The Foreign Service Journal, November 2008

W henplanningandpreparing for your transitiontoretire- ment, especially in the current climate of economic uncertainty, don’t forget to includeupdatingyour insur- ance needs on your long checklist of things todo. The twomost important items will be reviewing your life insurance and con- sidering long-term care insurance. Life Insurance First and foremost, take a look at your life insurance portfo- lio. If you are a family person and have adult children who are no longerdependents, youmaybe carrying toomuchsimple term- life insurance at a growing cost. Your term-life premiumsmight better be used for other purposes, such as paying off the mortgage or other types of insurance that aremore relevant to retirement living. Term-life insurancemakes sensewhen the kids are still with you at home, because you get the maximum amount of life insurance at the lowest possible cost. A high level of term-life insurance could be reducedsignificantlyby taking intoaccount income froma surviving spouse’s future annuityandSocial Security. With respect to term-life insurance, you will be asked to choose an option for your gov- ernment term-life insurance, known as Federal Employees’GroupLife Insurance. When I retired, I opted for continued coverage at a reduced level of $70,000, with no premium payable. One life insurance option to look at is cash-value insurance. In many cases, basic term-life policies have the option of con- version to cash-value life with no additional underwriting for health. The advantage of cash-value life insurance is the accu- mulation of savings that earn interest tax-deferred. With some policies, the interest paidonyour cash savings is greater thanpre- vailing rates inbank savings accounts. Deferred taxes are payable on the earned interest only if you withdraw cash from the poli- cy during your lifetime. If the policy pays off, your heirs will not have topay taxes on either the accumulated interest or the saved principal. Inmy current cash-value life insurance policywith the United States Automobile Association, the monthly interest on my savings is sufficient topay the premiumonmy life insurance, with funds left over to increase my cash accumulation. Unfor- tunately,USAAinsurance is available toForeignServicepersonnel only at the commissionedofficer level. But there aremany other insurance firms out there that offer similar policies. If you expect to continue having to support dependent chil- drenafter your retirement, youmaywish to continue to have low-cost term-life insurance. By far the best andcheapest place tobuy such insurance isWorldwideAssurance for Employees of Public Agencies, a nonprofit association in Washington that provides term-life insurance to federal civilian employees and their families. You can’t beat the price and the service, because everything is runby federal employees themselves. Term-life insurance is all they do. (For more information, go to www.waepa.org. ) Long-Term Care Insurance As youapproach age 55, it is important to consider long-term care insurance. This insurance covers extended stays inanursinghomeor other recuperative facility resulting fromsevere illness, injury or mental incapacity. The cost of such facilities, depending on geo- graphic location, can run between $400 and $600 per day. Regular health care policies do not cover such post-hospital care. The younger your age when you purchase such long-termcare insurance, the cheaper it is. A good place to learn about options for long-term care insur- ance that best meets your needs is the AFSA Insurance Desk at the Hirshorn Company in Philadelphia, reachable by phone at 1 (800) 242- 8221, or online at www.hirshorn.com . Personal Effects Coverage Insuring your personal householdeffects is not something that begins with retirement planning. It begins with your first day in the Foreign Service and continues through your entire career. Nevertheless, when retirement appears on the horizon, youmay verywell be facing theprospect of personal effects shipments arriv- ing at your retirement destination from a number of different storage locations, including overseas. Keep inmind that you can change your official retirement destination at the lastminute. At thispoint, it is important tomake sure youare fully coveredagainst loss andbreakagewhile your effects are in transit. This is the time in your life when accumulation is at a maximum. Here again, the best place to check on the adequacy and quality of your cov- erage is at theAFSADesk of theHirshornCompany. TheAFSA personal plan has given excellent service to Foreign Service per- sonnel since 1970. 78 F OR E I GN S E R V I C E J OU R N A L / NOV EMB E R 2 0 0 8 A F S A N E W S V.P. VOICE: RETIREE BY AMB. HERMAN J. “HANK” COHEN, RETIREE REPRESENTATIVE Making the Transition to Retirement: Insurance Needs If you are a family person and have adult children who are no longer dependents, you may be carrying too much simple term-life insurance at a growing cost.