting period for the policy? 

Generally, the longer the waiting period, the more affordable the policy will be. For those that have employer disability benefits, you’ll often come out better to opt for a personal policy with a longer waiting period to reduce the cost.

How long will I receive benefits from the policy? 

The majority of private policies provide benefits until you’re 65-years-old.

Will I remain insurable?

You’ll want to make sure that the policy allows you to purchase coverage in the future without needing to be medically insurable.

Sadly, no one knows when an accident or illness will strike and cause a long-term disability. However, we do know that, if not prepared, the result is all too often financial devastation.

Should You Include Your Life Insurance Policy In Your Will?

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Life insurance provides your beneficiaries with financial assistance. In addition to purchasing adequate life insurance coverage, understand if you should list it on your will.

Probate Versus Nonprobate Assets

When you die, your estate goes into probate. Probate is the process through which the executor of your estate files paperwork with the probate court to prove the validity of your will and ensure your final wishes are carried out.

Typically, any outstanding debts are paid. Then money is allocated to survivors. Of course, the executor also ensures that individuals receive any specific assets you want them to have such as real estate, art or heirlooms.

Some of your assets will not go into probate after your death, however. Life insurance is one nonprobate asset. The beneficiaries listed on the policy receive the death benefit whether the policy is listed in the will or not. This occurs because probate courts view life insurance as a contract between you and the life insurance company. You pay premiums, and the life insurance company agrees to give your policy’s beneficiaries the death benefit for which you paid.

Why List a Life Insurance Policy in Your Will

Even though your life insurance policy is a nonprobate asset, you may consider listing in in your will. Listing your life insurance policy makes it easier for your beneficiaries to  discover the policy, tell the company that you have died and receive the financial support they need.

You will also want to include your life insurance policy in your will if your estate is the beneficiary. In this case, the policy’s death benefit will to into probate and be distributed according to your wishes.

How to Choose Life Insurance Beneficiaries

You may choose whomever you wish to be your life insurance beneficiary. The policy’s beneficiary can be the same person you list in your will or someone totally different.

Popular beneficiaries include:

  • Spouse
  • Children
  • Parents
  • Charity or foundation
  • Estate

You can change your life insurance beneficiary at any time. Simply contact your life insurance company and complete the beneficiary form. Remember that because your policy is a legal contract, you cannot use your will to change the beneficiaries on your life insurance policy. Be sure to update your beneficiaries as needed to ensure your final wishes are carried out.

Life insurance is a valuable estate management tool. It can provide financially for your family or fund a charity after you die. Decide today if you will list it in your will or not, and be sure to update the beneficiaries.

Five Retirement Risks

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Retirement has always been a tough undertaking but in today’s tumultuous economy, it sometimes seems like an impossible task. There’s no question that countless risks go hand in hand with retirement. However, even during a recession, you can manage these risks. Here are the top five most common retirement risks and the best ways to deal with them:

Risk #1: Outliving Your Money. 

Running out of money is not only a scary prospect it’s also one of the biggest risks that all retirees and soon-to-be retirees face. In the retirement planning world, this is known as “longevity risk.” According to the Society of Actuaries (SOA), Americans are living longer, which means the risk of outliving their money is much higher. The SOA estimates that the average life expectancy for 65-year-old Americans is 17 more years for men and 20 years for women. However, 30% of women and 20% of men aged 65 will live until they’re almost 90 years old. That means many people might live up to 25 years or longer after they retire.

How to deal with it: 

As long as you save up enough money for retirement, avoid overspending and invest wisely, you should be able to avoid this problem. You might also consider taking on a part-time job after retirement or even delaying retirement a while so you can earn income for a few more years.

It’s also critical for soon-to-be and current retirees to properly manage their assets. You might consider investing in payout annuities, managed payout plans or “longevity insurance” – an annuity that does not start paying benefits until an advanced age, such as 85. Many retirees also apply for a reverse mortgage to protect against longevity risk.

Risk #2: Skyrocketing Inflation. 

