Time to insure your retirement

For many people, the last 10 years before retirement are their primary income earning and saving years.

While most knew that they should be saving more for their retirement while they were younger, life seemed to get in the way. Paying off the mortgage and raising kids has taken up most of their disposable income and now that they kids have moved out and their debt is gone, it’s time to play catch up and build that nest egg up to a big enough pot to retire on.

The good news is that these last 10 or so years will likely be the highest earning years for many people too. As they’ve climbed the ranks in their careers or more firmly established their own companies, the rewards in the way of larger salaries will help fill the retirement coffers more quickly.

What happens, though, if you become seriously ill right around the time that you’re ready to start putting away some major money?

How badly will your retirement plans be derailed if you are sick and must take a year off work (in addition to paying substantial medical bills) right at the time when you’re supposed to be earning and saving the most?

Unfortunately, a major illness like this can derail your plans and wreck your retirement. Worse news still is that the current odds of a serious or critical illness amongst Canadians is 1 in 3. I’d hazard a guess that these odds will be closer to 1 in 2 by the time I retire.

The good news is that like many other serious risks, you can insulate yourself with insurance. You can ‘insure your retirement’ by setting up a critical illness (CI) insurance policy. A CI policy works a lot like life insurance in that it pays out a one-time lump sum payment in the amount of the insurance policy’s face value. Instead of paying out upon a death, CI policies pay out when the policy owner is diagnosed with one of 16 major illnesses, including cancer, heart attack, stroke, MS and many others (cancer makes up 66 per cent of all critical illness policy claims).

A CI policy is a vital piece of many people’s retirement plans and should be strongly considered by anyone who’s playing catchup with their retirement savings. A plan like this can mean the difference between staying on track for a well-deserved retirement instead of working later than planned or relying on handouts to make ends meet. What would it cost? A 10-year term CI policy on a 50year-old female for $75,000 of coverage would cost approximately $80 a month. $75,000 for a 50-year-old male would be around $89/month.

Yes, this is another added monthly expense, but the protection it provides (which you have a pretty high chance of claiming on) could mean the difference between a solid or shaky retirement.

Should you add this expense into your budget and set something up? Look around you at your friends and family and see how many of them have been affected by cancer or another life changing health event. I’ve yet to meet someone who either hasn’t been personally affected or doesn’t know someone close to them who has been.

The reason I chose to write about this topic now, though, is that the window to buy CI insurance at current market rates is about to close. The insurance companies also realize how high the claim rates are and will most likely be re-vamping their CI policy offerings this summer. In speaking to several insurance carriers, my best guess is that rates will go up by anywhere from 15-25 per cent in the next little while.

So, if you need to insure your retirement, the time to act is now.

Brett Millard is the owner of SPEIR Wealth Management in Kelowna. Reach him at brett@speirwealth.com.