You Insure Your Car and Your Home – So How Can You Insure Your Financial Future?

Whether you’re concerned about market risk, outliving your retirement savings, protecting your qualified plan, your final years or your loved ones – here are five ways to insure your financial future.

A curvy road with 2021, 2022, 2023, 2024, 2025, etc. painted on it.
(Image credit: Getty Images)

If 2020 reminded us of one thing, it’s that we should expect the unexpected.

In fact, according to Nationwide’s sixth annual Advisor Authority Study of more than 2,500 financial professionals and individual investors, 85% of investors said that even if they did all the right things to manage their finances, they could be blindsided by outside events.

To prepare for the unexpected, you probably already have insurance to protect your car, your home, your health — maybe even your pet. But do you know about the ways that you can insure your financial future?

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Five Ways to Insure Your Financial Future

Preparing for your financial future starts with a holistic financial plan and a well-diversified portfolio. Staying invested for the long-term is key. Max out your qualified retirement plans at work, such as your 401(k), 403(b) or 457(b). Then maximize your savings in tax-advantaged vehicles, including traditional IRAs and Roth IRAs.

Insuring your financial future takes it one step further. To protect your investments against market risk, protect against outliving your savings in retirement, protect your qualified retirement plan, your final years, or a financial legacy for your loved ones, insurance solutions may help.

To find the right fit for your long-term goals, and the level of protection you need, be sure to consider:

  • Your risk tolerance: Are you a conservative, moderate or aggressive investor?
  • Your time horizon: How many years of saving do you have before you retire?
  • Your liquidity needs: Will you need access to a portion of your assets before you retire?

Be aware that not all insurance will be beneficial for you. Keep in mind that guarantees and protections are subject to the claims-paying ability of the issuing insurance company, so look for an insurer with superior rating and financial strength. Working with an adviser or financial professional may help.

Now let’s take a closer look at five ways to insure your financial future:

Insure Your Investments Against Market Risk

Nationwide’s study revealed that protecting assets was investors’ No. 1 financial concern, and pandemic-related losses in their portfolio were a close second. The market has rebounded from last year’s lows, but volatility is still a reality, and the pandemic is still a threat. Insuring your investments with an annuity may help you protect against market risk and potentially grow more wealth for the long term.

If you’re willing to take on some market risk in exchange for more upside potential, Registered Index-Linked Annuities (RILAs) can offer growth of an underlying stock market index, such as the S&P 500 or Nasdaq 100, combined with different degrees of protection through a buffer or a floor, depending on your tolerance for risk.

If you’re a moderate to aggressive investor concerned about ongoing volatility, RILAs with a buffer can protect against losses within a specific range. But if markets fall below that range, it leaves you exposed. If your buffer is 10%, and the market falls 10%, you’re protected. But if the market falls 30%, the buffer protects the first 10% and you lose the next 20%.

If you’re a conservative to moderate investor concerned about steep downturns or a prolonged bear market, RILAs with a floor offer a clearly defined level of protection. The floor is set at the maximum loss you’re willing to accept, and any losses below that floor are absorbed by the insurer. If your floor is 10%, whether the market falls 10%, 15%, 30% — or more — you will never lose more than 10%.

If you’re a more conservative investor, Fixed Indexed Annuities (FIAs) also offer growth potential linked to the performance of an underlying index, with the added benefit of guaranteed principal protection. While you won’t have the same degree of growth potential as a RILA, you won’t lose your initial investment, or any earnings credited to you, even when volatility is high or the market is down.

Insure Against the Risk of Outliving Your Savings

According to Nationwide’s study, nearly three-fourths of investors said the pandemic has had a negative impact on how long they could live off their retirement savings.

To insure against outliving your savings, annuities are the only product that can generate a guaranteed income stream for life. With predictable income from an annuity, you can cover essential living expenses. You can fill an income gap while waiting to take Social Security. It may give you the security you need to continue investing a portion of your retirement portfolio more aggressively for greater growth potential and inflation protection.

