Life Insurance – Why it is a Must Have in Your Financial Planning
There are at least four very good reasons to include life insurance to your financial strategy:
Reason 1: Take today a group of 100 people at the age of 25. According to the Social Security Administration (SSA Publication No. 13-11871, April 2000) 16 of them already died when the group reaches the age of 65. The number of people who needs to be supported by family and charities at that age is 66. The remaining 18 are financial independent. Just 18% are independent! This is way too few, none of us wants that our kids have to take the burden of supporting us after we have retired.
Reason 2: The study shows that 18% are financial independent, but how does the Social Security Administration define financial independence? The definition is: The annual income of a household or person greater than $30,000. That is not much! To get a feeling how low that amount really is, lets take look at the annual median income of all 58 Californian Counties. Only four of them have currently a lower median annual income than $30,000. This means, if you retire in California at 65 and you are financial independent (according to the SSA standard) you will probably have less income in more than 93% of the Californian counties than the median household there. So there is a good chance that you will not be able to spend your retirement in the “Golden State”, together with so many other people who lived and worked hard here their entire life, even if you “are” financial independent.
Reason 3: We have all heard and read the stories of 80 year old retirees who have to start working again because their 401(k) or 403(b) or any other IRA plan has gone down significantly in value. This did not just happen to retirees. No, unfortunately everybody experienced a loss in their retirement plans. Why? Because the Stock market, in which most of the retirement plans are invested in, is unpredictable. More than just one study has proved this fact. Even experts, like Jim Cramer from “Mad Money” on CNBC didn’t see the recent collapse of the Stock market coming, and he makes his living from watching the stock market and referring stocks to his viewers. The question that rises is: if he can’t see a crash of that magnitude coming, how can your stock broker or financial adviser? The answer is simply, they can’t.
Reason 4: We all know that life insurance never performs as well as a fund, a CD, a single stock or any other stock traded paper can. But this is and can be a very good thing that works in your favor. Because it means that life insurance is a safe and steady financial investment. You can rely on your life insurance, it will hold its value and therefore protect your investment. It builds an immediate estate. Even if you just paid one premium! Can you say that from any other financial product?
In order to be financially wise, you should always build your financial independence on a solid life insurance basis.
Click here for a complete list of the annual median income of all 58 Californian counties.