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Protecting Your Finances With Life and Disability Insurance

A woman who plans to work into her 70s reviews life and disability insurance options as a strategy to secure her financial future

Closing the Savings Gap - episode - 5


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How long are you planning to work? In this episode, you'll meet Narda. She tells us she's planning to work well into her 70s. It sounds like a great plan — one that many of us may be banking on — but the problem is that nearly half of all retirees leave the workplace sooner than they had planned due to health problems, job loss or other circumstances beyond their control. Narda, 48, is a married mom of a 5-year-old, and she works full time as a chief compliance officer in New York City. She's worried about what might happen to her daughter if, for some reason, she's no longer able to work. Lately, two things have been keeping her up at night: concerns that she's not doing enough to save before retirement and that she doesn't have enough life insurance.

We paired Narda up with certified financial planner Lynn Ballou. Lynn is the regional director at EP Wealth Advisors in the Bay Area of California. She has more than 30 years of experience helping women deal with the financial complexities of retirement, and she's going to help Narda get the answers she needs about making her best financial moves going forward.

Brought to you by Fidelity Brokerage Services,  Member NYSE, SIPC

Narda: I'm a first-generation American, and my parents were very conservative. It's the way I was raised. My parents never used credit cards. I use credit cards, but I pay them off every month. My parents just never believed in doing anything risky. The stock market was a foreign concept for them, so it was “Save your money and you live within your means”. So I never did anything too risky and never invested.

Jean: Hi everyone. I'm Jean Chatzky, and you're listening to AARP’s Closing the Savings Gap, brought to you by Fidelity Investments. You might have seen me on the Today Show or listened to the HerMoney podcast. I'm also proud to be AARP's Financial Ambassador.  On the next seven episodes, we'll be talking to real women as they work to close the financial gap holding us back in retirement. This is the gap between the income we're on track to draw from our savings and social security, and the amount we're going to have to spend on essentials like groceries, healthcare, and housing. It can be a big gap, especially for women who earn just eighty cents on the dollar compared to men. By age 60, we've earned a whopping $1,000,000 less than our male counterparts on average, and then, because we live a half decade longer, we have to figure out a way to make that money last. Closing the gap may sound daunting, but it is not impossible. Over the course of this series, you'll meet women who have a retirement gap because of a common financial roadblock. It could be debt, overspending, undersaving, lack of confidence when it comes to investing. Don't be surprised if some of these stories sound familiar. My team has matched each of these women up with a financial planner who's taking them by the hand and helping them make the changes they need to retire with confidence, and so that you can do the same.

Jean: On today's episode, you'll meet a woman who tells us she is planning to work well into her seventies, and we wish her so much luck with that! The problem is nearly half of all retirees – 48% – left the workplace sooner than they planned due to health problems, job loss, or other circumstances beyond their control. Narda is in the studio with me in New York. Welcome, Narda.

Narda: Thank you. So glad to be here.

Jean: It's nice to have you. So I know a little bit about you. I know that you are 48 years old. I know you are a married mom with a five-year-old and that you work as a chief compliance officer, which is an incredible title, at a healthcare company in Manhattan, earning about $150,000 a year.

Narda: Yes.

Jean: So those are your statistics. Tell us about you.

Narda: I'm a serial volunteer. Love to volunteer at God's Love We Deliver, and I volunteer at my daughter's school, on the parent's association, and anywhere people need help. I just love to help people.

Jean: Tell us about your retirement planning. How are you doing when it comes to thinking about it, saving for it, and dealing with the other financial obstacles that get in your way when you live in a city as expensive as New York?

Narda: I think I do the minimum required in terms of retirement, so I participate in my company’s 401(k) plan, but I don't think I'm as aggressive as I need to be, and having a five-year-old daughter, I figure I'll be working at least for the next 26 years, to put her through school. So I'm hoping to remain healthy, and not have to worry about anything in terms of finances.

Jean: Your five-year-old daughter is in private school?

Narda: Yes.

Jean: And that's expensive?

Narda: It is. It is.

Jean: How much of your paycheck does that eat up?

Narda: I would say about 15%.

Jean: What's the overall tuition?

Narda: $51,000 a year.