If you’re approaching retirement, or already in retirement, a single premium immediate annuity (SPIA) allows you to convert a lump sum of money into a guaranteed stream of income. If you have years or decades before you retire, an annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) could allow you to save more for retirement through tax-deferred accumulation, and then turn on an income stream when you need it.

Insure Your Workplace Retirement Plan

401(k)s, 403(b)s and 457(b)s are primary vehicles for retirement savings. The challenge is how to turn those savings into retirement income. Now, thanks to the SECURE Act, it’s easier for plan sponsors to offer annuities within your qualified savings plans. An in-plan annuity can help protect your principal investment, protect against outliving your savings — or both.

In-plan annuities have low or no minimum investment requirements and are designed for you to make regular tax-deferred contributions through payroll deductions. They can be structured like a target date fund, allowing you to accumulate wealth through more aggressive investments when you’re younger and automatically shifting more of your savings into asset protection and income guarantees as you get closer to retirement.

Insure Your Final Years

According to a survey by the Nationwide Retirement Institute® (NRI), the majority of Americans said the pandemic made them recognize the need for long-term care (LTC) insurance. In fact, 7 out of 10 people turning 65 will need LTC at some point in their lives.

LTC insurance helps you maintain your quality of life in your final years. Some think that LTC only covers nursing home expenses. In reality, half of all long-term care services are provided in the home. LTC insurance was developed to help offset the cost of both.

Details matter, so it’s important to compare. Some LTC policies will require you to submit receipts to receive your benefits. Other LTC policies provide a guaranteed monthly benefit, which simplifies the process when the care is in your home and the caregiver is a family member, friend or neighbor.

Many people are concerned about the cost of LTC policies. The perception is that while you pay a lot for it, you hope you don’t use it—and if you don’t use it, you lose it. But there are hybrid policies that will guarantee a payout to your beneficiary after you pass away, which could be equal to or greater than the premiums you paid if you never use your LTC insurance.

Insure a Financial Legacy for Loved Ones

When it comes to legacy planning, the pandemic made the majority of Americans recognize the need for life insurance, according to our NRI survey. But just 54% of all people in the United States were covered by some type of life insurance in 2020, according to the Insurance Information Institute and LIMRA, and 16% of Americans said they know they need life insurance coverage, but they don’t have it.

Life insurance can protect your beneficiaries, including your spouse, children or other dependents, after you pass away. Depending on your policy, the benefits could replace the income that you provided for your family, or could cover a specific amount, such as paying off a mortgage, paying for college, or paying estate taxes and inheritance taxes. It could simply be to cover funeral expenses, which currently average from $7,500 to $9,000.

You could choose term life insurance as a more affordable solution to cover your family for a specific period of time when their needs are greatest — such the years when children are younger or in college. To leave a more substantial legacy, you might choose permanent life insurance that will cover your entire life and will usually build cash value over time that you can pass on to your beneficiaries. And payouts from life-insurance are tax-fee.

Insure Your Financial Future – to Ensure Your Goals

Planning for your financial future — and preparing for the unexpected — may seem overwhelming. But it doesn’t need to be. According to Nationwide’s Advisor Authority Study, the vast majority of investors say that having a plan for their investments makes them feel in control, even if they can’t plan for everything. And their No. 1 reason for working with an adviser of financial professional is to feel more confident in their financial future.

Advisers and financial professionals can help you identify your priorities and the potential risks along the way. They can develop a holistic plan to help you insure your financial future — and ensure that you reach your long-term financial goals. Why wait? This educational resource from Nationwide can help you find a financial professional today.



This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Craig Hawley
Head of Nationwide's Annuity Distribution, Nationwide

Craig Hawley is a seasoned executive with more than 20 years in the financial services industry. As Head of Nationwide's Annuity Distribution, Mr. Hawley has helped build the company into a recognized innovator of financial products and services for RIAs, fee-based advisers and the clients they serve. Previously, Mr. Hawley served more than a decade as General Counsel and Secretary at Jefferson National. Mr. Hawley holds a J.D. and B.S. in Business Management from The University of Louisville.