Risks & the Role of Insurance in Retirement Planning

October 1, 2023 | David Lawrence, CFP®, AIF®

We all think of the future and what is in store for us down the road. At times, this is with excitement for the things to come, like retirement. While at other times it is with concern – for example, when we have health concerns for ourselves or those close to us. What can be unsettling during these moments, is the thinking itself. This is because the act of thinking often stems from an attempt to take control of our future, but at the present moment.

While we can’t control our future no matter how much we think about it (it would be nice if we could!), we should be planning for it by including ways to prepare for both the expected and the unexpected. In this month’s series on the risks and role of insurance in retirement planning, we look at the risks we face – as well as the options we have to deal with them.

First, in his video, Todd shared that while risks vary, we only have a limited number of options in dealing with them:

- Ignoring the risk (the biggest mistake of all),
- Avoiding or minimizing the risk,
- Accepting the risk yourself (self-insure), or
- Transferring the risk (insurance).

If we can’t avoid or minimize the risk, then we only have two options – accept the risk ourselves (self-insure on our own) or transfer the risk to others for a premium, or fee (insurance company).

Naturally, we tend to transfer the risks to others that would be financially catastrophic to us, and we cannot, or do not want to self-insure. Some examples include:

- premature death,
- disability, most certainly when that happens in the earlier portion of your working career, or
- extensive long-term care costs.

While all of these would be catastrophic financially, there are other areas we need to consider for our retirement. For example, poor stock market performance – especially one that persists for an extended period, high inflation, and living much longer than the average U.S. lifetime. Discussing these risks, and how to protect yourself against them in greater detail is included in prior blogs and video content that we have made available via email and our website.

From a financial perspective, the great news is that we can take a proactive approach to our planning for the future – one that extends beyond just thinking. We do this by educating ourselves and partnering with an insurance company to get the protection we need in the areas we need.

Along the lines of education, our content this month included a great podcast with special guest John Bryant, who is the CEO of Christ’s Home to discuss Continuing Care Retirement Communities (CCRCs) and long-term care. This is a great opportunity to not only learn what long-term care is, but some of the strategies to protect yourself against the costs, as well as when and how we should consider putting our own long-term care plan together.

At the opposite end of the “risk “spectrum” is a premature passing. Again, incorporating this very unsettling possibility into our financial plan in a proactive manner is crucial to protecting those who love you, and very well financially depend on you.

As is apparent, there is a lot to consider when addressing the best time and method in planning for each of these risks. If you’re not working with a financial planner, or you’re attempting to create a plan on your own and your considering partnering with a planner, please Contact us.

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