McEvoy Ins Blog |
 Many of us are feeling the effects of the COVID-19 global pandemic, especially when it comes to managing our finances. We recently surveyed hundreds of consumers about how COVID-19 has impacted their money. Nearly half of the respondents agreed that the pandemic has influenced the way they handle their finances and how they save for the future.
Spending changesFor many people, household spending has been reduced dramatically during the pandemic. Survey respondents noted they are eating out at restaurants less, stocking up more on perishable items, and limiting or avoiding travel and vacations. While many have decreased unnecessary spending, it has caused some consumers to increase their spending in other areas of their life, like increased water and electricity bills. What you can doRevise your budget. Budgeting isn’t always fun to do, but it's vital to keep detailed tabs on your money, especially if your finances have been affected by the coronavirus. Consider cutting out some of the subscription services that you no longer use. Take stock of each subscription and membership and determine if it’s essential or not. If you can do without, get rid of it and put the extra money into a savings account or an emergency fund. You can also use that cash to pay off debt. Try a “snowball” strategy and pay off a card with the smallest balance to bolster your confidence and sense of accomplishment. Income changesMany household incomes have been greatly affected by the pandemic. In some cases, a person or multiple people in a household have seen changes due to job loss, furloughs, layoffs, significantly reduced hours, pay cuts, or demotions. This has led many people to reevaluate their biggest expenses and how to reduce them where possible. What you can doFind ways to cut back. If you have lost income due to the pandemic, look closely at some of your regular expenses for the opportunity to adjust costs. Dining out is an expense that can slowly take a toll on your budget, $20-$30 at a time. Make sure you watch how much you spend on ordering from restaurants. If you rent an apartment, try negotiating down the cost. Given the pandemic, your landlord may be more agreeable to rent breaks. If you own a house or condo, consider refinancing. Investment alterationsThe stock market has experienced volatility, causing some accounts to fluctuate. Many 401(k) accounts have taken a hit and some companies have stopped matching contributions. This uncertainty has caused many people to rethink how they invest their money. According to the survey, consumers who originally had a more aggressive investment mindset have adjusted their strategies due to COVID-19. Almost half (49%) said COVID has changed their investment mindset. As a result, people are changing where they are investing, altering their portfolios, redistributing funds into more conservative accounts, withdrawing their money completely, or pausing their contributions to their retirement account. What you can doConsider a fixed index annuity (FIA). At a time when consumers are looking for a way to reduce volatility in their finances and retirement planning, and insurance product like a fixed index annuity that offers downside protection and upside potential can be a good option. An FIA allows you to contribute a set periodic amount or lump sum, and then your premium can grow tax-deferred with an option to receive guaranteed payments throughout your retirement regardless of how the stock market does. Increased and decreased savingsCOVID-19 has caused many people to decrease how much they are saving and investing. Survey respondents said they feel like they have less available to set aside. Some say they have been forced to “dip into savings” to buy things they were not expecting. On the other hand, those who are less financially affected by the pandemic have decided to save more aggressively, stashing away money for emergencies or putting greater amounts of money in their savings accounts to plan for the unexpected. What you can do (decreased savings) If you have been hit hard by the pandemic, you could start by trimming nonessential expenses. The money saved on what you don’t need can be reallocated to your savings. What you can do (increased savings) If you are less financially impacted by the pandemic, your monthly expenses may have dropped because you haven’t been spending money on entertainment, travel, or activities for your kids. If that’s the case, it may be a good idea to add the surplus to your emergency savings. The rule of thumb is to save1 three to six months’ worth of expenses in an emergency fund. Given the uncertainty caused by the pandemic, you may consider trying to save a year’s worth of expenses.
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 Choosing a beneficiary for your life insurance policy is a decision that might not be as easy as you think. A beneficiary receives assets if you die while the policy is still active. But deciding who gets your money isn’t always just a matter of selecting a person. Your policy rules and state laws may affect or even restrict your choices. So, when deciding who your life insurance beneficiary should be, it’s important to make sure you are familiar with your policy and any regulations it’s subject to. Here are a few suggestions for determining how to select the right beneficiary.
