What Are Professionals Overlooking In Their Portfolio?

Investment Portfolio

You probably have a 401k and some protection that is available to you through your employer. These are all great ways to get your feet wet in the financial planning world. Some who have done individual research might have even opened up an IRA or 529 plan on their own.

The biggest question is how much $$ should go into each vehicle; and when life happens and I need to change my budget, which bucket gets the haircut? What if there was a vehicle that protected you from dipping into those other buckets?

These are the types of questions a CERTIFIED FINANCIAL PLANNER® professional could help walk you through.

What to Consider When Upgrading From Rent To a Mortgage

Some professionals, for example, are looking to upgrade from renting to owning; however, that increase to their monthly expenses is a tough pill to swallow. How do you know you’re ready?

One of the most important things to consider when making that change is how protected your most valuable asset is. And what is your most valuable asset?! Is it your home or car? Not even close….it’s your ability to go to work every day and earn an income.

How much of your income is ACTUALLY covered through your employer? Most disability benefits through employers are capped. They pay only after 80% or more of your income is lost, have limited benefit periods, and are considered taxable income.

Because it’s a group policy, the coverage is by no means catered to your personal needs. For example, if you bring home 70k after taxes, your group disability coverage may only cover a maximum of 3k per month or 36k per year, before taxes. You would be taking home about 27k if could not work for a year.

Could you maintain the same lifestyle with less than 40% of the income you’re used to?

Group vs. Individual Coverage, What’s The Difference?

That being said, what’s the difference in types of coverage offered through your work vs. a policy that is individually owned? Group coverage is great because it’s cheap, but you get what you pay for. In addition to having a cap, the technical wording in the coverage doesn’t typically work out in favor of the employee who’s disabled and trying to do a claim.

There could be language such as “policy will pay if the insured is not able to perform job duties”. At the surface this might sound all well, but what type of job? If you work as a physical therapist, for example, who sprained their ankle, you maybe couldn’t do all the duties that your job as a PT requires. However, you could go work as a greeter at Walmart! In that example, there could be no need for the company to pay, since you can perform job duties. Feel free to take a deeper dive about group vs. individual here .

The Value of Locking In Future Insurability

Another advantage of owning your own income protection policy is the flexibility. If you feel you are on a path towards more income and more responsibility ten years from now, you also have the ability to increase your coverage without having to go through an insurance company’s vigorous underwriting process.

Consider all of the health changes someone could go through within a 10/20 year span. For all of these reasons, it’s worth securing a rate when you are the most insurable: young and healthy.

Financial independence is the goal for everyone looking to work with an advisor. To invest in the stock market without having the proper protection tools in place, is just as efficient as building a house from the roof down.

If you don’t have 3-6 months of monthly expenses liquid in savings at all times, tied together with a robust individually owned Income Protection plan, it’d be irresponsible to spend time researching more aggressive opportunities in the market.

If you want to learn more, feel welcome to CLICK HERE to schedule a free, no obligation consultation with our CERTIFIED FINANCIAL PLANNER® professional, James L. Hicks, CFP®, ChFC®, ChSNC™, MBA.