Retirement and Life Only Pension: Part 2

When planning for retirement, challenges can arise. In the previous blog post we discussed the issues that may arise with life only pensions. In some cases, a life insurance policy purchased prior to retirement can be a great solution. Life insurance policies can potentially provide the security you need to cover several scenarios.

•       If the retiree pre-deceases their non-working spouse, the non-working spouse should have enough life insurance in place to purchase a pension, annuity or investment that will give them income for the rest of their life. 

•       If the retiree and non-working spouse both die, the life insurance policy should be structured so that their children or heirs can benefit.

•       If the non-working spouse passes away first, the retiree has several options.  They can keep the life insurance policy and use it for charitable estate planning, which would include gifting for charities, their community or their children or heirs.  They can also cash it out and, in our example, increase their income from $700/month to $1,000/month plus depending on whether there's any cash value in this policy. 

Retirement and Life Only Pensions: Part 1

When it comes to retirement planning, most people just want to provide for their loved ones.  In this blog series, we’ll discuss some ways you can make sure they’re taken care of.

A life only pension is a pension that is designed to pay out for the rest of your life only. These benefits apply whether or not you’re married. If you take a life only pension from an institution and you are married, have a significant other or children, “life only” means it will pay only for the rest of your life and that's it. If you pass away the next day or you never collect, it will be absorbed back by the institution and nothing will be paid to your spouse, children and/or heirs.

Product Performance vs. Personal Discipline

As a financial planner, I often hear people talking about the latest investment portfolio or the latest product on the market. While product is important, I believe that the most important piece of financial security is personal discipline: how you handle your life circumstances and how you will react to inevitable market volatility.

What does this mean? Well, imagine you found a magical product that earns 10% a year. You still could have other areas that need to be taken care of, such as insurances in case of death or becoming disabled, health insurance, auto insurance and having emergency cash set aside to allow that magical 10% product to grow uninterrupted.

Put and Take vs. Put and Keep Part 3: Put and Keep Accounts

In the previous part of this blog series we discussed put and take accounts. Put and keep accounts differ from put and take accounts in many ways. There are two types of put and keep accounts. The first is similar to the frame of your house; this is the safe put and keep account. The second is like the roof of your house; the risky put and keep.

When building your financial house, we want to help you select ways to minimize wealth transfers. One of the best ways of minimizing unnecessary wealth transfers is to understand what they are and ways to minimize them.

Put and Take vs. Put and Keep Part 2: Put and Take Accounts

Are your retirement savings going to a put and take account?

At Kemp & Associates we often meet people who like to share how they’ve saved so much towards their retirement savings account¹. A recent client told us how they saved at least $1,000 a month and had been doing so for five years successfully. I did the math quickly and determined that they should have saved $60,000. When I asked where the $60,000 was currently being held, they responded somewhat sheepishly that they only had about $4,000. I questioned them politely as to how they were able to save $60,000 but only had $4,000 and they explained that they were going in and using it for different impulse purchases and bills.

This type of retirement saving isn’t truly saving. Instead, it is a form of “put and take” or, a more modern version, would be called a “delayed spending account.”