How to retire with $500,000 and $1 Million of insurance starting at forty

BY ANDREW STEWART

A vast majority of people invest truly little and wait to purchase insurance until the age of forty. So, if you have not saved much or have insurance, you are not alone. Fortunately, you have twenty years or more to save and compound. The length of time that your savings can compound generally has a greater impact than the actual savings. Let’s say you just turned forty. Obviously, forty is just a number, but in many ways, it’s a milestone. Though people are living longer these days into the eighties and nineties, still age forty is considered the halfway mark. On the brighter side, you are mature, stable, financially savvy, and likely well settled in your career.

More than likely, you are making much more money than when you just started. But then your living expenses have gone up at an even faster rate. Saving is always a tough challenge. It’s quite probable that you have experimented with mutual funds and purchased a term insurance. Nonetheless, if you have not saved much until you got to forty and prefer to have permanent insurance, there’s no need to panic or stress about it. You just need a strategy and the will to implement it. In the early stage of your working career, the thought of retirement and death appeared to be so distant, that so many people fail to accord any priority to savings and having insurance. Saving and purchasing insurance at a younger age goes a long way in meeting retirement goals without stress or much sacrifice. If only we all could get this wisdom in our twenties or thirties, but it does not happen to a vast majority of us.

Just for the sake of illustration two friends, Beyonce and Rhianna start their careers at the age of twenty-five. Beyonce purchased a participating whole life insurance policy the first year and contributed $5,000 a year until the age of forty-five. At the age of forty-five, she could stop her contributions and have over $500,000 and over 1 million dollars of permanent life insurance at the age of sixty-five. Option number two, Beyonce could continue to contribute $3,600 a year until the age of sixty-five and have over $650,000 and over 1.3 million dollars of permanent life insurance.

Her friend Rhianna does not see the importance of saving and having insurance at twenty-five and does not have this sense of urgency until she gets to forty years of age. Let’s see how much Rhianna will need to contribute every year (starting at forty) to get to the goal of $500,000 and 1 million dollars of permanent life insurance by the age of sixty-five. Rhianna would need to contribute $11,000 a year for twenty years until the age of sixty and then stop contributing. She would then meet the target of over $500,000 and over 1 million dollars of permanent life insurance. This is over two times larger amount every year compared to Beyonce, who started at age twenty-five.

This article is centered around folks who are in their early or mid-forties or nearing forty but haven’t given much thought about the retirement savings and insurance. If you turned forty already, it’s time to be serious about saving for retirement. You cannot afford to wait any longer. The longer you wait, the harder it will be to qualify for insurance and be able to achieve your retirement goals. Compounding can do wonders for your savings, but it needs time.