Insurance vs. Investment: Which is the Better Way to Prepare for Retirement?

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insurencePrepare better for your retirement by knowing where to put your money.

People who are planning for retirement but have limited budgets often ask about the best way to prepare for their retirement. Should they get a life insurance policy or would it be better to put their money in other investments? If you are in the same situation, consider an insurance policy and/or an investment portfolio, and understand the advantages and disadvantages of each of these options before making a decision.

Why do you need an insurance policy?
An insurance policy can act as your “parachute”. Having one can give you peace of mind since it can help ensure that your family’s financial needs will be taken care of in case something happens to you. It can help provide enough money to pay off your home loan and/or send your children to college should anything happen to you. If you really care about your loved ones, this is something that you should consider. However, please note that there is one great disadvantage in purchasing a term life insurance policy. You would not get any money if you outlive it.

Why do you need to invest??
You need to build your investment portfolio so you can enjoy a more comfortable lifestyle during your retirement years. Taking into account the looming uncertainty of social security and pension benefits, coupled with the possibility of increasing healthcare and medical expenses as you grow older, you need to have a substantial source of income if you want to live comfortably during your golden years.

Relying on your social security benefits would not provide you the means to live comfortably during your retirement since these programs are designed to provide the bare minimum standard of living during your old age. And this is precisely why you need to invest.

Having a diversified investment portfolio can help ensure that your money will grow over time and protect it against the risk of inflation. As such, you don’t have to worry about running out of money just when you need it most. However, keep in mind that investing in diversified portfolio puts you at a greater risk of losing your principal.

Preparing for Your Retirement: Some Tips to Consider

  • Start planning. Consult with a trained financial planner to determine how much you need to set aside for insurance and investment.
  • Be flexible. To make sure you set something aside for insurance and investment, your spending habits should always match your income. This is of utmost importance if you don’t want to run out of money during your retirement years.
  • Ask questions. Don’t hesitate to ask questions, especially if it can help you prepare for your future. Consider talking to your employer, your bank’s representative or your financial adviser, and do some further research? to learn how you can enjoy a more comfortable retirement.