Protect Your Retirement Savings From Critical Illnesses


There is one very important message that’s often overlooked in planning for one’s retirement and that is how to protect your nest egg in the event that you are diagnosed with a critical illness. The chances of a critical illness affecting you are probably greater than you think. Three out of every 10 people, that’s 30%, in the workforce will become disabled before retiring!

For many Americans disabled by a critical illness, nest egg savings including 401(k)s become the source of emergency funds. While this may help you through the difficult times of your disability, it could result have catastrophic consequences to your retirement plans.

Early withdrawal from retirement plans withdrawal can have severe tax consequences, and having to sell your investments earlier than anticipated might be at a time when the market isn’t at its best. Even if you are fortunate enough to not have to tap into your retirement savings as an emergency fund, lost income from time off work due to the disability to recuperate or care for a loved one might force you into reducing or discontinuing contributions from being made.

As a result of this unexpected bump in the road, you may not have as much retirement income as you had been planning on before the illness was diagnosed. That’s why planners recommend that your savings for retirement should be kept separate from your savings for emergencies.

To protect your retirement nest egg, you may find it prudent to have critical illness insurance.

Critical illness is similar to term life insurance except you don’t have to die to collect! It has been referred to as “Me insurance”. Policies vary, but coverage typically includes blindness, cancer, kidney failure, heart attack, multiple sclerosis, stroke, Parkinson’s disease, Alzheimer’s disease and several other serious ailments.

Once you are diagnosed with one of the covered critical illnesses, you receive a one-time, tax-free lump-sum payment. This is your money that you can use any way you see fit. You don’t have to use it for medical bills if you don’t want to. You don’t have to pay it to the bank. It is yours! This is why many people call it “Me insurance”. This also means that you might not have to dip into your retirement nest egg and/or it might allow you to keep contributing to your retirement plan while you’re not working and recovering from your illness.

Critical illness insurance plans are generally available to people up to age 65 and in good health. You can purchase coverage in any amount even up to $1 million and it may be possible to buy a larger policy than that depending on the needs. Most planners generally recommend that you own 2-3 times your annual income in critical illness.

Please contact us today so that we can help determine the level of coverage that you need, and recommend a plan to meet your requirements.