Friday, September 30, 2016
Road of Life Events
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Preparing for Retirement
It seems like this day may have never come, but you're finally nearing retirement.
You may have been planning your retirement since the day you started working, but
you still have a little bit of work to do. Leaving the workplace usually means leaving
some of your benefits behind; therefore it is important to do a thorough review
of your insurance program.
The primary purpose for life insurance is to protect you family's financial well
being, but life insurance can be applied differently in many situations. Your primary
use of life insurance may have been to provide protection for your spouse, but now
that you have saved up sufficient financial resources you may think it is unnecessary.
This is probably untrue. The following are three important considerations to make
when evaluating your life insurance needs at this stage:
- Pension Benefits - If you have a qualified retirement plan that is sponsored
by your employer, then you will have a decision to make near the time you decide
to retire and begin receiving benefits. The decision concerns an election of benefits.
You will probably be given a choice of taking a full lifetime benefit or survivor
benefit option in which life insurance could play an important role.
- Estate Planning - Life insurance can provide the necessary liquidity and
cash to pay for estate and inheritance taxes at death.
- Final Expenses and Cash Bequests - Life insurance can also provide the needed
cash to pay for funeral and estate administration expenses, and can be used to provide
cash gifts to loves one or a favorite charity.
Once you reach age 65 you will become eligible for Medicare which is administered
by the Social Security Administration. Medicare Part A covers hospital benefits
and Medicare Part B covers medical benefits. If you retire prior to age 65 then
you will still need health insurance coverage. If you are leaving an employer and
you have health insurance then you may be able to extend the coverage either 18
or 36 months under COBRA if you qualify. Another alternative is to purchase an individual
health insurance policy on your own.
To start with, you need to understand the 3 basic types of individual health insurance.
This type of plan lets you visit the healthcare provider of your choice, and it
reimburses you for a portion of the expenses. The portion of the medical expenses
you are responsible for is called co-insurance which is usually twenty-percent of
the charges that are considered reasonable and customary (reasonable and customary
charges are the prevailing fees charged by healthcare providers in a particular
region of the country). Many fee-for-service plans also have a deductible that must
first be met before medical expenses are eligible for reimbursement. In addition,
most plans also have "maximum-out-of-pocket expenses" or "stop-loss"
provisions that limit the amount of co-insurance a patient is responsible for. After
co-insurance payments reach a policy's stop-loss provision, the insurance company
pays for the remainder of the annual expenses at one hundred percent of reasonable
and customary charges. Fee-for-service plans, like all other types of health insurance,
have lifetime limits which place a cap on the total amount of medical expenses an
insurance company will pay for. You should look for a policy with unlimited lifetime
benefits or at least $1,000,000 in coverage.
Health Maintenance Organizations (HMOs):
HMOs are managed care health plans that restrict you to a designated network of
healthcare providers. Under an HMO, you must select a primary care physician in
the network. If you become ill or injured (non emergency) then you must first visit
your primary care physician before being referred to a specialist. HMO's usually
pay for all of your medical expenses except for a small co-payment which is your
responsibility for each visit to your healthcare provider. HMOs will not reimburse
you for any medical expenses if you obtain care outside of the HMO network unless
your HMO plan has a POS (Point of Service) option. POS gives you the flexibility
of going outside the HMO network for medical treatment; however, the insurance company
will only reimburse you for a portion of the expenses subject to co-insurance. HMOs
are the most restrictive type of health plans available but are also among the least
expensive types of health insurance.
Preferred Provider Organizations (PPOs):
PPOs are types of managed care plans that gives you financial incentive to use specified
or preferred healthcare providers. If you visit a preferred healthcare provider
the insurance company will usually pay for all of the medical expenses after you
pay a small co-payment which is usually $10-$20. PPOs also give you the flexibility
of using doctors or hospitals out of the PPO network; however, you will be responsible
for co-insurance payments similar to those in fee-for-service health insurance plans.
PPOs differ from HMOs in that you have the freedom to choose any healthcare provider
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