Financial Focus: Add layers of protection to financial strategy
To achieve your financial security, and that of your family, you will need to create a comprehensive strategy. But for this strategy to succeed, you’ll need to guard it from various challenges — and that means you’ll need to build in different layers of protection.
What are these challenges — and what types of protection can be used to defend against them? Consider the following:
Challenge No. 1: Protecting your ability to reach your goals
To achieve your long-term goals, such as a comfortable retirement, you’ll need to build adequate financial resources. And that means you’ll need to create an investment portfolio that’s suitable for your objectives, risk tolerance and time horizon. And you’ll need to keep your long-term goals in mind when adjusting your portfolio during times of volatility.
Challenge No. 2: Protecting your family’s future if you’re not around
Hopefully, you will live a long life and always be around to support your family. But the future is not ours to see – and if something were to happen to you, how would your family cope? Their chances could be much better if you have adequate life insurance. Proper coverage could help pay off your mortgage, pay for your children’s higher education and allow your family to continue its lifestyle.
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Challenge No. 3: Protecting your income should you become temporarily disabled
If you were to become ill or temporarily disabled and could not work for a while, the disruption in your income could jeopardize your family’s living situation, or, at the least, lead to an inability to pay bills in a timely fashion. To protect against this threat, you may want to consider adding disability insurance. Your employer may offer a short-term disability policy as an employee benefit, but it may be insufficient, either in duration or in the amount of coverage, so you might want to look at a private policy.
Challenge No. 4: Protecting your long-term investments from short-term needs
Life is full of unexpected expenses — a major car repair, a new furnace, a large bill from the dentist, and so on. If you did not have the money available to deal with these costs, you might be forced to dip into your long-term investments, such as your IRA or 401(k). Taking money from these accounts earlier than you intended could incur taxes and penalties, and, even more importantly, could reduce the amount of money you have available for retirement. To help protect these investments from short-term needs for cash, try to build an emergency fund containing three to six months’ worth of living expenses, with the money kept in cash or a liquid account.
Challenge No. 5: Protecting your financial independence
You would probably do all you could to avoid ever becoming a burden to your grown children — which is why it’s so important to maintain your financial independence throughout your life. One potential threat to this independence is the need for some type of long-term care, such as an extended nursing home stay, which can be extremely expensive. A financial professional can suggest protection strategies to help you prepare for these types of costs.
It can be challenging to keep your financial strategy intact — so do whatever it takes to protect it.
This article was written for use by Edward Jones financial advisers. Edward Jones and its associates and financial advisers do not provide tax or legal advice. Chuck Smallwood, Bret Hooper, Tina DeWitt, Kevin Brubeck, Charlie Wick, Jeremy Lepore, Jessie Steinmetz and Mark Eaton are financial advisers with Edward Jones Investments and can be reached in Edwards at 970-926-1728, in Eagle at 970-328-0361, 970-328-0639 or 970-328-4959, and in Avon at 970-688-5420.