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Protecting your investment

So you’re thinking about retirement and have a few questions such as how much capital will you need for your retirement and how much do you need to save each month to meet that goal. All great questions, but don’t forget to ask this one critical question - are my investments protected?

Insurance for Your Peace of Mind

For example, you’re in your 40s; you have a retirement plan in place, but develop a critical illness. How does this affect your portfolio? How does this affect your future? Perhaps you will stop contributing to your retirement plan and will start to access some or all of the capital that you have already saved. By doing this, you will not only be altering your retirement projections, but you will end up retiring on less capital or even pushing back your retirement date in order to make up for those lost funds. Neither of these should be an option during a time in your life that is already stressful and full of uncertainty. So, how do you prevent this from happening?

Well, the first step is some simple asset allocation with the purchase of a Term to 75 Return of Premium on Surrender Critical Illness Plan. Let’s say you make $250,000 per year. The idea is that you pay an annual $5,000 in premium fees “in exchange” for $300,000 worth of critical illness coverage. If in four years from now you become ill, even though you only put in $20,000 in premiums fees over the course of those four years, you will still be entitled to the full $300,000 payout from within your plan. This $300,000 can be used for whatever you need during your recovery and you will not need to dip into your retirement savings.

The Best Case Scenario

The next logical question is what happens if you do not become critically ill. At your target retirement age of 65, you will have $125,000 of premium fees collected in that Term to 75 critical illness account. At this time, you could stop making premium payments, give up the possibility of using the $300,000 coverage and move your $125,000 back into your retirement portfolio – no fuss. The only downfall from this plan is that your $125,000 would have lost the possibility of earning interest had that money been invested in your regular portfolio. A small price to pay for financial security and peace of mind.

At the end of the day, it doesn’t matter if you make $30,000 or $1,000,000 a year because the real question is how much of your annual salary do you want to cover – is it six months? A year? Two years? It’s up to you to figure out your individual needs, but the role of an Advisor is to help you get there.


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