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Life Insurance Needs Are Not One-Size-Fits-All

Life insurance helps reduce financial risk to your family if something happens to you. But coverage that meets your needs when you’re 25 may not fit when you reach 45 or even 65.

To start looking at your life insurance needs, ask yourself, “What will my family need if I die?”

This image goes with the Life Insurance Needs are not one-size-fits-all article. Two same size fish bowls, one with a big fish, one with a little fish.

It may be helpful to use a calculator or worksheet to find out what coverage you need. Download the Life Insurance brochure at www.kpers.org or try an online calculator. The brochure has a worksheet on the last page you can use.

Consider your age and the stage of life you’re in. Not everyone’s insurance needs will be the same, but here are some scenarios to give you an idea.

Single and in Your 20s

You may not need significant coverage yet. But along with funeral expenses, life insurance can pay off student loans, car loans, credit cards and other debt.

Newlyweds

It’s an exciting new chapter in your life. There are two of you now, and with that comes new responsibilities to each other. There may be two sets of debt to consider, as well as home ownership and a new family. You’ll want to make sure you and your spouse are covered for these new financial obligations.

If home ownership or children haven’t entered the picture, you’ll still want to consider your combined incomes. Would you or your spouse be able to maintain your current standard of living if something happened to one of you?

Things to consider:

  • Immediate Needs including funeral expenses, and possibly medical expenses in case of a serious illness or accident
  • Existing Debt like a mortgage, vehicle loan or other personal debt
  • Ongoing Needs like replacing your income and paying for childcare and health insurance
  • Future or Special Needs could include education expenses for children, spouse’s retirement, or even a future wedding or legacy gift to a charity or other organization.
Families and Children

You’ve got a lot of responsibilities on your shoulders — most likely a mortgage, child care, family health insurance coverage and other monthly bills. If you die, you may need significant life insurance coverage to help your spouse (if you have one) maintain your home and provide for your children, now and in the future. Single parents may need coverage the most.

College-age Children or Elderly Parents

With children on the way out or aging parents on the way in, it’s important to reassess your life insurance needs. It can provide the money to meet financial goals and help keep the assets and the lifestyle you’ve worked hard to achieve. Important considerations may include college tuition and elder care.

Grown Children and Nearing Retirement

Your life insurance needs may decline once your children are out on their own. You’ll still need to consider how close you are to retirement, how many years are left on your mortgage, and other debt and income needs. Life insurance may also give you an opportunity to support a charity, leave a legacy for your children and grandchildren, or cover estate taxes.

You Already Have Some Coverage Through KPERS

Keep in mind that KPERS and Judges members already have basic life insurance equal to 150 percent of annual salary. Your employer pays for this benefit. KP&F members have a death benefit built into their retirement plan.

But your basic benefits may not be enough. Optional group life insurance can provide additional coverage. Many KPERS employers, including state agencies, offer optional life insurance. You pay the premiums through payroll deduction, and you can change your coverage anytime. Visit KPERS Additional Benefits or talk to your employer for more info.

Find the Right Budgeting Technique for You

Most of us have struggled at times with managing money. Using a budget can be the answer, but not every budgeting method works for everyone. Here are some techniques to help you manage money your way.

Budgeting Tools, including a calculator, paper and pen
Envelope System

Nothing beats cold hard cash. Start by labeling envelopes, each with the name of a monthly expense and budgeted amount. Put that amount of cash in the envelope and when it’s gone, it’s gone. Then start over the next month. It might not work for mortgage or utility payments, but using cash for things like groceries, entertainment and clothing could help keep you on budget.

Pencil/Paper

If you’ve never used a budget, this is a good way to get started. Keep a notebook in your pocket or purse and write down all of your daily expenses as you go. At the end of the month, categorize the expenses and add them together. This is the first step to creating a budget, and it can be a real eye-opener to see how much you spend and on what.

50/20/30 Rule

This technique divides your income into general categories and percentages of spending in order of importance. The first 50% is spent on “needs” – the basics such as housing, groceries, transportation and utilities. The next 20% is for savings and paying off consumer debt, like credit cards and student loans. The last 30% is spent on “wants” – things you could live without. Cell phone, dining out and entertainment fall here.

Spreadsheet

This is a popular budgeting technique since most computers already have software like Microsoft® Excel® installed. Budget templates are often included for free. These templates have headings and calculations already in place. All that’s left to do is customize it for your family expenses and key in your transactions.

Online/Software

Technology can help you integrate your banking with your budgeting. An online budgeting app or website gives you access to your information from almost anywhere. You can adjust your budget on the fly or connect to your bank accounts for automatic updates. Budgeting software allows you to connect your budget to your accounts, but are limited to one computer or device. Software is usually more expensive than online sites or apps, but often provide more detail.


Roadblocks to Starting Your Retirement Savings

Road construction conesYou’re bound to encounter some roadblocks during your journey to retirement. But it’s important to stay the course because you’ll need more than just KPERS and Social Security for a secure retirement.

Avoid the Procrastination Pothole

You might think waiting a few years to start saving won’t matter. The truth is, your first years of saving are the most important. The money you tuck away now will work for you the longest. Even small amounts, invested over time, can add up.

Debt Can Detour Your Progress

Paying down student loans, buying a car or saving for a down payment on a home are excellent goals. It’s easy to think you can get started on your retirement savings after you accomplish them. But there will always be immediate financial needs to tempt you to put off saving, even as you get older. Pay yourself first, and you’ll be thankful you did later.

An Easy Way to Save

One of the easiest ways to save is through an employer plan like a 457(b) deferred compensation plan or a 403(b) annuity. Ask your employer about what is available to you. State employees and many local employees can participate in KPERS 457, a 457(b) plan. It’s easy to get started with as little as $12 a paycheck.

Money Matters KPERS Investment Snapshot

graph showing KPERS return overtime. 25 year return 8.7%, 10 year return 6.6%, 5 year return 9.1%, 1 year return 1.4% *average annualized total returns as of November 30, 2015


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Contact KPERS: Phone 1-888-275-5737 or email [email protected]

Our Mission: In our fiduciary capacity, we exist to deliver retirement, disability and survivor benefits to our members and their beneficiaries.

The fiduciary standard is our driving force. That means we put the interest of our members first. It is the highest standard of care and accountability. A fiduciary relationship is highlighted by good faith, loyalty and trust.

Board of Trustees: Lois Cox (Chair), Kelly Arnold (Vice-Chair), Ernie Claudel, Shawn Creger, Ron Estes, Todd Hart, Christopher Long, Suresh Ramamurthi, Michael Rogers

Executive Director: Alan D. Conroy