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Insurance planning doesn't end once retirement begins

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Insurance planning doesn't end once retirement begins: tips for retired medical professionals.
OMA Insurance
9/1/2011
In the final instalment of a four-part series on insurance planning tips for doctors at different stages of their career, OMA Insurance Services suggests ways for retiring physicians to protect their retirement income and create an effective estate plan that will ensure their own needs, and those of loved ones, are met.

OMA Insurance Services presents the last of a four-part series on planning tips to help physicians manage their insurance and financial needs from early practice to retirement. The final instalment, below, offers practical advice for physicians entering the "Phase 4: Retirement" stage of practice.

After a career's worth of diligent saving, careful planning, and excited anticipation, your retirement date is finally in sight! Before you hang up the white coat for good and throw away that last pair of latex gloves, there are still a few key insurance planning needs to take care of.

Protect your retirement income with health-care insurance

Once you retire, one of your first financial priorities is to determine your annual retirement income. This involves balancing your lifestyle goals with making sure you don't outlive your retirement savings.

Unexpected health-care expenses pose one of the greatest risks to your retirement income. Covering expenses related to a serious illness or impairment can have a long-lasting, negative impact on your retirement lifestyle. Even the costs of routine and preventive care can add up.

Consider the following facts and review the health insurance solutions you should incorporate into your financial retirement plans.

  • Fact: after age 65, 44% of men and 72% of women are expected to develop either a cognitive impairment or a need for help with two or more activities of daily living for at least 90 days.1
  • Solution: Long Term Care insurance — this type of insurance provides a weekly benefit of up to $2,000 tax-free should you require help with at least two activities of daily living, or suffer a cognitive impairment that requires constant supervision. This type of protection is especially important once you retire, as the likelihood of requiring extended care increases as you age and you will no longer be eligible for Disability Income insurance. You can purchase Long Term Care insurance until age 74, but if you apply at a younger age, premiums will be much more affordable, and from a health perspective, you will have a greater chance to qualify for coverage.
  • Fact: men and women are more likely to suffer a critical illness before age 75 than they are to die from other causes.2
  • Solution: Critical Illness insurance — this type of insurance pays a lump sum benefit if you are diagnosed with, and survive, one of the illnesses covered under the plan. If you are retiring at a younger age and are under age 66, you can cut expenses later in retirement by choosing a critical illness plan that lets you fully pay your premiums by age 65 for coverage that stays in place until age 100.

Life insurance is the cornerstone of an effective estate plan

Some people mistakenly believe that the need for life insurance diminishes with age. Instead, the focus generally moves away from protecting your family's lifestyle to providing an estate to pass on to your children and grandchildren. Also, permanent life insurance can be used to provide liquidity and pay for final expenses, such as estate taxes, so that property (e.g., the family cottage) can stay in the family instead of having to be sold.

At this life stage, you may want to convert some or all of your Term Life insurance to a Permanent Life insurance plan. If you have OMA Flex-Term Life insurance, you have the option to convert to lifetime term-to-100 coverage without medical evidence at any time before you reach the age of 65. Rates are based on your age at the time of conversion. At age 100, coverage is considered "paid up," and will remain in place until death.

Following is an example of how one couple arranged their estate plan, in advance of their retirement, in order to ensure their needs, and those of their loved ones, would be met:

  • Dr. R (age 68) and his wife Jane (age 64) are ready to enjoy their retirement. They are confident that they have enough savings to support a comfortable retirement lifestyle, and have health insurance in place to protect their retirement income. The couple has one adult daughter, Carol, who has limited financial means. They want to transfer ownership of the family cottage to Carol after they die, while making sure she is not burdened by estate taxes, such as probate fees, deferred capital gains, etc. To accomplish this, Dr. R converts a portion of his Term Life insurance to Permanent Life insurance, with Carol as the sole beneficiary. Upon his death, Carol will receive a tax-free benefit that she can use a portion of to pay the estate taxes on the cottage. Dr. R's remaining Term Life insurance provides added security for Jane in the event that he predeceases her.

Advice and solutions for all your retirement financial needs

Retirement income protection and estate planning are two very good reasons why retirees need a well-rounded insurance plan that includes both life and health insurance solutions.

Even in retirement, it is very important to regularly review your insurance needs to ensure all of your financial goals and objectives are met.

 

References

1. Cohen MA, Weinrobe M, Miller J, Ingoldsby A. Becoming disabled after age 65: the expected lifetime costs of independent living. [Policy paper #2005-08 ]. Washington, DC: American Association for Retired Persons; 2005 Jun.

2. Sun Life Financial. The Critical Illness Insurance Solution: Incidence of death vs. critical illness based on male and female population incidence rates 2008-2009. Toronto, ON: Sun Life Financial; 2010 Sep.​​