What will you need to ensure security?

Steven Podnos
| For FLORIDA TODAY

Q: I’m planning to retire next year and I’m wondering: what should we do with our different types of insurance?

A: Most of us start thinking about retirement at least as we approach our 60s, and this is a great time to reevaluate your insurance coverage. Let’s look at the most common insurance issues as you approach retirement.

Disability insurance typically provides benefits that expire at age 65 (or shortly after disability if you are still working after age 65). Therefore, if you are paying premiums for individual coverage, your cost-to-benefit ratio increases over time. Hopefully, you have saved up significant assets to cover your retirement and/or disability needs and should at least consider reducing or discontinuing your coverage as you approach retirement age. When you stop working, most disability insurance policies must be canceled. Group disability insurance (from your employer) is usually automatically canceled upon retirement.

Life insurance should also be reevaluated. Most of my clients should not need life insurance when they retire. It becomes more expensive as we age and, as with disability insurance, you should have built up enough assets to cover the needs associated with an early death. Even whole life insurance should be reevaluated with an “in force” statement and a good, unbiased advisor. Many policies have not performed as expected and it is not uncommon for families to simply withdraw their cash value in a lump sum or annuity rather than continue to pay the premiums. There are two reasons why life insurance makes sense in retirement: the need to pay estate taxes (often to prevent your heirs from selling a business or real estate) and families with heirs with special needs.

Social Security can be thought of as a type of retirement insurance. When you receive this benefit can have a big impact on how long the funds you receive last. Carefully review your options with an advisor.

For most people, health insurance will change at age 65. Medicare Part A is automatic at age 65, although people who continue to work past age 65 sometimes continue to get their employer-provided insurance as their primary coverage. If you’re no longer working, be aware that not signing up for Medicare Parts B and D at age 65 (or having stopped working for a large employer) can result in penalties later. Most families who sign up for Medicare Parts B and D also buy a “Medigap” policy, which covers many uncovered expenses. About half of families who start Medicare buy an Advantage plan that bundles Part D and Medigap coverage.

Long-term care insurance should be considered by every family. The best time to purchase it is typically in your 50s, but it is not unusual to purchase this coverage in your 60s. This is a complex coverage that is best discussed with a fiduciary advisor.

There’s nothing wrong with reevaluating your home and auto coverage. Consider getting a new quote from other companies, especially if your premiums have increased significantly in recent years. Sometimes, reducing the number of miles you drive each year when you’re not working can lower the cost of your auto coverage.

Don’t forget about supplemental liability insurance. It will protect all of your hard-earned savings for decades to come in retirement. Expensive uninsured car insurance may be less necessary after you stop working.

Discussing all of these types of insurance with a good advisor can help you both save money and protect yourself during your retirement years. Think about it.

Steven Podnos is a fee-only financial planner in Central Florida. He can be reached at [email protected] and www.WealthCareLLC.com.