Mistakes to Avoid in Financial Planning and Insurance for Boomers

Baby Boomers have a lot on their plate.  They have to worry about their careers, their family, their retirement and their health.  With so much to be focused on many financial and insurance planning necessities go overlooked.  So that you don’t fall into the same trap, here’s some common mistakes to avoid.

1. Launch Failure

Most boomers spend more time planning their vacation than they do planning their financial future. To the extent most people have done any planning, it’s typically been on a piecemeal basis, and usually they receive different advice from different people at different times. But none of them referring to what the others may have done. It’s recommended that one person acts as a quarterback in making recommendations for your financial future.

2. No System In Place

If you want to save for retirement, you need to have systematic contributions in place. Boomers want to try to save and invest 10% or more of one’s gross income monthly. The older boomers get the closer they are to retirement, the greater the more should be. Most people are about three months away from bankruptcy. After setting aside three to six months income in liquid assets or cash value as a cash cushion to fall back on, a fixed amount should be invested every month to take advantage of dollar cost averaging.

3. Get Diversified

I’m sure you’ve heard the old adage, “you shouldn’t put all your eggs in one basket.” It’s generally considered wise to diversify these investments, not be too dependent, for example, on one company’s stock.  Think if you had a majority of your retirement in GE stock last year.  Even after the modest recovery we’ve had since you would still be down over 50%. Ouch!

4. Inadequate disability insurance

The most valuable asset you have is earning power. Group disability insurance is seldom adequate so one should acquire an individual disability insurance policy which is portable, and personally owned provides income tax-free benefits under current tax laws.

5. Do you have enough life insurance?

As a rule of thumb for each $100,000 of income earned, about $1 million of income producing capital is needed to produce $600,000 annually for a family. For most people this is life insurance that is neededif they don’t have other large amounts of income producing assets. They should not be overly dependent group term life insurance, it’s costly, inflexible, not portable and probably won’t be available when it’s most likely to be needed, after age 65.

6. No estate plan

Most people do not have a will or trust or what they do have is out of date. It’s important to note it’s not how much is left to heirs but how much is left for heirs . Estate taxes or later costs may be ultimately take 40% to 50% of the estate unless the has been made to use life insurance to pay them.  That’s why estate planning is so important.

7. Not utilizing selective compensation plans

For business owners and key executives, there are many selective compensation plans that can be tailored to provide a supplemental pension and family protection benefits.

8. Spending too much on employer-sponsored plans

The only real security is that which we provide for ourselves. To count on lifetime employment with one company is foolhardy regardless of the company’s stability.  Even though most pensions have insurance, it only guarantees up to certain amount.   You really need to have additional savings to account for this.

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