In Part 1 of this article, I talked about the importance of carefully planning out how you will use any life insurance payout you receive.
My first piece of advice was to consider annuitizing the death benefit to generate a guaranteed income for the future. Here are my other two recommendations:
- Buy Life Insurance!
Seems like an obvious answer coming from me, right? But ask yourself two key questions: Do you have as much coverage as you need? And what about the other people in your family?
Because you have more cash on hand than normal, you can do go about securing your life insurance the RIGHT way (and WIN THE GAME!). For example, you can:
- Get permanent life insurance on a reduced payment schedule with single premium or limited premium whole life policies. Instead of sending the life insurance company checks for the rest of your life, you can set up a policy that will be “paid off” after 20 payments, 10 payments, or even with one single premium.
Today, a 40 year-old man in excellent health who doesn’t smoke could purchase $1 million of whole life coverage for a single premium payment of only $115,101.76. That’s a pretty impressive return, wouldn’t you say?
Plus, the policy will never lapse and it will accumulate cash value at a minimum guaranteed rate every year, tax deferred.
- Protect your children with coverage they can’t lose. As you’ll see in the video below, this is a great time buy a policy like this for your children or grandchildren, too. I like to call this “a gift that lasts a lifetime.”
- Set up a trust to fund your life insurance. Rather than paying your policy off all at once (you may be worried about paying more than you have to), you can set up a trust to pay your premiums automatically every year. Your trust can also pay for other expenses, such as long term care insurance
It should be noted that life insurance is not considered an investment. But, in my opinion, it’s one of the smartest ways you can spend your money.
- Set Yourself up for a Happy Retirement
According to Bank of America’s Spring 2014 Merrill Edge Report, 55% of “mass affluent” Americans – individuals with $50,000-$250,000 in investable assets – are scared about running out of money in retirement (only 27% fear public speaking!).
Smart planning can help you keep that fear from ever becoming a reality.
Make the maximum contributions to your retirement accounts: 401(k), IRA, etc. With tax-deferred growth and employer contributions (where applicable), nearly all financial advisors agree that these are your best bet to build strong retirement savings. Build a diversified portfolio of investments. It’s a cliché piece of investment advice, but it’s based on time tested, tried & true results.