Coasting in Retirement – Episode 91
Building wealth takes time. For most people, it represents decades of working, saving, investing, building a business, purchasing property, and making decisions with the future in mind.
Once you have accumulated that wealth, the question begins to change.
It is no longer only, “How do I continue growing my money?” It also becomes, “What could disrupt the plan I have spent 20, 30, or even 40 years building?”
A strong investment portfolio can create financial confidence, but the balance shown on a statement does not tell the whole story. A family might have significant savings and still be exposed to an unexpected death, loss of income, extended healthcare event, or lawsuit.
Having enough money to write a large check is certainly better than not having it. However, being able to pay for an emergency does not automatically mean using your own assets is the best solution.
Your main focus should not be how much wealth you have accumulated. It should be on how well that wealth is protected.
Having Wealth Is Not the Same as Having a Protection Plan
Imagine that a family has built a multimillion-dollar portfolio. If a major expense arises, they may technically have enough money to cover it.
But where will that money come from?
Will they withdraw it from a taxable investment account? Will they take money from an IRA or 401(k) and potentially create a larger tax bill? Will they have to sell investments during a market downturn? What happens to the future growth and income that money was expected to cover?
A large withdrawal may also affect the surviving spouse, the family’s retirement plans, or the legacy intended for children, grandchildren, etc.
This is where risk management becomes part of financial planning.
Insurance is not only about whether you can afford an expense. It is also about deciding whether you want one unexpected event to consume a significant portion of the assets you worked hard to build.
This is why it is important to identify the events that could seriously disrupt your financial plan and determine whether it makes sense to transfer some of that risk elsewhere.
Life Insurance Can Protect More Than a Paycheck
People often assume that life insurance is only necessary when a family cannot survive without someone’s income.
Income replacement is one important purpose, especially for younger families. If a primary earner dies unexpectedly, the surviving spouse may be left with regular household expenses, a mortgage, education costs, and children to support.
Without a separate source of funds, the surviving spouse may have to begin spending down inherited investments immediately. A life insurance benefit may allow the family to cover ongoing expenses without dismantling the assets that were intended to support its future.
For families with more complex financial lives, life insurance may serve other purposes as well.
Someone may own a business, several investment properties, multiple LLCs, or other assets that cannot be divided or sold quickly. The family may want those assets to remain intact instead of being sold to create immediate cash.
Life insurance can potentially provide liquidity for:
- Household expenses
- Debts and final expenses
- Business obligations
- Estate-related costs
- Support for a surviving spouse
- Equal inheritances among beneficiaries
- Charitable or church gifts
- A planned family legacy
The appropriate policy structure, ownership, and beneficiary arrangements depend on the family’s circumstances. Those decisions may also require coordination among financial, insurance, tax, and legal professionals.
The larger point is simple: having substantial assets does not always eliminate the need for life insurance. In some cases, those assets are exactly what the family is trying to protect.
Your Ability to Earn an Income May Be Your Largest Asset
A person can build an impressive portfolio and still depend heavily on the income they earn each month. This is especially true for business owners and independent professionals whose income is tied directly to their ability to work.
Consider a dentist who owns a small practice. The business may be successful, retirement accounts may be growing, and the family may feel financially secure. But if an illness or injury prevents that dentist from working for several months, the income could slow down quickly while the mortgage, household bills, employee salaries, and other business expenses continue.
Without a protection plan, the family may have to use emergency savings, sell investments, or withdraw from retirement accounts earlier than intended. The money is available, but using it could interrupt the long-term plan it was meant to support.
Employees may have short-term or long-term disability benefits through work, while business owners and independent professionals often need to arrange coverage themselves. Even with employer-provided benefits, it is important to understand how much income would be replaced, how long the payments would last, and whether those benefits would be taxable.
Your portfolio is valuable, but so is the income that allowed you to build it. Protecting that earning ability can help prevent a temporary setback from becoming a permanent change to your financial future.
Extended Care Can Turn Savings Into Spending
An extended healthcare event can place tremendous pressure on a retirement portfolio.
People sometimes say they plan to “self-insure” for long-term care. In practical terms, that means self-paying. The family must decide which assets will be spent first if care becomes necessary.
Will the money come from cash? An investment account? An IRA? Will assets have to be sold during an unfavorable market? How will those withdrawals affect the healthy spouse’s future income?
