Planning for Retirement with FUMA Financial

Planning for retirement is a lifelong process. The earlier you get started, the easier the transition will be and the more time you’ll have to enjoy it. However, it’s never too late to start planning for retirement. Though the process may seem complicated, a trusted advisor can make a world of difference. Our financial experts will gladly help you understand your options and successfully plan for the future. 

Planning for Retirement 

Every individual and their circumstances are unique. This means that what works for one won’t necessarily meet the needs of another. While only you know your specific goals and situation, there are some general best practices to keep in mind. 

The average U.S. adult can expect to retire at age 64 and live to about 78 years of age. This leaves about 10-15 years to relax, travel, and enjoy a successful retirement. The more time you have until then, the less you’ll have to save each year to reach your goal. Those who begin planning early better position themselves for long-term growth. 

A successful retirement depends on a variety of factors. The first to consider is your planned retirement age. When exactly do you want to retire, and can you afford it? While you can start collecting Social Security benefits early at age 62, the full retirement age for those born after 1960 is 67 years old. If you choose to claim benefits early, you’ll suffer a financial penalty. On the flip side, you can choose to delay benefits until age 70 to claim an increased monthly payout. 

Another important consideration is healthcare costs. Your medical needs are likely to remain during retirement, and the earliest age to get started with Medicare is 65 years old. Until then, plan to continue covering the cost of insurance, hospital visits, and prescription drugs yourself. Those with chronic health conditions can expect to spend a larger part of their retirement income on healthcare costs each year. 

With these aspects in mind, the next step is to assess your total annual living expenses. This will give you a good baseline when saving, investing, and planning for retirement. Then, multiply annual expenses by years of retirement for a rough estimate of what you’ll need. 

Saving and Investing 

Planning for retirement comes down to living expenses. We recommend about 80% of pre-retirement income to support the same standard of living during retirement. Unfortunately, Social Security benefits are unlikely to cover more than 50% of your financial needs. 

There’s no one-size-fits-all strategy when planning for retirement. However, it always involves some form of saving or investing, or both. The truth is these are quite different methods of retirement planning and one may be better for you than the other. Investing generally leads to greater returns over time, though it also involves greater risk. Saving may sometimes be safer, but then you also must contend with factors such as inflation. 

Several types of plans exist to meet diverse retirement needs. There are various pension plans, individual retirement accounts (IRAs), and employer-sponsored plans. Pension are rare in the private sector, but employer-sponsored 401(k)s are common. If you’re unsure about your options, ask your employer if they offer any financial aid. Otherwise, IRAs are another great way to save, invest, and reduce taxes either now or in the future. 

Planning for retirement on your own can be intimidating. That’s why we developed our Retirement Analyzer tool to help you create and monitor a custom financial plan with ease. Our trusted advisors can provide a clear snapshot of where you are, how much you have saved, and how to best spread out your retirement income. This easy-to-use software simplifies the planning process so you can retire with confidence and peace of mind. 

If you’re ready to start planning for retirement, we encourage you to reach out for more information. Our financial experts will sit down with you to discuss your unique needs, goals, and timeline before offering their advice. We look forward to helping you prepare for the future today. 

What Is Disability Insurance?

There are many types of insurance policies available today. After all, insurance is an incredibly important investment for guarding against the unexpected. One policy that often doesn’t get enough attention is disability insurance. In fact, you may find yourself asking, “What is disability insurance?” The reality is that this type of policy is critical for protecting individuals throughout their lifetime. 

Disability Insurance 

As you might guess, disability insurance protects someone from being financially impacted by a disability. It’s a form of income insurance that ensures a stream of income in the event that someone is unable to work. 

Let’s say that you get into a car accident caused by another driver. It results in a major spinal injury that prevents you from returning to work for several months. Disability insurance would provide you with continued income in that situation. This income may cover anything from medical bills to normal living expenses. 

This insurance often comes in short- and long-term policies. Short-term policies may only provide benefits for up to 2 years, while long-term benefits kick in after that and may last for a few years or until the end of the insured individual’s life. 

How Does Disability Insurance Work? 

Like any type of insurance, the policyholder pays a monthly premium to the insurance company in exchange for the coverage. The policy will spell out the benefits and the conditions that need to be met for them to apply. 

Typically, disability insurance will provide a portion of your income prior to becoming disabled. This often amounts to between 60% and 80% of your income. Another thing to consider when evaluating different policies is the length of the payouts. Depending on the policy, you may receive benefits for a certain number of months, years, or even until a specific age. 

These policies may come from employers or the Social Security Administration, or directly from an insurance company. Worker’s compensation insurance is also a form of government-mandated disability insurance. While added coverage often isn’t required, many employers offer it as part of their annual benefits packages. Sometimes, employees may pay policy premiums through payroll deductions. 

Do I Need Additional Coverage?  

Every individual’s needs are different. That said, disabilities are more common than you may imagine. In fact, research shows that up to 1 in 4 people will experience a disabling event before reaching retirement age. 

When we think of disabilities, we typically think of major accidents. Unfortunately, this is only one reason why people purchase a policy. Most disabling conditions associate with medical conditions. Conditions such as heart disease, stroke, cancer, arthritis, and depression can often lead to someone being unable to work for a brief period or even for the rest of their lives. 

Employer-provided insurance may not be enough to cover your needs in the event of a disability. In this case, supplemental coverage through a private insurance company can bridge this gap. This also applies to small business owners and the self-employed who cannot claim workers’ compensation for themselves. 

We always recommend that those in high-risk industries consider disability insurance. Such industries include drilling, mining, construction, automotive, agriculture, and manufacturing. Individuals who also engage in risky activities like extreme sports may need special coverage, as a standard disability policy oftentimes won’t cover injuries from these hobbies.  

Disability insurance can be a touchy subject for many. If you have concerns about it, feel free to contact us for more details. Our staff are always happy to answer all your questions and give you greater peace of mind. We’re here to help you find the policy that best meets your unique needs.