Burial Insurance – is it for you?

funeral insuranceSooner or later death will come knocking at everyone’s door. Many people want to make arrangements for end-of-life preparations before that final time arrives to ease the stress and burden on grieving family members. Purchasing burial insurance takes care of paying in advance for services that will be provided sometime in the future.

Burial insurance can be confusing since death does not always result in a funeral or burial. However, burial insurance policies can cover most types of final arrangements, including cremation or donating your body to science.

Most burial insurance policies are a small type of whole life insurance plan that can be purchased from an agent who sells plans from various life insurance companies. Other burial policies can be purchased through funeral service providers.

It is prudent to note that it is far better to purchase burial insurance as a whole life policy, rather than as a term life policy. Term life policies will expire at a certain age. You may outlive your burial insurance if you have burial insurance under a term life policy.

Burial insurance can help defray many final expenses such as medical bills, services, flowers, urns, caskets, plot planning, interment and estate taxes. Since burial policies are designed specifically to cover final costs; consumers are able to buy policies in much smaller amounts than typical life insurance policies. Some burial plans may cover $25,000 dollars, while others may be available in higher or lower amounts.

Benefits of burial insurance are numerous.

•No medical or physical exam:
Burial insurance policies are generally marketed by life insurance companies. Unlike life insurance; to apply and qualify for burial insurance does not require meeting stringent physical requirements.

•Peace of mind:
Burial insurance can ease the strain on family members and relatives that may not be emotionally or financially ready to deal with the many details of funeral services. Burial insurance policy claims are usually paid quickly since funeral costs are due at the time of the service.

•Cost effective:
Funerals are not getting cheaper and can cost upwards of several thousand dollars. This can be a devastating amount to pay in a lump sum. A funeral service paid at death with burial insurance is usually much less expensive since it has been pre-planned.

•Control:
Purchasing burial insurance will give you the most control over your own final arrangements since your preferences will be written and followed.

Can you trust online-only banks?

By Melanie Hicken  @melhicken

online banking

Many online banks offer a variety of perks, ranging from higher interest rates for savers to fewer fees.

NEW YORK (CNNMoney)

Are non-physical branch online banks with higher interest rates trustworthy? — Thuy, San Jose, Calif.

With low interest rates making it a difficult time for savers, opting for one of their branchless counterparts can seem pretty appealing.

The lack of overhead costs for things like branches and tellers means that online banks can afford to offer higher interest rates on savings and money market accounts — albeit these annual rates are still paltry, typically ranging from 0.6% to 1%, according to Bankrate.

Internet-only banks offer customers further savings by charging fewer fees than their brick-and-mortar competition. For example, branch-free Ally Bank lets you use any ATM for free.

And while there are some tradeoffs to switching to an online bank, security isn’t one of them.

“Brick-and-mortar banks give an appearance of safety, but they are no safer,” said Deana Arnett, a Manassas Va.-based financial planner.

In order to protect your money and personal information, be sure to follow these rules when banking online.

Make sure deposits are federally insured. The Federal Deposit Insurance Corporation protects your money in case your bank fails. Currently, the FDIC will protect up to $250,000 in deposits for each account holder.

Check the bank’s website to see if it’s insured by the FDIC or you can use the agency’s BankFind web tool. In addition to listing a bank’s FDIC status, the database includes information on its history and links to its latest financial information.

Beware of copycats. Just because it looks like a popular bank’s website doesn’t mean it’s safe. Scammers will often attempt to trick you through sites that mimic those of real financial institutions.

The FDIC advises that you always make sure you’ve typed the correct web address before going through with any transaction. And never click on a link within an email since scammers often send fraudulent messages attempting to get your personal information, Arnett said.

Lock out identity thieves. Whenever you use online banking tools, regardless of whether it’s through a physical or online-only bank, you should make sure your bank is encrypting your information. Look for a lock or key icon in the web address window of your Internet browser.

You should also carefully craft a banking password that can’t be easily guessed by identify thieves. In addition, it’s a good idea to use one that’s unique from those used for other accounts, such as your email, and to change it regularly.

