4 Ways to Take the Taboo Out of Talking About Money with Your Spouse

“Don’t invest and forget.” This is a common sentiment that advisors try to communicate to their clients. We understand the importance of having a solid financial plan, but the plan doesn’t serve you if you set it and then don’t check in with it for years. A financial plan is a living and breathing document. As your life changes, so should your plan because those life changes can cause changes in your goals and your risks.

As you start your adult life, risks are generally low, and timeframes are typically long. You may be single, you may be renting. Should you hit some rough times, not that much may be rocked. This also applies to your investments. If there is a market shake-up, you have plenty of time to wait for the market to correct itself. Therefore, this is the time to be aggressive on your way to financial independence.

However, as your life changes, so does your risk. Perhaps you get married and start a family. Perhaps you buy a house or maybe you start a business. Suddenly, there is more at stake, there is more to lose. Additionally, while there is more at stake, there is less time. There is less time to save, less time to recoup any losses. These changes undoubtedly influence our decisions and our behavior in the market.

This change in risk isn’t done with the flip of a switch. Everyone’s life is different, hitting different life milestones at different times, starting to work towards financial independence at different places and having different goals to work towards. Therefore, computing risk, can be a gradual and complicated process. Working with a financial advisor can help you know when and how to change your risk so that you can steadily work towards the future and protect what you have today.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Like many in my generation, I prefer to subconsciously minimize the odds that I’ll become ill and ignore the reality that I’ll eventually pass. Unfortunately, the harsh reality is that illness and death are inevitable. Enter another subject we tend to ignore: Life Insurance. For many Americans – particularly young and/or single adults, life insurance is nothing more than a plot point in a Hollywood movie or true crime drama: the money collected by remaining relatives after someone has passed. However, life insurance, like health insurance, is just something you need to have. It can provide financial security for your loved ones, cover end of life expenses, and can even provide tax free income.

There are two different types of life insurance: temporary and permanent. The most common form of temporary insurance is Term insurance. Term typically lasts for a specified “term” of years, hence its name. Permanent – on the other hand – stays with you for your entire life, provided you continue to pay the premium, or have developed an account value large enough you no longer have to pay in. There are a wide variety of insurance policies available under the permanent life insurance umbrella, such as: whole life, universal life, variable universal life, and indexed universal life.

To put in another way, Term insurance can be thought of as renting insurance. You pay a monthly premium for the coverage but once the specified term of time is up that coverage goes away. The term can vary from 5 years up to 30 years. With some companies you can continue the policy, but you will have to pay premiums that are a multiple of what you had been paying during the “term” of the contract. It is used to provide protection for liabilities that will disappear after a certain time period ex: raising children, your mortgage, or income replacement. In your 20s-50s you have more people depending on you; therefore, if something were to happen to you (e.g. illness, death) you need an insurance policy that will take care of the people you support. If you pass away, you need enough coverage to pay off any existing debt, provide income replacement, and cover any other miscellaneous expenses associated with supporting your family. This coverage makes a difficult time a little bit easier by reducing the financial burden and allowing loved ones time to grieve without worrying about impending bills. Term insurance is perfect for this type of coverage as it has the lowest premiums and can be structured to disappear once certain liabilities disappear (e.g. mortgage is paid off, kids are out of the house, and your income is no longer critical to the security of your family).

Permanent Insurance, on the other hand, can be framed as owning the insurance coverage. As with term insurance, you pay a monthly premium; however, the coverage stays with you for the rest of your life, not just a specified term of time. Once your family is out of the house and your liabilities are decreased you still want to maintain some level of insurance coverage to cover end of life expenses and provide for loved ones. Permanent insurance is a great choice to cover these remaining liabilities. The premiums for permanent insurance are higher than those for term insurance because, unlike term – where the insurance company may not ever have to pay out the policy- permanent insurance means a guaranteed payout – assuming you’ve paid the premium. At some point the insurance company will have to pay. Additionally, part of these monthly premiums are placed into a cash value account which, depending on the type of policy, earns a fixed or variable rate of return and can provide tax free income. This income can be used to fund an early retirement as it can be accessed prior to age 59 ½ – the age required to legally withdraw from retirement plans without incurring penalties.

But what if you want to access the death benefit in an insurance policy without having to die – sound too good to be true? In fact, some insurance policies allow you to access death benefits before actual death! These policies feature Accelerated Benefit Riders (ABRs) which allow you to accelerate (or, in other words, use) the death benefit while still alive to cover certain terminal, chronic, or critical illnesses. Unlike health insurance, which only reimburses medical expenses, ABRs provide tax free money for you to use as you wish, assuming you have an ABR event. You can use this money for experimental treatments that health insurance will not cover or use it to travel the world. There are no restrictions on how the money is spent.

Now you know about life insurance and the many different options and benefits available to you – consider working with a financial planner to discuss the right life insurance policy for your needs.

If you have questions about insurance or any other aspect of your financial life please do not hesitate to reach out to me at zach.swaffer@trilogyfs.com

This article contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. Guarantees are based on the claims paying ability of the issuing company.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.