Covering all bases with income protection

Protecting your income as you near retirement is just as important as protecting your income early in your career.

Income protection insurance comes across most people’s radar when they’re starting out in their career. Often, people take out this type of policy when they buy a house, so if a serious illness or a bad accident strikes, your children and your spouse are covered.

But income protection can really come into its own when we’re nearing retirement and often more prone to accidents, illness and injury. According to the 2012 update of the Australian Bureau of Statistics’ Australian Health Survey1, only 1.6% of Australians aged between 35 and 44 have suffered a heart attack, stroke or other vascular disease. But this figure rises to 8.8% of people aged between 55 and 64.

If we suffer a trauma as we’re preparing to finish work, without income protection insurance all our plans for a comfortable retirement can vanish as savings are eroded paying for medical bills or funding everyday living expenses.

We’re also living longer, which means it’s increasingly important to have enough money to provide for ourselves financially after we retire. According to data from the World Bank2, someone born in Australia in 1960 can expect to live to 70.82. Contrast this with someone born in 2010, who can expect to live to 81.70. So people born today need to provide for themselves for a decade longer than someone born in the ‘60s.

Today, we’re also more likely to help our dependents as we approach retirement. Over the past 23 years, the number of people aged between 18 and 34 who still live at home has risen from 19% to 23%3.

So we’re trying to help the kids financially and support elderly parents, all while saving for retirement. It’s a big ask – an even bigger one if you become ill.

It pays to hang onto your protection plan

Income protection and trauma insurance are both great ways to protect your lifestyle from sickness or injury. As you approach retirement, this protection becomes even more critical:

  1. If you have regular bills and lifestyle expenses that rely on your ongoing income.
  2. If you suffer a serious illness like cancer or a heart attack, which could stop you from working for a long period.
  3. If you’re using your last few years in the workforce to reduce your debts and bump up your retirement savings.

If an illness or accident ends your career and you don’t have income protection insurance, the quality of your future lifestyle could be dramatically lower.

Speak to your financial adviser about how income protection may be of value to you.

1. Australian Bureau of Statistics, Australian Health Survey: Updated Results, 2011-2012 2. World Bank life expectancy figures, downloaded 20/2/14 3. Australian Bureau of Statistics, June 2009, Home and away: The living arrangements of young people, June 2009.

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