Using insurance to help protect your income

What will your future income needs be? For an estimation, multiply your current annual income times the number of years you expect to work before retirement. You might be surprised at how high this number is.

Life insurance: will it meet your loved ones’ income needs?

Saving for retirement or college for your children/grandchildren all can be undone in a moment without protection and planning. That’s why life insurance may be an important consideration for a financial plan.

If you’re married, it’s crucial to have enough life coverage on each partner to complete the family’s financial goals, pay off any debts, provide any needed child care and maintain the family’s standard of living. The total amount of coverage you need is different for every family and every budget.

You may already have some life insurance, perhaps through your job, or that you bought on your own.

To make sure your coverage does what you need it to, ask yourself a few questions:

• How did you determine the total amount needed?
• Is it enough to pay off any debt (your mortgage, car loans, credit cards, etc.)?
• Is it enough to cover college costs for children?
• Will it provide enough to replace your income, so your family can stay in their home and maintain their lifestyle?
• Does your spouse agree that you have the correct amount?
• Does your spouse also have enough coverage? (Many families have little or no life insurance on stay-at-home spouses, ignoring the need to pay for child care in the event of an untimely death of the caregiving parent.)
• If the spouse caring for young children at home should pass away, will the surviving spouse currently working outside the home want to spend more time with the children at least temporarily, with a resulting decrease in income?
• Have your needs changed since you bought your life insurance due to birth or adoption of children, additional debt, increased income that would need to be replaced, or other factors?

Disability insurance: Does it replace enough income? 

Another crucial piece of your financial foundation should be disability insurance.

Many people have disability coverage as part of their employee benefits package. However, it may not be enough.

Take a careful look at your benefits, as most of corporate-provided disability plans replace 60% of your net income in the event of a disability.

For example, an employee earning $120,000 per year would see their income decrease to $80,000—and that’s before taxes. Is 40 cents of every dollar you currently bring home disposable income?

For many families, a reduction in income like that would cause significant financial hardship, plus seriously disrupt planned savings for college and retirement.

Disability insurance: How long will you be covered? 

Another thing to consider is how long you could live with a disability. Advances in medical care can often save a life from situations that were typically fatal just a few years ago.

This positive can have a downside: You may have a temporary disability that prevents you from working for an extended period of time. Or you may even be permanently disabled.

Individual disability income insurance could be a potential solution to this problem.

It can vastly reduce the gap between group coverage and your current income. In some instances, it will even provide a benefit if you can’t do the job you are experienced at and trained for, whether or not you can do other (lower-paying) work. In addition, for those with no disability coverage at all (including the self-employed), individual coverage is a critical base to a financial plan.

Working with Janney

Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.

When you engage in an advisory relationship, you will pay an asset-based fee which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory accounts. For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on  www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

By establishing a relationship with a Janney Financial Advisor, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences. Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.

_Disclaimer

<sub>This is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within. Janney makes no representation that an individual will obtain gains or losses similar to those illustrated. The concepts illustrated here have legal, accounting and tax implications.

Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.</sub>