Jean: That's a lot more than 15%.

Narda: I'm not great at math. (Laughs)

Jean: It's about a third of your paycheck that is going to that. Are you the only breadwinner in your family?

Narda: My husband works, and so between our two salaries we are able to pay for her tuition, and one of the things that gives us an advantage is that I purchased my co-op years ago, and as a single woman I was able to pay it off. The conundrum is that we're in a walk-up and my husband has bad knees, so it's going to be very difficult to leave, because it's paid for and trying to find another two bedroom apartment in New York City is really very, very expensive as you know. So we've made a commitment to pay for tuition, and so we don't want to skimp on her education, because the public schools in our neighborhood are okay, but they're not great and she's thriving where she is.

Jean: When you say you're doing the minimum in your company for retirement, can you be a little bit more specific? How much are you putting away?

Narda: I put 7% in my 401k, but I'm in not very aggressive funds because I'm a little nervous about the market. I'm just really conservative when it comes to investing.

And how about your husband? Does he have a retirement plan that he participates in?

Yes, he does. Um, and he is actually probably more of a risk taker, but I don't know the details of what he's invested in and not.

Jean: As you know, we're going to match you up with a financial advisor who is going to take a look at this and help you figure out what the right things are to do. What sort of questions do you have for your financial advisor, and what are the things that worry you most?

Narda: What worries me most is, in terms of life insurance, I just want to be able to find some type of policy – outside of my company's policy that pays the bare minimum, essentially – that will again, leave something comfortable. My daughter will still have to work, still have to go to school and do well for herself, but something that will help her in the event my husband and I are no longer here.

Jean: Are you healthy?

Narda: I am. I am. I'm a retired New York City marathoner. I've run two New York City marathons. I haven't exercised and run as religiously as I used to since my daughter was born, but I do things. I do an 8-minute workout every morning now.

Jean: I do a 7-minute so you're one minute more than me!

Narda: I'm trying to get back into shape. I eat well.

Jean: That's good.

Narda: I don't smoke. I drink occasionally, but with a 5-year-old you have to drink.

Jean: These are all the sorts of questions that a life insurance agent is going to ask you when it comes to finding a life insurance policy and they're all good answers, so I expect that you won't have trouble getting a policy that works for you. One of the things that worries me about your plan is the planning to work until you're into your seventies. Are you serious about that?

Narda: I am. You know, Ruth Ginsburg for example, is my idol. Like if she could work as long as she's working, I can do the same thing too.

Jean: What other questions are you going to ask the advisor?

Narda: I'd like to ask what types of funds should I be investing in, and really help push me into something that is not as conservative as what I'm investing in now because really, the returns are so low that sometimes I think to myself, "Okay, I may as well just keep this under my mattress because the returns are not really there."

Jean: Have you thought about college for your daughter?

Narda: Oh, absolutely. Yes, and so my husband has looked into a 529, but I also want to ask questions about that because is it smart to put that money away? Does that count towards income for her in the future? I mean, there are questions that I have. I just want to make sure that we're doing the best things for her.

Jean: And the best things for you when it comes to checking those retirement boxes, because there is no financial aid for retirement.

Narda: That's right.

Jean: But there is a lot of financial aid for college. Narda, thank you so much for sitting down and telling us the beginning of your story. We're going to set you off on this journey and we will check back in with you in a few weeks to see what's shaping up as your plan, and how much of this gap you're going to be able to close.

Narda: Terrific. I'm looking forward to it.

Jean: Thanks so much.

Narda: Thank you.

Jean: My team and I were so happy to be able to pair Narda up with certified financial planner, Lynn Ballou. Lynn is the regional director for EP Wealth Advisors in California's bay area. She's got more than 30 years of experience helping women deal with the financial complexities of retirement and other transitional moments in life. Hi, Lynn.

Lynn: Hi. Thank you so much for inviting me onto your podcast.

Jean: Oh, well thank you so much for doing this, for helping Narda and for helping everyone who's listening. It's so important.

Lynn: It is. You're right. We can't have these conversations enough.

Jean: Tell us a little bit about the math in Narda's case. What did her retirement look like before she went through this process? What does it look like now?