Unfortunately, none of us are immune to inflation – all retirees will be affected by it. The trouble is that the rate of inflation can be difficult to predict. According to the SOA, annual inflation in the U.S. varied from 1.1% to 8.9% from 1980 to 2007 quite a large range. However, the average inflation rate throughout these years was 3.5%. Based on that percentage, a product that cost $1 in 1980 cost $2.82 in 2007. And the rate of inflation can have an even bigger impact on retirees, especially for things like health care an expense that becomes a growing portion of a retiree’s budget.
As a matter of fact, studies show that health care represents only 5% of the average person’s budget before retirement, but it grows to 10% for retirees ages 65 to 74 and increases to 15% for retirees 75 and older. On top of that, health care expenses generally increase much more rapidly than other goods and services. According to the Bureau of Labor Statistics, the cost of medical care is nearly four times higher than it was in December 1982. In other words, health care that cost $100 in 1983 would now cost $387.

How to deal with it: 

To prepare for the effects of ever-growing inflation, the SOA says that retirees and soon-to-be retirees should invest in assets that grow in times of inflation, such as common stocks, inflation-indexed Treasury bonds (TIPS), inflation-indexed annuities, and commodities and natural resources. Retirees might also consider taking a “semi-retirement” for a couple of years before they officially retire so they don’t drain their retirement assets too soon.

Risk #3: Unpredictable Interest Rates. 

Although many consumers are thrilled about today’s low interest rates, retirees and soon-to-be-retirees aren’t too happy about it. That’s because when interest rates are low on both short and long-term investments, retirees might be forced to re-invest their money at lower rates. Plus, many soon-to-be retirees who are investing in fixed income will have to save more to build up a big enough retirement fund. While the SOA points out that government spending, inflation and business conditions all affect interest rates; it’s difficult to predict what the future holds.

How to deal with it: 

To manage the risk of interest rates, the SOA says retirees and would-be retirees could invest in immediate annuities, long-term bonds, mortgages or dividend-paying stocks.

Risk #4: Stock Market Fluctuations. 

Because it’s practically impossible to forecast what will happen to stocks, many retirees fall prey to major stock market losses. One major stock market downturn, and your nest egg could disappear in the blink of an eye.

How to deal with it: 

First of all, the SOA says retirees and older workers should limit their stock market exposure. If you do invest in the stock market, be sure to diversify your stocks and spread your money among different investment classes and individual securities. This will greatly decrease your risk. You might also consider investing in financial products that invest in stocks, but guarantee against the loss of principal, such as mutual funds.

Risk #5: Disappearing Retirement Funds. 

If your employer declares bankruptcy, what happens to your pension? If your annuity insurer becomes insolvent, where does that leave you? Many terrible things can happen to your retirement funds but there are ways to manage these risks.

How to deal with it: 

Before you invest your money do your homework. Find out your employer’s credit rating to determine if they might be at risk for bankruptcy. Look into your insurance company’s claims-paying ability rating. Of course, you are already protected from many of these risks. If your employer does go out of business, the Pension Benefit Guaranty Corp. will insure your defined-benefit pension plan (up to certain limits.) Annuity companies are covered by state insurance guaranty funds up to specified limits which means if the insurer becomes insolvent, the claims will still be paid.

10 Way Your Pharmacy Can Make You Healthier

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Pharmacists spend at least six years in college learning about medicine and health. Take advantage of 10 services your pharmacy offers as you get healthier.

1. Health Screenings

Many pharmacies offer a variety of health screenings, including:

  • Anemia
  • Blood pressure
  • Cholesterol
  • Glucose
  • Prostate
  • Skin cancer
  • Thyroid

After you get the results, visit your primary care physician for an official diagnosis and treatment plan.

2. Sexual Health

Sexual health is important now and into the future. Your pharmacist can offer advice about safe sex, recommend contraceptives, provide pregnancy tests, give you emergency contraception and talk about important vaccines.

