November 04, 2018
Every week, Simply Money’s Nathan Bachrach, Ed Finke and Amy Wagner are answering your financial questions in The Cincinnati Enquirer. If you, a friend, or someone in your family has a money issue or problem, please feel free to send those questions to firstname.lastname@example.org
Annie and Tim from Delhi Township: We’re both in our late 40s and hoping to retire early, like in our mid-50s. How can we make sure this actually happens?
Answer: According to the U.S. Census Bureau, the average retirement age for an American worker is 63. But if you plan on retiring earlier than that, there are four areas to focus on:
Here’s The Simply Money Point: While we believe everyone on the verge of retiring should have a financial plan, it’s even more crucial if you’re hoping to retire early. After all, you’re going to be ‘unemployed’ for longer than the average retiree. Making sure your finances are ready to weather various scenarios and ‘what ifs’ is imperative.
Jackie from Montgomery: My daughter and her husband just had a baby. Should I buy a life insurance policy for my new grandson?
Answer: We understand why this can cross your mind. After all, you want to do everything in your power to protect your grandson’s well-being, including his financial well-being. However, in most cases, buying a life insurance policy for a child does not make financial sense.
As a reminder, life insurance (in its simplest and most basic form) is meant to protect a stream of income. This is why you probably had a policy at some point—to make sure your child(ren), who were dependent upon you, would be taken care of if anything ever happened to you. But unless your grandson will be supporting your daughter’s family as the next Justin Bieber, in this case there’s no income stream to protect.
Another main argument made in favor of a life insurance policy for a child is that the policy can pay for funeral expenses. If you or your family are truly concerned about these expenses, this is not the route to take. Instead, have your daughter and son-in-law consider getting a “rider” policy on their own life insurance policy. This will be much more inexpensive.
Additionally, proponents will also claim the “cash value” of the life insurance policy can be used later on in the child’s life, such as for college expenses. We, however, would argue this is an expensive way to pay for college – you’re essentially just over-stuffing the policy with cash and paying a lot to do it. A much better alternative is to open up a 529 college savings plan for your grandson and let it grow for the next 18 years.
Here’s The Simply Money Point: Yes, the idea of losing a child – or grandchild – is unbearable. But life insurance should only be used for financial risk, not emotional risk.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and Ed Finke and their team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email email@example.com.