Most people who carefully built a retirement portfolio did not intentionally designate a large portion of it for several years of care at home, in an assisted living community, or in a nursing facility. Without a plan, however, that may be exactly what happens.
Long-term care planning is not only about protecting an account balance. It can also help preserve independence.
A person may want to receive care at home, avoid placing the full responsibility on adult children, or provide financial stability for a spouse who is not receiving care. Thinking through those preferences ahead of time gives the family a clearer path if an illness, injury, or cognitive decline occurs.
Insurance may be one possible way to address that risk, but it is not the only consideration. A thoughtful plan should identify:
- Who would provide or coordinate care
- Where the person would prefer to receive care
- Which assets would be used
- How much the family could comfortably self-pay
- Whether insurance would cover part of the expense
- How the plan would affect the healthy spouse
- Who is authorized to make financial and healthcare decisions
The purpose is not to build a plan around fear. It is to avoid forcing the family to make every decision during a crisis.
Liability Exposure Can Grow Alongside Your Wealth
As a person’s net worth grows, liability protection deserves another look.
A household may own multiple homes, rental properties, boats, vehicles, or a business. The family may also have teenage drivers or frequently welcome guests onto its property. Each can create potential exposure.
Homeowners and automobile policies provide important coverage, but their liability limits may not be enough for someone whose assets have grown significantly. An umbrella liability policy may provide additional protection above the limits of underlying policies, subject to the policy’s terms, conditions, and exclusions.
This is an area to discuss with a qualified property and casualty insurance professional. Financial advisors and other members of the planning team can help identify the issue, but the coverage itself should be reviewed by someone who works directly in that area.
The important point is that the liability protection selected years ago may no longer match the financial life you have today.
A Plan From 2012 May Not Protect Your Life in 2026
One of the most common mistakes is treating insurance planning as a box that only needs to be checked once.
Perhaps you purchased life insurance when your first child was born. Maybe you selected disability coverage when you started your career or bought long-term care coverage years ago. Taking those steps was responsible, but your life may have changed considerably since then.
Over time, you may have:
- Increased your income
- Built a larger investment portfolio
- Started or expanded a business
- Purchased additional real estate
- Paid off major debts
- Experienced a marriage, divorce, birth, or death
- Changed your legacy goals
- Added new beneficiaries
- Entered a different stage of retirement planning
Coverage designed for an earlier version of your life may no longer provide the right benefit, use the right ownership structure, or name the correct beneficiaries.
An outdated plan is not always an inadequate plan. Sometimes a review confirms that the existing coverage still fits. Existing policies may also have accumulated value or contain features that remain useful. In other cases, changing circumstances may reveal a gap that was not present when the coverage was purchased.
The purpose of a review is not automatically to replace what you own. It is to understand it and determine whether it still supports your current financial plan.
Protecting the Wealth You Worked to Build
Investment management focuses heavily on building the pile of money. Risk management asks what could attack that pile once it has been built. Those risks may include premature death, loss of income, extended healthcare needs, personal liability, business interruption, etc.
A strong portfolio matters, but it cannot answer every financial risk by itself.
Reviewing your protection plan does not mean you need every type of insurance or the largest policy available. It means identifying the events that would cause serious financial damage, deciding how much risk you can reasonably retain, and considering whether some risks should be transferred.
You may be able to write the check if something goes wrong. The more important question is whether writing that check would change the retirement, business, or legacy plan you worked so hard to create.
Your net worth is more than a number on a statement. Protecting it means looking beyond how much you have accumulated and making sure one unexpected event does not determine what happens to it next.
Is Your Protection Plan Keeping Up?
As your income, assets, business interests, and family circumstances change, your protection strategy may need to change with them.
If it has been several years since you reviewed your life insurance, disability coverage, long-term care strategy, liability protection, or beneficiary designations, Gulf Coast Financial Advisors can help you begin that conversation.
Call 251-327-2124, or click this link to schedule a meeting.
Meeting options include:
- A 15-minute introductory phone call
- A 30-minute Zoom meeting
- An in-person meeting in Fairhope, Orange Beach, or Mobile
No pressure. No obligation. Just a conversation about whether the wealth you have built is protected against the risks that could disrupt your plans.
Watch the complete discussion on YouTube: How Vulnerable Is Your Net Worth?
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.