3. New Medicine Service

A new medication that treats asthma, high blood pressure or another chronic condition can be confusing. The New Medicine Service ensures you’re taking the medicine properly and understand what it does and any side effects.

4. Medication Therapy Management (MTM) Services

If you take more than five medications per day, sign up for Medication Therapy Management. During your 30 to 60 minute session, your pharmacist will review your medication to ensure each one is essential, taken correctly and  affordable. Ask your health insurance company if they will cover your MTM session.

5. Diabetes Classes

One of the most prevalent diseases in the United States, diabetes affects 25 million Americans. At your pharmacy, you can receive diabetes management and education, medication counseling, blood-glucose meter training and glucose testing.

6. Vaccinations

You may be familiar with the flu shot given at your pharmacy. However, you can also receive other vaccinations such as:

  • Gardasil (HPV vaccine)
  • Hepatitis A and B
  • Meningitis
  • Pneumonia
  • Tetanus
  • Zostavax (Shingles vaccine)

While your primary care physician will need to give you a prescription for these vaccines, you can also talk to your pharmacist about which vaccines are right for you.

7. Unwanted Medicine Disposal

Instead of tossing your unwanted or expired medication in the trash or toilet, give it to your pharmacist. He or she will safely dispose of it.

 8. Minor Ailments Advice

When you’re suffering from a cold, rash or earache, visit your pharmacist. Get medication recommendations and other tips to help you feel better and heal quickly.

9. Health Lifestyle Advice

While you will want to see your primary care physician for ongoing health issues, your pharmacy team can offer a variety of advice. Gain healthy eating tips, weight loss advice, smoking cessation tools and information about chronic conditions.

10. NHS Health Check

Only your doctor can diagnose diabetes, dementia or another chronic condition. However, your pharmacist can screen you for certain conditions if you’re between the ages of 40 and 74.

Your local pharmacy offers these 10 beneficial services. Use them as you get healthier.

5 Retirement Risks

By Life and Health | No Comments

Retirement has always been a tough undertaking but in today’s tumultuous economy, it sometimes seems like an impossible task. There’s no question that countless risks go hand in hand with retirement. However, even during a recession, you can manage these risks. Here are the top five most common retirement risks and the best ways to deal with them:

Risk #1: Outliving Your Money. 

Running out of money is not only a scary prospect it’s also one of the biggest risks that all retirees and soon-to-be retirees face. In the retirement planning world, this is known as “longevity risk.” According to the Society of Actuaries (SOA), Americans are living longer, which means the risk of outliving their money is much higher.

The SOA estimates that the average life expectancy for 65-year-old Americans is 17 more years for men and 20 years for women. However, 30% of women and 20% of men aged 65 will live until they’re almost 90 years old. That means many people might live up to 25 years or longer after they retire.

How to deal with it: As long as you save up enough money for retirement, avoid overspending and invest wisely, you should be able to avoid this problem. You might also consider taking on a part-time job after retirement or even delaying retirement a while so you can earn income for a few more years.

It’s also critical for soon-to-be and current retirees to properly manage their assets. You might consider investing in payout annuities, managed payout plans or “longevity insurance” – an annuity that does not start paying benefits until an advanced age, such as 85. Many retirees also apply for a reverse mortgage to protect against longevity risk.

Risk #2: Skyrocketing Inflation. 

Unfortunately, none of us are immune to inflation – all retirees will be affected by it. The trouble is that the rate of inflation can be difficult to predict. According to the SOA, annual inflation in the U.S. varied from 1.1% to 8.9% from 1980 to 2007 quite a large range. However, the average inflation rate throughout these years was 3.5%. Based on that percentage, a product that cost $1 in 1980 cost $2.82 in 2007.

And the rate of inflation can have an even bigger impact on retirees, especially for things like health care an expense that becomes a growing portion of a retiree’s budget. As a matter of fact, studies show that health care represents only 5% of the average person’s budget before retirement, but it grows to 10% for retirees ages 65 to 74 and increases to 15% for retirees 75 and older. On top of that, health care expenses generally increase much more rapidly than other goods and services. According to the Bureau of Labor Statistics, the cost of medical care is nearly four times higher than it was in December 1982. In other words, health care that cost $100 in 1983 would now cost $387.

