Most people understand the reason for having life insurance in their working years. People do sometimes wonder if they really need life insurance in retirement. And this is a perfectly reasonable thing to wonder. Now, in some cases, people obtain life insurance in their working years. They do this mainly to protect their household income. If one spouse dies, the idea here is to keep the same standard of living possible for the other spouse. presumably, retirees usually have enough saved to live out the rest of their lives without working. So then, do you still need life insurance protection if your spouse already has enough income without a death benefit? The answer depends.
Reasons You Might Not Need Life Insurance in Retirement
Some people may not need life insurance in retirement. As an example, if your current retirement income is reliable and pays all your bills, you may not need it. Some retirees also have whole life insurance policies. With this type of life insurance, policyholders may have accrued a cash value in their policy. For this reason, they might want to include this insurance as part of their overall retirement strategy. Additionally, your current life insurance policy could be sufficient for your retirement needs. In this case, no further insurance products may be required.
Reasons You Might Want to Keep Life Insurance in Retirement
There are quite a few reasons for keeping or even purchasing life insurance in retirement. There are three main reasons, however, to consider doing this.
First of all, if you retire with debt, a life insurance policy could be a good idea. For one thing, the death benefit may help provide your spouse with the funds necessary to pay off that debt. Living a debt-free life after the death of a spouse may make things a little easier. And, if nothing else, the additional funds could give your loved ones more confidence and stability.
Second of all, if your retirement income will decrease when your spouse dies, life insurance could help fill the gap. Some pensions continue to pay a spousal benefit when the former employee passes. However, the amount could be much less than before the death of your spouse. Your household social security income could change as well. As a matter of fact, some retirees may find themselves having to cut back expenses if they haven’t properly planned for this change.
Thirdly and lastly, life insurance could help if you have a family member who relies on you for care. As an example: A couple’s retirement income may be enough to cover their own expenses. But if that couple also provides care for their adult child who has a disability or medical issue, income alone might not be enough. In this scenario, if one of the spouses dies, the family may need a source of additional income. You may need money to pay for someone to help with caregiving now that you’re alone. If the husband or wife requires support as well, these funds could also be useful. So, do you really need life insurance in retirement? As you can see, the answer to that depends.
Keeping Life Insurance For Estate Planning Reasons
Retirees may choose life insurance for estate planning reasons, on top of income and lifestyle protection. Retirees may consider life insurance in retirement if they have large total assets. If your portfolio consists of large amounts of money, it’s possible for life insurance to assist in payments of your estate taxes when you die. Life insurance could also sometimes be used to help pay for any buy-sell business agreement you may have. It’s important to note, however, that using life insurance for this purpose is complex. It’s crucial that you consult with a qualified estate planning attorney and tax advisor before considering life insurance for this purpose.
Tower Bridge Financial is here to help show you your options. Contact us for a one-on-one meeting or register for one of our upcoming events to learn more.