Lynn: So first of all, can I just give Narda the biggest thumbs up and shout out? Narda is an example of a woman who totally understands the importance of the basic tenants of financial planning: Live below your means, try to live debt free, aspire to things that can be attained, and keep yourself in a position that if something goes amuck or awry, you're still going to be fine. In fact, if we could have her on the ballot for the next election or put her on boards of directors, I'm telling you things would be great.

Jean: We love her too, but she was pretty honest about the fact that this was daunting for her.

Lynn:  She did have some really good questions. She wanted to know, for example, were they doing a good job of protecting the assets that they had? They are under-insured for life insurance. They don't know if they have disability coverage through work, if they've elected it or not. It's easy for people to think, oh, I need life insurance, but it's hard for people to think, you know what? It's really statistically unlikely I'll ever cash in a life insurance policy, thank God, but it's really statistically likely that I'm going to experience some sort of disability short or long-term during my life, and that protecting the income that I'm bringing home while I'm still alive and I'm using resources at home, is maybe a more important focus, even than life insurance. And that's tough sometimes to talk about, but it's nonetheless the statistical truth.

Jean: Disability insurance can be very expensive. Did you suggest that Narda look into what's available from her employer?

Lynn: I always suggest going to the employer, sometimes almost impossible to actually buy disability insurance outside of our employers. So you want to look at all the group plans, all the extra liability, and disability insurance you can buy on your own. And you also want to look at what's available through your state, if you have state disability insurance.

Jean: Those are some fabulous suggestions. Narda told us she's contributing 7% to her retirement at work. Is that enough? Or do you want to see her increase those numbers?

Lynn: Great question. Before I answer the question about the 401(k), let's take a little side trip, because these are all sort of tied together, because there's really only so many resources that afamily has. So if they were to buy an apartment, it would be a little less than twice the value of what she lives in right now. And so if she could get a 30-year, low interest rate fixed mortgage, they would be increasing their cost of living, you know, by a substantial amount, a few thousand dollars a month between the mortgage and the extra property taxes, the upkeep and all of those things. And so then we have to come back to which goal is more important? Does that matter more, or does putting more money into retirement accounts matter more? So in a perfect world, I'd have them do both. I would have her max-fund the $18,500 per year that she can into her 401(k). and I think that goes up to $19,000 next year, if I'm right. And then also by the way, Ken is not doing the full amount that he can fund. He's doing $18,500 and because he's over age 50, he could be doing another $6,000 a year. If they both funded everything they could, that would put them about $400,000 to $500,000 ahead over their whole life expectancy in terms of net worth. Does that make sense?

Jean: It makes total sense because it's all about tradeoffs, right? It’s all about tradeoffs. And I know they've got a daughter as well. They want to make a contribution to college for her. So as you laid out all of these things, what was your hierarchy for her?

Lynn: So in my perfect hierarchy, the first thing they do is they get their insurance house in order, and that might be involving, you know, a few thousand dollars a year of extra expense for disability or life insurance. Then the second thing I think we would do is try to have Narda and Ken prioritize the house.  But in a perfect world they would partially or fully fund their 529 plans. So in New York on the plans that you have there, she and Ken can put in up to $520,000 into 529 plans. So where is a bigger house, compared to pre-paying for college, compared to maybe retiring a little bit younger, compared to having a higher net worth?

Jean: This is what financial planning is all about. You look at it from the perspective of helping Narda and helping the women who are listening accomplish their goals. So I just want to say a huge thank you for working with her and for helping her feel so comfortable with her finances moving forward.

Lynn: Oh totally my pleasure. Thank you for this opportunity and a shout out to all the women do ask for directions. I am going to stay in touch with Narda. I think she and I bonded on a very personal level, as well as a professional, and she is truly an amazing woman.

Jean: It has been a few weeks now since Narda and Lynn met, and we are checking back in with Narda to see how she's doing with her new financial plan. Hey, Narda.

Narda: Hi. How are you?

Jean: I'm good. I'm good. So I understand the getting going with this was tougher than you expected?