How to deal with it: To prepare for the effects of ever-growing inflation, the SOA says that retirees and soon-to-be retirees should invest in assets that grow in times of inflation, such as common stocks, inflation-indexed Treasury bonds (TIPS), inflation-indexed annuities, and commodities and natural resources. Retirees might also consider taking a “semi-retirement” for a couple of years before they officially retire so they don’t drain their retirement assets too soon.

Risk #3: Unpredictable Interest Rates. 

Although many consumers are thrilled about today’s low interest rates, retirees and soon-to-be-retirees aren’t too happy about it. That’s because when interest rates are low on both short and long-term investments, retirees might be forced to re-invest their money at lower rates. Plus, many soon-to-be retirees who are investing in fixed income will have to save more to build up a big enough retirement fund. While the SOA points out that government spending, inflation and business conditions all affect interest rates; it’s difficult to predict what the future holds.

How to deal with it: To manage the risk of interest rates, the SOA says retirees and would-be retirees could invest in immediate annuities, long-term bonds, mortgages or dividend-paying stocks.

Risk #4: Stock Market Fluctuations. 

Because it’s practically impossible to forecast what will happen to stocks, many retirees fall prey to major stock market losses. One major stock market downturn, and your nest egg could disappear in the blink of an eye.

How to deal with it: First of all, the SOA says retirees and older workers should limit their stock market exposure. If you do invest in the stock market, be sure to diversify your stocks and spread your money among different investment classes and individual securities. This will greatly decrease your risk. You might also consider investing in financial products that invest in stocks, but guarantee against the loss of principal, such as mutual funds.

Risk #5: Disappearing Retirement Funds. 

If your employer declares bankruptcy, what happens to your pension? If your annuity insurer becomes insolvent, where does that leave you? Many terrible things can happen to your retirement funds but there are ways to manage these risks.

How to deal with it: Before you invest your money do your homework. Find out your employer’s credit rating to determine if they might be at risk for bankruptcy. Look into your insurance company’s claims-paying ability rating. Of course, you are already protected from many of these risks. If your employer does go out of business, the Pension Benefit Guaranty Corp. will insure your defined-benefit pension plan (up to certain limits.) Annuity companies are covered by state insurance guaranty funds up to specified limits which means if the insurer becomes insolvent, the claims will still be paid.

Seven Tips For 20-Year-Olds Who Are Planning For Retirement

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When you start your very first job, you probably don’t think about retirement. However, you owe it to your future self to start planning for retirement now at the beginning of your work career. Here are seven tips that help you grow your nest egg.

Be serious about saving for retirement now.

By saving now when you’re young, you take advantage of compound interest and give your nest egg the chance to grow over time. For example, invest $25,000 before your 25th birthday in an account that earns a 12 percent rate of return and you’ll have $2 million by the time you turn 65.

Save as much or as little as you can.

Ideally, you want to save as much money as possible. However, even a small investment makes a difference. Invest $23 per week in an account that earns a 12 percent rate of return, and you will accumulate over $1 million when you retire.

Be thoughtful about your spending.

It’s easier to spend money on a nice car or something fun rather than retirement. Thoughtful spending now secures your future, though. Prioritize your needs, avoid as much debt as possible and be thoughtful about your spending.

Take advantage of matching funds.

If your employer offers to match your 401(k) contributions, take advantage of it. That money is essentially free and helps your nest egg grow.

Diversify your investments.

The 401(k) account you open at work is a smart move. Consider supplementing it with other investments, too, like a traditional or Roth IRA. Be sure to balance risk and return as well to increase your nest egg.

Automate your savings

Automatic savings increase the likelihood that you will actually save for retirement, and you won’t miss that money if you don’t see it in your paycheck. Set up automatic transfers from each paycheck to your retirement fund. Also, consider increasing your automatic withdraws every month or at least annually when you receive a raise.

