The Life Insurance Movement (for Retirement Investors)
Why life insurance and retirement investing go hand-in-hand
On the face of it, life insurance and retirement planning have little in common. In basic terms, life insurance is about dying “early”; retirement savings, dying “late.”
And retirement planning is for everyone, regardless of circumstance. Life insurance is part of a solid financial plan for those with families or others who depend on them for income, or for those who simply want to leave something to their heirs.
But a closer look reveals a deeper relationship. For those in both categories, life insurance plays yet another, critical role: it allows people to be better retirement savers.
That’s because with a life insurance in policy in place, your need to hold a pile of cash reserves to cover the loss of income caused by unexpected death is greatly reduced. In exchange for relatively small monthly premiums, you’re getting access to cash that would otherwise take many years to save. Instead, if you need the money, you’ll have it. If you don’t, you’ll at least have enjoyed peace of mind.
At the same time, you’ll be able to focus on, and save more for, retirement. You’ll also have greater ability to choose long-term investments and be less susceptible to having to sell at an inopportune time. Selling stocks based on emotional and dire financial circumstances is among the quickest ways to see all those hard-fought earnings quickly slip away.
So it’s no surprise that RothIRA.com is a big advocate of holding adequate life insurance. As such, we’re happy to be part of the Life Insurance Movement, an initiative started by our friends at goodfinancialcents.com.
Life insurance companies are easy to find online or through a local insurance broker. Your physical health and lifestyle affect premiums, but most relatively healthy adults are able to find affordable coverage. We recommend a term-life policy—one that will pay you a fixed amount, for a fixed monthly premium, if you die during the policy term.
So called whole-life policies are more complicated and tend to be more expensive. So shop around and protect yourself against the worst-case scenario. It could be the difference between a comfortable retirement, and one decidedly not so.