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How much money should you have saved by each age?
No matter your age, it’s never too early to start planning for the future. There’s no hard and fast rule for exactly how much money to have saved at every age, but understanding savings trends among people in your age range can help you get a better sense of your financial standing and set realistic goals. In general, budgeting experts recommend allocating 20% of your income toward savings by following the 50-30-20 rule.
The most recent Federal Reserve Board’s Survey of Consumer Finances lists the average savings balance for six primary age groups. These statistics measure the average amount of money people hold in transaction accounts, which includes checking and savings. Here’s a look at their findings:
- Under 35: $11,250
- 35-44: $27,910
- 45-54: $48,200
- 55-64: $57,670
- 65-75: $60,410
- 75+: $55,320
How to Use Life Insurance as a Savings Tool
Life insurance is one of several tools you can use when you want to prioritize and build your savings. While you’re probably familiar with life insurance’s fundamental purpose, which is providing your loved ones with financial support in the event of your death, there are also ways for you to take advantage of it while you’re still alive. For instance, you can use a life insurance policy as a way to supplement your savings or reach specific savings goals, like a retirement fund.
To gain a better understanding of how this works, it’s important to understand the two primary types of coverage: permanent life insurance and term life insurance. A permanent life insurance policy is meant to last your entire lifetime, while term coverage lasts a set number of years. Permanent life insurance policies have a cash value component that can be used as a savings tool; this component is not offered as part of term life policies.
There are three ways you can access the cash value of a permanent life insurance policy:
- Withdrawal: This method of accessing your life insurance allows you to make a straightforward withdrawal from the overall cash value of your policy. It’s important to note that in most cases, a withdrawal will reduce the overall death benefit of your policy, so you may want to avoid making them if you’re trying to maximize the benefit of your life insurance coverage for your loved ones.
- Loan: Another option for accessing the cash value of your policy is to take a loan against the cash value portion from your insurance carrier. If you want the death benefit to remain the same, you can pay back the loan plus interest over time. If a reduced death benefit isn’t a concern, you can choose to not back pay the loan or the interest. Both methods come with a perk: even though you’re taking out a loan against the cash value portion, your cash value account doesn’t actually fund the loan. The insurance company does. This means that your cash value component can continue growing with earned interest even while you have an outstanding loan.
- Surrender: The third option for accessing your funds is to surrender, or terminate, your policy. This means you receive the entire cash value, minus the insurance carrier’s surrender fee. Choosing this option ends your life insurance coverage and the need for premium payments. This option can have tax consequences as well, so it’s important to consult your carrier before deciding to surrender your policy.
Why Life Insurance Can Benefit You at Any Age
No matter your age and where you are in your financial journey, life insurance is a valuable form of protection and security. Here are some examples of how life insurance can provide you with the financial support you and your loved ones need, at all stages of life:
- Young families may choose a term life insurance policy to cover them until they’ve reached certain milestones, like paying off a mortgage or getting their children through school.
- Middle-aged individuals approaching retirement can use the cash value of a permanent policy to supplement their retirement income.
- Older adults can purchase final expense insurance as part of their end-of-life planning to avoid leaving their loved ones with the burden of funeral costs and unpaid debts.
Plan for Your Financial Future by Shopping for Life Insurance with SelectQuote
With the right life insurance policy, you can have peace of mind that your loved ones are protected while also planning for your financial future. When shopping with SelectQuote, we take the guesswork out of the life insurance shopping process by searching trusted carriers on your behalf. We’ll find you a variety of quotes in a matter of minutes and help you choose the coverage that’s right for your lifestyle and financial needs.
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