Save an emergency fund.

It’s tempting to borrow from your retirement account to pay off student loans, buy a house or pay daily living expenses. This action can include penalties, taxes and fines as it decreases your retirement savings. Instead, establish an emergency fund that covers at least three to six months of living expenses, and resolve to safeguard your retirement account.

With these seven tips, you make planning for retirement easy. However, you can also hire a financial planner if retirement savings are confusing, intimidating or boring. He or she will analyze your finances and prepare an investment strategy that meets your needs and gives you financial security for the future.

Retirement Living

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Up to 80% of retirees decide to stay in their initial homes after they retire. They have lived there throughout their lives and are relaxed there. However, could you experience more relaxation somewhere else? Perhaps you should spend some more time thinking through things. How much space do you truly need to be relaxed in retirement? What are your choices? Things you might want to think about include the cost, geographic situation, availability of services, and maintenance factors. Think about the different scenarios and how they might apply to you, such as whether to stay in one location or to relocate. You might wish to relocate across town, or perhaps across the country. If you were always interested in moving to somewhere dry or sunny, this could be your chance. You might also be interested in relocating because you would like to be closer to your children and your grandchildren.

The first thing to consider is your cost of living. The majority of other retirement issues will come second to the fiscal factors. If you decide to stay where you are, typically, your mortgage will already have been paid off, which is a large part of your fixed, or non negotiable costs. Here, you would only need to add money to your budget to account for inflation, taxes, and costs of operation. Then you should consider the cost of maintenance. If your home is in good condition, this should not cost too much. If you have not replaced your furnace in a decade, you might need a new one at this point. Similarly, if you have a 20-year-old roof, you might want to factor in a replacement in the next few years.

If you would like to stay in your current home when you retire, you should make maintaining your home a priority. As we age, we are typically less interested and capable in maintaining our homes, especially if they are older homes. It becomes less fun to cut grass or shovel snow after 60 years of doing so. Some people enjoy being able to continue to do it at 70, but you might want to consider riding mowers and snow blowers.

If you move, you will need to pay for housing wherever you end up. The operating expenses will be less in smaller homes and maintenance will be much less in a newer home. You can consider lots of options including renting your home, reverse mortgages, and living in cheaper areas, or simply using your saved money in cheaper areas to retire more fully. Speak with one of our financial advisers and consider your retirement goals thoroughly.

Something else that is important to consider is the access you will have to different services. As you get older and approach retirement, you will probably have a greater need to be able to get to different kinds of medical care, groceries, and an everyday pharmacy. Will you be able to go shopping or get to the local supermarket easily? Will there be some form of public transit you can use if you or your spouse becomes unable to drive in the future? It can be wise to make the decision ahead of time to move closer to some of the things you use frequently as you age.

What Exactly Is Short-Term Disability Insurance?

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Short-term disability insurance is an important resource you may have heard about through your job or private insurance agent. Understand what short-term disability insurance is as you decide if it’s right for you.

Short-Term Disability Insurance Defined

Short-term disability insurance is a benefit that covers a temporary disability caused by an illness or injury. Usually in effect for a short time period, it pays the policy holder up to 66-2/3 percent of their weekly earnings.  It may also include a benefit that helps an ill or injured employee return to work.

The waiting period to file a short-term disability insurance claim is up to two weeks after you become ill or injured. Be prepared to show medical proof of your illness or injury. Benefits usually last from three to six months. Your policy will have a maximum per-month benefit cap.

Why You Need Short-Term Disability Insurance

Short-term disability insurance is designed to provide financial assistance if you suffer an illness or are injured. The top five reasons people purchase short-term disability insurance include:

  1. Pregnancy
  2. Injuries
  3. Joint disorders
  4. Digestive issues
  5. Cancer

If one of these or any illness or injury affects you and you have to take time off work, do you have enough financial resources to manage your living expenses and other financial obligations? In essence, short-term disability insurance protects you and your resources. It covers your living expenses and gives you peace of mind until you can return to work.

