The Fourth of July holiday is one of the best here in Kosciusko county, and usually means cookouts, fireworks and time on the lake or in the pool.  Independence Day means more than that though.  It’s also the day we asserted our freedom as a nation 246 years ago.  Today I’m going to give you some hints toward preserving your financial freedom.  The whole point of financial planning is to establish your financial freedom - your ability to live your life without being dependent on anyone.

Financial planning, when you boil it down, is all about managing risk.  We often talk about managing risk in terms of investments and the market.  However, other risks can affect your financial independence.  For example, one serious illness can wipe out your entire net worth.  Even a short stay in the hospital for observation can run into tens of thousands of dollars.  That’s why it’s so important to have health insurance, even though the cost of the policies have gone through the roof in recent years.  It is particularly important to address health insurance if you plan to retire before you are eligible for Medicare.  Often, health insurance is the biggest check early retirees must write each month, even more than housing.  While you are working, your employer may offer healthcare coverage.  It’s rare to find one that offers it for free anymore, but employers will often subsidize part of the cost as part of your overall compensation package.  In today’s world, there are usually deductibles and co-pays, but health insurance will protect against the huge medical bills.

Another important way to help safeguard your financial freedom, is to purchase an umbrella liability policy.  An umbrella liability policy will help to protect you if you are sued by someone else.  If you have auto and homeowner’s insurance, you probably have a measure of coverage already.  However, those policies often carry a lower maximum benefit.  According to dmv.org, an auto policy in Indiana could have as little as $25,000 in liability protection.  The umbrella policy can extend that coverage limit to $1 million or more, usually at a reasonable cost.  

Most of us are in the habit of using insurance to protect our biggest assets, like houses and cars.   People often neglect a very important asset, however.  That’s your ability to work and make money.  Disability insurance can help to bridge that gap in your coverage.  Disability insurance will pay you if you are unable to work.  This is often overlooked because people often think that worker’s comp or social security will take care of it.  Worker’s comp is only for injuries that happen on the job.  Social security will pay you income, but it can take a long time to qualify, and may only kick in if you are unable to hold any job.  Individual disability policies can be very expensive and may be hard to qualify for.  It’s usually best to obtain coverage through work.  Many policies will cover only 60 to 70% of your income.

Finally, the need for long-term care can be a risk to your financial freedom.  According to the American Council on Aging, the average cost per year of a nursing home in Indiana was $76,575 in 2022.    A long-term care policy will cover nursing home stays that are not covered by health insurance or by Medicare.  Long-term care insurance is usually most affordable if you buy it early.  A policy purchased at 65 may cost two to three times as much as a policy purchased at age 50.  Some employers may offer long-term care, but these types of policies are often purchased individually.

Paying attention to all the financial risks you face can help toward preserving your financial freedom.  Alderfer Bergen & Co. uses a list of 13 topics to consider in protecting and growing your wealth.  For a copy of those topics, go to alderferbergen.com/contact and request one.

To hear the podcast of the Smart Money Management radio show on this topic, or others, go to our website at alderferbergen.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  

Securities and financial planning offered through LPL Financial, a registered investment advisor.  Member FINRA/SIPC