Insurance Basics

Insurance Basics

Youve been saving for years and making good progress toward your retirement and other investment goals. But a single catastrophic event like major storm damage to your home or a serious car accident can quickly derail your financial plan. Thats why having adequate insurance protection is a cornerstone of financial wellness. 

Many different types of policies are available. To help ensure you have all the protection you might need, its important to understand the options. 

Homeowners insurance. A homeowner's insurance policy can protect you from losses due to fire, theft, storms and other perils. And when there’s a mortgage on the property, it’s typically a lender requirement. 

Renters and condo insurance. Both of these types of policies can offer some of the same protection as homeowners insurance but are tailored to the specific needs of renters and condo owners. Condo owners, for example, don’t need as much structural coverage as homeowners. Renters primarily need insurance to cover belongingsand certain liability claims and it’s often the least expensive of the three types of policies. 

Flood insurance. Damages caused by flooding are generally excluded from standard insurance policies, so you’d most likely need to purchase this type of coverage separately. Even homes outside of flood zones can be susceptible to flooding. 

Auto insurance. Car insurance can protect you from unforeseen losses resulting from accidents, storms, theft and vandalism as well as property damage and injuries to yourself or others. Coverage requirements can vary by state, so its important to carefully review the terms of your policy.   

Boat, motorcycle and RV insurance. Operating watercraft and vehicles other than your car carry unique risks and require separate policies of their own. They may also include coverage for belongings stored on them. 

Health insurance. Preventive care, as well as treatments for diseases and other conditions such as diabetes and asthma, are covered by private or employer-provided policies. The Affordable Care Act guarantees 10 essential health benefits, including mental health treatment, maternity care, lab work and ambulatory and preventive services. 

Life insurance. Purchase this type of protection to safeguard the financial future of those you love should the unthinkable happen. Term policies typically cost less and pay a benefit for a certain number of years, while whole life policies cover an entire lifetime and can accrue cash value. 

Umbrella policies. You can obtain extra liability coverage beyond the limits of other policies — such as homeowners and auto policies — with this type of insurance. Umbrella coverage is often sought after by higher net worth individuals with more assets to protect. 

Disability insurance. If youre unable to work due to illness or injury, short- and long-term disability coverage can help protect your income. You may have a policy provided through your employer, but you can also purchase disability insurance individually.  

Pet insurance. This type of policy can help offset expensive veterinary treatment for your pets. But be sure to look into what conditions or treatments are excluded. 

Insurance Can Be Complex, So Get Help  

While your declaration page can give you an overview and a good starting point for understanding your policy, many important details are in the fine print. Thats why you should understand the specifics and do your homework on:  

  • Coverage limits. 
  • Any exclusions. 
  • Your deductible (what you have to pay out of pocket before coverage begins). 
  • Whether your policy reimburses according to actual cash value (depreciated value) or replacement value (cost to buy new). 
  • Any waiting period before coverage kicks in. 

Effectively knitting together adequate protection from a variety of policies can mean the difference between financial security and financial peril. With such high stakes, it can be highly beneficial to get advice from a qualified financial professional or licensed insurance agent to help ensure you have the types and amounts of coverage you need. The time to act is before disaster strikes because insurance helps protect your financial future and the things you value most. 

The Average Cost of Retirement

The Average Cost of Retirement

Many people wonder exactly how much it will cost for them to retire comfortably, and whether they’ll have enough money to do it. That can be a tough question to answer but it’s an important one to get right. Learning about current retirees finances can be a helpful starting point when gauging your own retirement goals. 

According to the Data … 

The U.S. Census Bureau provides information regarding the typical retirement income of Americans. They do this by reporting two types of statistics — mean income and median income. 

Mean income is determined by adding all the annual incomes of retirees and dividing by the total number of retirees. The resulting number is the arithmetic average. However, this value can be greatly influenced by extremely high- or low-income numbers.  

The median is calculated by taking the middle value of all annual incomes of retirees when the values are arranged from low to high. Because a median isnt influenced by those with very high or low incomes, its often regarded as more representative. In 2021, the median annual income of American retirees over the age of 65 was $47,357 — whereas the mean was $73,288.  

Census Bureau data also reflects a downward trend in retirement income as retirees age. 

From ages 65 to 69, the median household income was $60,324; from ages 70 to 74, it shrinks to $53,327. And among retirees over 75, the median income was $37,335. This is in part because as retirees age, they are less likely to be earning any income and are typically spending down savings and investments.  