An Example of how Short-Term Disability Insurance Works

Here’s an example of how short-term disability insurance can help you.

Let’s say you acquire a bad infection and must be on bed rest for a few weeks. Instead of worrying about money, tapping into your savings, racking up credit card debt or pushing to return to work before you’re healed, rely on short-term disability insurance.

Your policy only covers a portion of your weekly income, but it is a big help. If your salary is $32,000 with weekly gross earnings of $615.38, your weekly short-term disability insurance benefit will be approximately $406.15. You can use that money to pay any expenses, including rent, groceries or other bills.

Who Should Buy Short-Term Disability Insurance?

Short-term disability insurance is important for almost anyone, especially if you don’t have a big nest egg saved for emergencies. Review your financial portfolio with your financial advisor as you decide if a short-term disability insurance policy is right for you.

How to Buy Short-Term Disability Insurance

Talk to your Human Resources manager about short-term disability insurance. You can also purchase a policy through your personal insurance agent. It’s invaluable coverage that protects you and your financial security.

How IRAs Can Help, Even in a Tough Economy

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Personal savings has become an increasingly important part of preparing for financial security in retirement. That Americans recognize this is seen in the findings of a study from the Investment Company Institute that found, despite the challenges wrought by today’s tough economy, individual retirement account (IRA) ownership has remained steady. Apparently, Americans are resisting the temptation to cash in on their retirement savings to cover their short-term financial needs, or in reaction to the volatilities and uncertainties in the financial markets.

According to the ICI report, The Role of IRAs in U.S. Households’ Saving for Retirement, 2009, 39% of households own IRAs. This includes 31% of households reporting owning traditional IRAs, 15% owning Roth IRAs, and 8% owning employer-sponsored IRAs (SIMPLE IRAs, SEP IRAs and SAR-SEP IRAs). IRA holdings represent about one-quarter of U.S. total retirement assets (up from 15% two decades ago), and 9% of all household financial assets (up from 4%).

IRA growth has been fueled by rollovers from employer-sponsored retirement plans, the survey reports. In 2009, 54% of households owning traditional IRAs had rollover assets in these IRAs. Among these IRA-owners, 89% reported that they had rolled over their most recent retirement plan distribution, in its entirety, into their IRA.

In contrast, few IRA-eligible individuals actually make contributions of new money to IRAs. In 2008, only 15% of U.S. households contributed to either a traditional IRA or a Roth IRA. This marks one of the few “bad news” findings from the report, and underscores how important rollovers of employer-sponsored retirement plan distributions have been to IRA growth.

Despite uncertainties in the financial markets and economic pressures that have left many households cash-strapped, IRA withdrawals continue to be infrequent and mostly retirement-related. Only 19% of households owning traditional IRAs took a withdrawal in tax year 2008, and for 84% of these households the withdrawals were made in retirement.

Even among IRA-holding households in which at least one family member was in retirement age, nearly 60% did not take an IRA withdrawal in 2008.

Only 5% of traditional IRA holders making withdrawals were younger than age 59 1/2. Furthermore, 64% of IRA-owning households not making withdrawals in tax year 2008 said it was unlikely that they would withdraw from their IRAs before age 70 1/2.

Among IRA holders who did make withdrawals, the size of these withdrawals was typically modest, with a median of 8% of the IRA account balance withdrawn. Expressed in dollar amounts, one-third of the withdrawals were less than $2,500. For households withdrawing IRA funds in retirement, 44% reported using withdrawal proceeds for living expenses while almost a third said they reinvested the withdrawal or deposited it in another account. Health care expenses (cited by 19%), home purchase, repair or remodeling (15%) and emergencies (14%) were other reported uses of IRA withdrawals.

The ICI report validates the continued importance of IRAs to U.S. household wealth and to individuals’ income in retirement. However, efforts to increase new contributions to IRAs are necessary in order to increase the overall financial security of Americans in retirement.