Understand your life insurance policyTypically, a life insurance policy provides financial security for loved ones after a person dies. There may be other reasons as well, such as a company or business that you would like to continue in your absence. It’s also possible that you want your life insurance benefits to help support your child’s education or that the money could be used to cover funeral expenses. Whatever the reason, it’s a good idea to do what you can to make sure you understand your policy type and the details regarding beneficiaries. Try to do the best you can to review your policy and if you have a life insurance agent, stay in contact with him or her. Consider your beneficiary optionsThere are options beyond your immediate family when it comes to choosing a beneficiary. Some examples of beneficiaries include:
When you’ve decided on who will receive your death benefit, the next step is to figure out how they will be distributed. If you have multiple beneficiaries, it’s a good idea to seek help from legal counsel or a financial advisor with the process. Select a back-up beneficiaryThere is a possibility that your primary beneficiary might die before you, can’t be located, or refuses the proceeds at the time of your death. By naming a secondary beneficiary you can ensure your death benefit passes directly to that person. Review your beneficiary choices regularlyMajor events like marriage, having a child, and getting a divorce are just a few things that can affect who you might want as your beneficiary. It’s a good idea to review your beneficiary designations on your life insurance policy every year or so to make sure the person or persons that you want to receive the death benefit are set up to do so. Your life changes and so do the lives of your loved ones, a periodic policy review can take into account events at every stage. Be aware of what will happen if you name a minor as a beneficiaryIf you die while your children are still minors, they may not be eligible to receive the funds until they reach the age of majority. This delay can be detrimental if they need your death benefit for living expenses. There are a couple of ways to help ensure your children can have immediate access to your assets: Establish a trustTrusts are a good solution for leaving money to your children. You can set up a life insurance trust and name a trustee to oversee the funds and distribute the money to your children, or whomever you wish. There are costs involved with setting up a trust – talk to a lawyer for assistance. GuardianshipIf a minor is the beneficiary on your policy, a court-appointed legal guardian may be designated to oversee the death benefit. This process can be lengthy and complex, so it can be a good idea to talk to a lawyer before you start. Don’t forget your willYour life insurance beneficiary designations will supersede the will in almost every case. To ensure your wishes are honored, make sure your will matches your life insurance policy. You can’t use your will to modify your life insurance policy, so if you named someone as a beneficiary of your life insurance, that person will receive your death benefit. Get familiar with your state lawsYour state may have laws about beneficiaries. For example, some states, like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin have community property laws, and three other states — Alaska, South Dakota, and Tennessee — have elective community property laws. These laws give couples equal ownership of their joint property. If you want to designate someone besides your spouse as a beneficiary, your wife or husband will need to sign a waiver. Research the laws in your state or talk to a financial advisor about the rules your beneficiary choices may be subject to. When in doubt meet with a professional  Most people get life insurance through their employer because it's easy and convenient. All you have to do is sign up. You don’t have to take a medical exam, and you only have to fill out one form and name a beneficiary. The problem, however, is that the coverage you get through your work probably won’t be enough. To secure the appropriate amount of coverage for you and your family, it's vital to consider buying a supplemental or individual life insurance policy. Here’s why.
Why relying on your employer-provided plan might not be enough Life insurance offered by your employer is often included as part of your overall benefits package. While some life insurance coverage is preferable to none at all, you may want to ask yourself whether or not relying just on the life insurance offered through your job is enough. There are some ways employer-provided life insurance may fall short, such as: Limitations to coverage While the coverage provided by your job may be low-cost, it might not offer enough coverage. The U.S. Bureau of Labor Statistics, for instance, found that the average life insurance benefit amount for flat-dollar plans in 2020 ranged from $10,000 to $25,000.2 If you are single with no dependents, this amount may be enough for you. On the other hand, if you’re married, have children, or own a home, or you’re planning for any of those things, that amount of coverage likely won’t go very far. There’s no one-size-fits-all amount, but various professionals in the life insurance space may recommend purchasing coverage that is several times your annual income. Policy options may be restricted Work life insurance policies are part of group life insurance plans, which are completely determined by your employer. This means you’ll likely have zero say in the details of the policy and you can’t customize it to fit your needs. You’ll also have limited coverage for a spouse. Lack of control Your employer can decide to drop its life insurance plan at any time. If they do, you may lose your coverage immediately, without any say in the matter. Your employer is the policyholder, not you, so you’ll likely find it difficult or impossible to talk to the insurance carrier. Changes in employment Your life insurance through your employer is tied to your employment status, so if you decide to leave your job, retire, or get laid off, you will likely lose your coverage. If you can take your employer-sponsored policy with you, you probably won’t receive the pricing benefits provided by the employer. This means you’d be paying more money for coverage that likely isn’t sufficient. |
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