hat will keep you afloat if you encounter storms along the way?
Saving for the future is vital. Fewer than 40% of Canadians have pension plans at work, leaving 60% of us responsible to make our own plans for a comfortable lifestyle in retirement. That is why it’s never too early to start putting some money aside today for our future needs.
Yet how many of us focus only on our annual contribution to RRSP and/or TFSA, and don’t think about what strong waves could capsize the boat with these hard-earned savings?
The truth is that random events happen – a car accident can prevent you from working for several months, a disease such as MS can make it impossible for you to work at all, or a diagnosis of cancer can lay you up for a period of time while you have treatment. If you are unable to earn income, struggle to pay your mortgage, or incur high expenses during any such unfortunate life event, you may have to dip into your retirement savings, throwing off your long-term projections.
Fortunately, there is protection for your retirement savings in the form of Long Term Disability Insurance and Critical Illness insurance, both part of what the industry calls Living Benefits. You are probably familiar with Life Insurance but you don’t collect that while you are alive (in fact you don’t collect Life Insurance; your beneficiaries do). According to Manulife, a healthy, non-smoking female aged 42 has a very low chance of dying before age 65 (4%). However, the chance of being disabled before age 65 is 34% and the chance of having a critical illness before age 65 is 18%. (Data current as of March 2012.)
So, while saving and investing for the future golden years is important, I also recommend you disaster-proof your life by learning more about Disability and/or Critical Illness insurance. Pay-outs are usually tax free. If you are expecting a tax refund this April after claiming your RRSP contributions, consider using it to fund the annual premiums. Contact me for more information and personalized quotes. Different factors such as age, gender, current health, occupation, etc. affect eligibility and premiums for the two types of insurance. Both can include features to refund premiums if claims are not made.
To learn more about how Long Term Disability Insurance: protects your biggest asset:
Sun Life offers these short videos on Critical Illness Insurance including a real-life story of a person who had insurance in place to help out after suffering a sudden heart attack:
Living benefits are a safety device to protect your retirement savings. Keep them in mind during and after RRSP season.
It’s just good advice.