When puzzling together your retirement plan, it’s important to remember the stable pieces, such as insurance products.
“In retirement, what we’re talking about is income, and seeing that it is adequate and secure,” says Joseph V. Stiles, assistant general agent with Ohio National Financial Services.
Insurance products can be key to the puzzle because they are investments designed to help reduce risk and the uncertainty of a person’s financial priorities, Stiles points out. He identifies a few insurance vehicles that can help in retirement planning, but cautions that each person or family will have a different set of circumstances, and thus different needs and uses for the products. For that reason, Stiles advises working with a trained professional to design the best coverage for them.
In her role as director of financial security for AARP, Jean Setzfand says educating people on insurance can be the hardest topic to teach, in terms of generating interest.
“It’s so far in the future that they don’t want to think about it, and in many ways it can be depressing to think about,” Setzfand says. “But if you don’t think abut it, it can be a bad situation that you find yourself in." 
When to Investigate
In retirement planning, “time is a benefit,” says Joe Stiles of Ohio National. “It’s important to start thinking about these investments years before making the decision to retire.”
Stiles recommends at least two to five years out from retirement. Your choices (in insurance coverage) narrow significantly if you wait too long. 
Jean Setzfand of AARP concurs. “Hopefully, the 30-year-old is thinking more seriously about retirement,” putting money away in their 401(k) and making the decisions, including Social Security projections.
In their 40s, people should check to see if they’re on track and then, when they hit 50, look at it as half-time and really start the retirement planning process, planning and plotting out the second half of their life, Setzfand advises.
As an action step, people can further learn about planning at the AARP.org website, at AARP.org/money/financial planning, which has a section on insurance.
“Be mindful that you want to approach this with some horizon left,” Stiles says. “You don’t want to wait till the two-minute drill.”  

Life Insurance

The need for life insurance doesn’t go away, but its role changes as a person ages, according to Stiles.
“In simple terms, life insurance is money — the role of life insurance is income replacement,” Stiles says. “It’s a contract between the insured and the insurance company for the delivery of money,” in the event something happens to the policy holder.
For the younger policy holder, life insurance replaces the income of the wage earner. For the older policy holder, life insurance more likely has the role of protecting assets accumulated for retirement purposes; paying off debt and medical bills, plus covering end-of-life expenses.
“If a family has life insurance, when planning for retirement, it can serve as a permission slip to use their other assets more efficiently,” Stiles adds. “They know they have this permanent asset that will be there at the end of life of this individual.”
Annuities are financial investments offered by insurance companies, “and because they’re offered by an insurance company, there’s a way to set them up to provide income for life,” Stiles says. That guarantee — insurance on your income for life — is the attraction of the annuity, which can’t be matched by other investment products like money markets, Setzfand notes.
A good place to start when determining whether an annuity might work for you is to determine what income you’ll need to cover your most basic living expenses, Setzfand says: “Those expenses should be covered for life. You need to make sure that you have income to cover your medical bills, rent and food.”
Matching those numbers up with your retirement income streams, like Social Security, will let you determine if you might consider an annuity. If your only other income stream will be Social Security and there’s a gap between what that will pay and what you’ll need for those basic expenses, then you might look at an annuity, Setzfand says.
Annuities are categorized according to their payouts; immediate or deferred and fixed or variable, the latter of which refers to the amount of payouts. Of those, the most basic and consumer-friendly annuity is the fixed immediate brand, where the consumer is buying an annuity and getting a fixed payment right away.
With a variable annuity there is a variable payment, based on the investment option presented by the insurance company and chosen by the consumer. So there is some risk, when say, the investment option is market-based. If the market is good, the payment is higher than when the market is down.
Though annuities “have grown in importance over the last 20 years or so,” they have also suffered something of a bad rap recently, Setzfand says.
“They have been seen as a dirty product,” mainly because of the instances of inappropriate selling to older individuals that have come to light, she adds. Typically caregivers have discovered these bad practices, in which say an 80-year-old has been sold a variable annuity, “which doesn’t make any sense, whatsoever.”
Annuities are complicated and individualized and that makes them a hard product for which to comparison shop, Setzfand observes, although some internet sites like Annuitynet.com may help.
Consumers should be sure to get all the details on the annuity, such as inflation protection and the add-on features which require additional costs but may enhance the usefulness of the annuity product.
Long-Term Care Insurance
Ideally, each of these insurance products should be considered well before retirement, but maybe none more so than long-term care insurance, if only for the potential savings.
Starting a plan in middle age is more affordable than waiting for your 60s and 70s, when you’ll essentially be paying to catch up on the years you didn’t contribute to a long-term insurance care plan.
LTC policies allow the insured to receive care in the setting of their choice, whether it is at home, in an assisted living facility, adult day care center or a nursing home.
LTC policies offer a maximum daily/monthly benefit for a period of time. They often cover two to six years of care, as opposed to cost-prohibitive (but still available) rest-of-life care, Setzfand says.
“At some point as we get older there’s a greater chance we’ll need professional help,” Stiles says. “Without long-term care insurance, your retirement income (assets) will have to pay for the care.”