Narda: Yes. Just because it's intuitive. I mean, Lynn and I connected very well. Part of getting organized when it comes to finance is organization and really just taking and making a really good assessment of everything that you have. And so bringing everything together was probably the most difficult part, but once you have it together it's like, oh, okay. Why haven't I been doing this sooner?

Jean: I totally get that. I have this file system on my desk, and I just shove papers into a file and eventually it gets to the point where it looks like it's going to explode, and I actually file them in the appropriate place in the filing cabinet, but as everything is building up, it just gets daunting and you have to tackle it and get through it until you realize that you can control it. So now that you are organized and you've got your plan, tell me how it's going, and tell me what steps Lynn is putting you through?

Narda: It's actually going well. One of the Aha! moments was: Think of yourself first. I come from a family where my parents put the children first all the time, and they were selfless, and I find myself doing the same thing. So one of the things Lynn asked me was, "Why aren't you maxing out your 401(k)?" But in the back of my mind I said, oh, well I have all these other obligations that I have to set in place to make sure my daughter has everything she needs. And she said, "Well, I think you'll be okay. You know you are not going to miss this money if you just put it away, pretax."

Jean: Another big item that she had you look at was your need for insurance. Disability – which I don't even think was on your list when we originally spoke – and life insurance. How is that process going? What's the plan there?

Narda: My focus was so much on life insurance. She said, no, this is actually the area you should be looking at first, because God forbid something happens to you. And I said, Oh my goodness, it's just one of these areas when you're healthy you don't even think about it. So, at open enrollment I'm signing up for long-term disability as well.

Jean: We can't all be Ruth Bader Ginsburg, but are you still planning to work into your seventies?

Narda: I wouldn't mind, because I truly love what I do. Most of the time I'm reading and writing and so it's not labor intensive. I mean, I may have to curtail my hours if the New York City transit continues to operate the way it does, but really I love what I do. So I could see myself working well into my seventies.

Jean: But it's nice to know that you don't have to.

Narda: Exactly.

Jean: Tell us a little bit about the experience of working with a financial planner. How did that feel, and how did it make you feel about your future?

Narda: One of the things about Lynn is that she was an excellent listener and there is no judgment. She truly wanted to know: tell me about your life. And I mean we ended up talking for hours and, and really not that I'm replacing you, Jean, but I've found another BFF. I mean she was phenomenal, and she was a great listener and just had really great suggestions.

Jean: You know that's interesting. When I get asked, "How do you know if it's a good planner?" My answer always includes a recommendation that the planner listens more than they talk because that's the only way they're gonna know what's going on in your life.

Narda: Exactly.

Jean: Well, thank you so much, Narda, for sharing this journey with us and going on this ride with us. We so appreciate it.

Narda: Thank you for making this happen. It's one of these things that has been in the back of my mind forever and I'm so glad I was finally able to dedicate some time to it and put it together.

Jean: Let me just recap the steps. Narda will take to close her retirement gap. She and her husband are going to look at life insurance and disability insurance options to see what's right for them. They need to protect this financial life they're building. She's going to increase her contributions to her 401(k) plan to 15%, open a 529 plan for her daughter's education, and make a thoughtful decision about whether moving to a more spacious place in New York City – maybe with an elevator – is in the cards. A big thank you to Narda and Lynn for sharing their thoughts and their experiences with us today. And a big thank you to all of you for joining us on this episode of Closing the Savings Gap. Our hope is that you’re not able to just survive your retirement, but that you can actually enjoy it. And for those of you who have enjoyed this program, I'd love to suggest you check out my weekly podcast, HerMoney with Jean Chatzky.  It is our continuing conversation on money and life — and life and money — for women of all ages. For now, please tune in to the next episode of Closing the Savings Gap, and join us at to find episodes, stories, and more great content. Hope to see you there and we'll talk soon.

Disclaimer: The information contained in this podcast is provided for educational information purposes only, and does not constitute a recommendation from any guest of the podcast to the listener. Neither any guests nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast, and any liability, therefore, including in respect of direct, indirect, or consequential loss or damage is expressly disclaimed. The guests of this podcast are not providing any financial economic, legal, accounting, or tax advice planning or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by such guests or their affiliates to that listener, nor to constitute such person a client of any guests or their affiliates.


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