The census also breaks down data by state. Typical retirement income varies a great deal in terms of where retirees live. The highest reported income is in the District of Columbia ($43,601), and the lowest is found among Indiana residents ($20,521). Cost of living is a primary driver of retirement budget calculations including: 

  • Your lifestyle during retirement (travel, eating out). 
  • Housing costs. 
  • Health care expenses. 
  • The age you elect to start receiving Social Security benefits. 
  • Economic conditions, including inflation at the time you retire. 
  • Financial contributions from your spouse. 

Where to Start? 

One often-cited rule of thumb when it comes to retirement income planning is that many people are expected to need approximately 80% of their pre-retirement income to retire comfortably. That means if you made $100,000 per year pre-retirement, you’d need about $80,000 post-retirement. Thinking about why youll need less is that your income tax obligations are anticipated to be lower, and you won’t have to pay for many job-related expenses. However, it’s important to realize that other costs, especially those related to medical needs, can increase significantly during retirement. 

The Number That Matters Most 

Retirement planning is ultimately a very personal decision-making process that depends on your unique situation and needs. That’s why things like the 80% rule are best regarded as a starting point and not a hard and fast rule. Because so many factors go into retirement planning projected taxes, inflation, cost-of-living increases and much more it can be useful to seek the advice of a qualified financial professional to assist you. In the end, it’s not the average retirement that matters most — it’s your own. 


What Is Wealth Management?

What Is Wealth Management?

While terms like financial planner and wealth manager may sound synonymous, these two types of financial professionals have different areas of focus. Financial planners help their clients with investment advice, budgeting and dealing with debtand while wealth managers do many of the same things, they tailor their practice to the unique financial needs of more affluent clients, often referred to as high net-worth individuals (HNWIs). HNWIs are those who have accumulated a large amount of wealth. Often, the threshold is considered to be more than $1 million in investible assets.  

Investment management. Investors with a lot of capital often have access to a broader range of investments such as private equity and hedge funds, which can take greater expertise and experience to manage effectively. Also, things like real estate can make up a larger proportion of their portfolios. These investments can have different, and often more complex, oversight needs than typical mutual funds and stocks. 

Tax planning. In part because HNWIs’ assets are often held in a broader range of investments, their taxes can be more involved. For some HNWIs, tax liability for capital gains is higher than their income tax. Wealth managers and tax professionals can offer strategies to mitigate HNWIs’ tax burden.  

Gifts and estate planning. Managing generational wealth is a frequent concern of HNWIs — and trusts are often used to pass assets on to their loved ones or charitable causes while helping to mitigate estate taxes. However, there are various types of trusts, each with different tax and other rules, so these instruments need to be set up carefully.   

A certain amount of assets is allowed to be gifted without incurring taxes — for 2023, up to $17,000 per person can be gifted — and that amount can be gifted from each spouse. But for certain types of gifts and donations, such as to a child’s college fund, there can be an even greater tax exemption of up to $75,000. According to the IRS, “Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000.” Wealth managers can also work with attorneys to assist in setting up private foundations or endowments to support charitable causes. 

Risk mitigation. Frequently, another important role of a wealth manager is asset protection, as HNWIs are often at increased risk for identity theft and fraud. Wealth managers can assist with privacy protection and fraud detection, as well as helping ensure their clients’ assets are properly insured. This may include securing umbrella coverage and policies or riders for tangible assets such as antiques and jewelry. 

Wealth Managers Have Specific Expertise for HNWIs  

While anybody can benefit from the guidance of a financial professional, oversight needs can become more complex as investments diversify and assets increase. And that’s one reason those who have amassed significant assets can often benefit from the specialized advice and services of a wealth manager.  

Contact a qualified financial professional to see if you might benefit from working with a wealth manager. 


Financial Fact or Fiction

Financial Fact or Fiction

While most people realize breaking a mirror won’t bring seven years of bad luck, many money myths are still widely believed. Can you tell whether the following are fact or fiction?  

Let’s put your financial know-how to the test. 

1. A mortgage is good debt, no matter how big it is. 

FICTION: “Good debt” is manageable and can help you achieve important life goals. While home ownership can be a great goal, not all mortgages are “good debt.” If your house payments are breaking the bank, or if your adjustable-rate mortgage (ARM) is about to reset to a payment you can no longer afford, even the mortgage on your dream home may not qualify as good debt.  