As long as you follow all these steps, you can bank online in confidence, said Arnett.

“It’s a nice world in which to do banking,” she said. “You just have to think a little differently.”

First Published: August 30, 2013: 6:23 AM ET

The Social Security mistake that costs retirees thousands

By Melanie Hicken  @melhicken

social security strategy

While many retirees claim their benefits at the age of 62, holding off can often result in an additional hundreds of thousands of dollars over a lifetime.

NEW YORK (CNNMoney)

After decades of paying into the Social Security system, many retirees are eager to start collecting that monthly check as soon as possible. But that can be a costly mistake.

While you’re allowed to start claiming Social Security benefits at age 62, holding off for several years can add thousands of dollars to your payments over a lifetime. That’s because you don’t qualify for all of your earned benefits until you reach “full retirement age,” which is 66 for most Baby Boomers and 67 for those born in 1960 or later.

So checks claimed at age 62 are about 25% smaller than if you wait until your full retirement age. And if you wait even longer, your annual benefits will grow by another 8% for each year you wait up to age 70.

For example, let’s say 61-year-old Mary, who currently earns $55,000, is deciding when to retire. If she were to file for Social Security benefits next year at 62, she would receive around $15,400 a year, according to T. Rowe Price’s Social Security benefits evaluator. If she waits until 66, however, her annual benefits would grow to around $20,500 per year. And if she is able to hold off for several more years, until age 70, her annual benefits would climb to roughly $27,100 per year.

The difference can really add up. If Mary lives to be 95 years old, claiming her benefits at age 70 would result in roughly $677,000 in cumulative Social Security benefits (in today’s dollars), compared to the $500,000 or so in benefits that she would receive if she’d filed eight years earlier.

“We think for most people that’s really startling because they’ve never really thought about it,” said Christine Fahlund, a senior financial planner at T. Rowe Price. “They don’t appreciate that waiting would make such a difference.”

Still, waiting until 70, or even 66, is not for everyone. For example, you may be concerned that you won’t live long enough to reap the benefits of waiting for the larger checks. In Mary’s case, she would need to live to at least 80 before waiting until age 70 to collect Social Security would result in greater lifetime benefits.

Another potential obstacle: Due to health issues or unemployment, you may not be able to work any longer and don’t have enough savings to tide you over.

“Just because it’s better doesn’t mean it’s necessarily going to be the best option for you,” said David Richmond, president and founder of Richmond Brothers, a Michigan-based financial advising firm. “You may not be able to afford to maximize Social Security.”

Living off credit cards to ensure a larger check is never going to be a good idea, for example.

While singles are only able to control the age at which they file for benefits, married couples (and divorced couples who were married for at least 10 years) have a variety of strategies to consider. Each married partner is typically eligible for three kinds of benefits, depending on circumstances:

  • A retired worker benefit, which are the benefits you accrue over your own working years.
  • A spousal benefit, which entitles you to half of your spouse’s benefits while he or she is still alive. If you have not hit full retirement age, you are only eligible to receive a portion of those benefits.
  • A survivor benefit, which entitles you, once you reach full retirement age, to a deceased spouse’s full benefit. If you have not hit full retirement age, you are only eligible to receive a portion of those benefits.

Couples can increase their annual benefits by coordinating when and how they file for Social Security. In many cases, for example, it makes sense for the lower-earning spouse to file first, while the higher-income earner waits as long as possible.

Not only does this strategy result in larger annual benefit checks, it also locks in a higher “survivor benefit” for the lower-earning spouse. According to Fahlund, the survivor benefit is so important that sometimes it makes sense for even a spouse with health problems to hold off on claiming benefits if he or she is the higher earner.

Couples can also consider other strategies, such as the ability to “file and suspend,” which allows one partner to receive spousal benefits while the other partner delays their annual benefits to receive a larger check.

To learn more about the Social Security strategy that makes the most sense for you and your retirement goals, online tools are available, including the Social Security Administration’s Retirement Planner, T. Rowe Price’s Social Security Benefits Evaluator tool and AARP’s Social Security calculator.

First Published: July 31, 2013: 5:57 AM ET