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Insurance and retirement planning

by | Jan 22, 2012 | OTHER, SELF-PUBLISHED

Q – My wife and I put all of our savings into our mutual fund portfolio. We are doing okay but fear that we may not have enough money to retire while supporting our growing family and taking care of our aging parents. Do you have any advice for people like us? – Tom N., Surrey, BC

A – In this, the “sandwich” generation, many people find themselves taking care of both their own young family and their aging parents as well. This can cause a strong financial drain on retirement savings if you are not forward-looking. Investing regularly in your mutual fund portfolio is a great start. By adding money to your investments on a regular basis, you are “dollar-cost averaging,” meaning you are regularly buying through different cycles in the markets, buying more when markets are down and less when markets are up. In this way, your overall average cost is lower.

But that may still leave you with less than you’d ideally like at retirement, particularly if ongoing expenses are high. So another strategy you might want to consider is to “insure” your parents. Yes, I know this sounds a bit offbeat, but it can bring considerable peace of mind, especially if your parents have debts or other obligations to be settled out of their estate. If your parents are in their ’60s and in good health, take out an insurance policy on their lives. For about $250 a month, you can purchase a $250,000 term life policy. When your parent passes away, the $250,000 is paid out to you and is tax exempt. This payout could come just as you yourself are getting ready to retire.

However, an insurance policy is not liquid, and you must be mindful of this. The annual premium will be a “cost,” much like your regular investment plan. And it’s important to consult a qualified insurance agent to see whether this strategy is right for you and your parents. – R.T.

© 2023 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited. This article is for information only and is not intended as personal investment or financial advice.

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