2. Financial planning is only for the wealthy. 

FICTION: You may think there’s no point in working with a financial professional if you don’t have a fortune in the bank, but most people can benefit from a little expert help. Even those with modest assets may have a lot to gain from advice about taxes, investments, budgeting, debt and credit. And this valuable service may also be easier to obtain than you think. Workers with an employer-sponsored retirement plan may already have access to a financial professional through their benefits package — check with your human resources department to learn more. 

3. If I’m still young, there’s no rush to save for retirement. 

FICTION: It’s actually never too early to start saving for retirement, but waiting too long could put some serious cracks in your future nest egg. If someone invests $30,000 into a retirement fund at 25, even with no further contributions, they could have nearly $450,000 by age 65, assuming an average annual rate of return of 7%. But if they were to wait until 45 to start saving, that amount drops to around $116,000.  

4. There’s no sure thing when it comes to investing. 

FICTION: There actually is a sure thingand that’s your employer 401(k) match. This is an additional deposit from your employer into your 401(k) equal to a percentage of your contribution up to a certain limit. Your matching funds may not “vest” right away, which means they might not fully belong to you when they’re deposited. But while you may have to wait for your matching funds to vest, your employer match is like free money — and one of the few sure things in the world of investing 

5. It’s better to pay down all your debt than invest your money. 

IT DEPENDS: Whether it’s best to pay down debt or invest first depends on your individual situation. It’s often advantageous to pay off higher interest debts like credit cards quickly especially with the average credit card rate topping more than 19% in the final months of 2022. But for a low-interest mortgage or other manageable debt, it might make sense for investing to take priority — or do a little of both at the same time. This is an area where getting advice from a qualified financial professional can really help. 

Everyone can improve their financial wellness 

WellCents can help boost your financial wellness. The first step is to take a short online financial assessment. Your individual results are completely confidential and can help you better understand your financial strengths and weaknesses. You’ll gain valuable insights into your retirement readiness, debt, credit, investments and more. And you’ll have access to e-learning and articles tailored to your needs, plus advice from a financial professional. No matter your current situation, it’s never too late to start improving your personal finances — and that’s a FACT! 



Avoid These 7 Critical Financial Planning Mistakes

Avoid These 7 Critical Financial Planning Mistakes

A solid plan is foundational to your financial wellness, so it’s important to get it right. Here are seven common mistakes and ways to avoid them. 

1. Not having a written financial plan. The only way to know for sure that you haven’t missed anything important is to write it all down. Your financial plan should include all aspects of your personal finances, including your budget, investment targets, retirement goals, debt reduction strategy and insurance protection. 

2. Not reviewing your plan. Did you make a financial plan a long time ago but haven’t looked at it since? That could be a problem. Once you’ve written everything down, meet with a qualified financial professional regularly to make sure you remain on track, and make any needed adjustments. Do this at least annually or whenever your situation changes significantly. 

3. Delaying saving for retirement. It may feel like you have all the time in the world when it comes to preparing financially for retirement, but your golden years will be here before you know it. Don’t neglect this crucial part of your financial plan. Setting up automatic contributions to your 401(k) — and increasing them regularly — is one of the easiest things you can do to put yourself on track for retirement readiness. 

4. Lacking sufficient emergency funds. Having to deal with an emergency can derail any financial plan and potentially land you deeper in debt. Set up an emergency fund of at least three to six months worth of expenses. That way, if your vehicle or computer breaks down, you don’t have to reach for your credit cards or raid your retirement account to pay for it. Also make sure you have adequate insurance protection for your car, home and other possessions.  

5. Paying only the minimum amount due on credit cards. It may be tempting to just meet the minimum obligation on your monthly credit card bills. After all, why pay more than you have to? But that reasoning falls short when you look at how it affects you in the long term. Over time, your total interest costs will be higher, and you’ll be in debt longer, if you only pay the minimum balance. In fact, card issuers are required by law to include a “minimum payment warning” on each statement, which shows you the total amount you’ll pay, including interest, if you choose to send only the minimum required amount each month. Instead, pay as much as you can above the minimum — or if possible, pay the statement balance in full.  

6. Overspending on housing and cars. Housing, food and transportation are often the three largest expenses in household budgets. And overspending on any of them can make it difficult to stick to your financial plan. Many financial experts recommend spending no more than 28% of your total income on housing — and no more than 36% of your income on your total debt, including credit cards and car payments.  

7. Not seeking help from a professional when needed. If you’re struggling financially, don’t just wish that things will get better. Sit down with a qualified financial professional to create a realistic and comprehensive financial plan that meets your needs and goals. Because when it comes to your financial future, a solid plan will beat out a wish every day of the week. 


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