My job is very sedentary. The most exercise I get is to walk from my car to my client’s house. Ironically, while I deal with health every day, I have gained a great deal of weight as a result of my job.
Still, I do not have to worry about accidental injury or death as much as my bother-in-law. He oversees operations in a warehouse. I do not smoke or drink. Barring a heart attack or automobile accident, I should live to see my Social Security retirement.
I recently read that 56% of Americans plan to continue working after their 65th birthday. That makes sense. For the most part, Baby Boomers stay healthy longer than our parents did. Many do not feel like they are ready to retire at 65.
As Baby Boomers start to retire this year, Social Security is adjusting the age that people must be before they are eligible for full retirement benefits. In my case I must work until I am 67 before I am eligible for full retirement.
For years we have trusted in the benefit packages we get at work. Whether it is right or wrong does not matter. The truth is that some benefits change at age 65. As we Baby Boomers approach retirement, there are at least 3 questions that we should be asking. If you find that your group plan has benefits that change at age 65, there are some things that you can do.
Before you turn 65, you have 3 questions that you must ask about your group plan. If the answers are not what you want, you need to take actions on your own. You cannot afford to count on your employer to pick a plan that benefits people over the age of 65.
1. WILL MY GROUP LIFE INSURANCE STILL COVER ME?
Many employees only have enough group life insurance to pay for final expenses. A few employees have gotten supplemental insurance to replace their income for their loved ones if they should die before their working years are over. Some plans will even extend a certain amount of Life insurance for retirees.
However, before you make any assumptions about your Life insurance at work, make certain that you review your package to see what happens when you turn 65. Many plans cut the Life insurance benefit in half or eliminate it totally at that age.
Don’t assume that everything will remain the same if you continue working past age 65. If you are going to want life insurance during your retirement years, your only option is often to get your life insurance in the individual market before you retire. You can visit our Life insurance web site to see how much term life insurance is going to cost.
2. DO I EVEN NEED LONG TERM CARE INSURANCE?
In recent years, employers have started offering Long Term Care insurance as a “Voluntary” benefit. That means that employees can purchase Long Term Care insurance through pay-roll deduction plans. Sometimes the employer pays part of the premium for the employee. More often the employer pays nothing towards the premium.
If you want Long Term Care insurance, you are probably going to have to pay for it yourself. That may not be the worst thing. It may prevent you from buying a plan that is too expensive. Remember, you will still have to pay your premium after you retire and your income declines.
As you approach retirement, it is important to ask yourself if you even need to have Long Term Care insurance. If you have been fortunate enough to save at least $30,000 for your retirement, Long Term Care insurance is probably a wise idea. You will find that the premiums that you are able to get, even in a “Voluntary” plan, are lower than if you had waited until you retired.
However, if you have not been able to save at least $30,000 for retirement, you probably are able to rely on your state’s Medicaid system for your Long Term Care needs. If that is the case, my recommendation is for you to research what Medicaid’s “Asset Test” is in your state since every state is different.
If the amount that you have been able to save is less than what your state’s Medicaid system requires, I cannot justify your spending money on LTCI premiums while you are working. There is a good chance that you will not be able to afford them during retirement.
3. WHAT IF I GET SICK OR INJURED?
Disability insurance is often the Cinderella of benefit packages. It is often dismissed while the more popular Health and Life insurance plans get all the attention. Ironically, the idea of Disability insurance is decades older than the idea of Major Medical insurance. Our grandfathers understood that it was more important to put food on their family’s table than it was to pay doctor bills if they broke their leg.
Ideally, you could do both during your working years but sadly many people no longer have the priorities our grandparents had. Emphasis is placed on insurance to pay the doctor but there is often no thought about how groceries are going to be bought if a wage earner is laid up because of an accident.
Major Medical insurance does not provide money to pay for groceries, mortagages, utilities or any other bills. The type of insurance that does that is called Disability Income insurance.
Most Disability insurance plans, whether they are group or individual, stop at age 65. That means that if you continue to work past 65 you would have no insurance to protect your salary after 65.
Also, most state’s Worker’s Compensation laws require that an employer continue to pay a portion of your salary if you are injured on the job. Unfortunately, the vast majority of disabilities are not work related.
As of today, there are no answers in the individual market for that gap in Disability insurance after age 65. The closest thing there is to being able to protect your income during a disability is Critical Illness insurance.
Critical Illness insurance does not pay the same way that Disability insurance does. Disability insurance pays a stated amount of money each month. Critical Illness insurance pays a lump sum of cash if you are diagnosed with a covered critical illness. It does not pay anything for accidental injuries.
There are a couple of things that you should know about Critical Illness insurance.
First, most insurance companies will not sell Critical Illness insurance to someone after they have reached age 65. However, a few will. My advice is to review your Disability insurance as soon as you determine that you are going to continue working past age 65. If you are going to rely on Critical Illness insurance to replace your Disability insurance benefit, apply for it before you turn 65.
Second, although many insurance companies will not sell a new policy to someone who is over 65, most plans will continue to offer coverage after age 65 at a reduced level. If you are going to use Critical Illness insurance, make certain you find out how it pays if you are diagnosed with a critical illness after you turn 65 but before you retire. Make adjustments in your planning accordingly.
If you are eligible for Social Security retirement benefits, you already have a little bit of a safety net if you are unable to work past age 65 because of a disability. It is normally not as much as you would make if you were able to work but at least it is something.
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