Most people understand why you should have life insurance in your working years. People sometimes wonder, however, if you really need life insurance in retirement.
People obtain life insurance in their working years, in many cases. They do this, firstly, to protect their household income. If one spouse dies, for example, the goal is to make sure the same standard of living is still possible for the other spouse. Retirees often have enough saved to live out the rest of their lives without working. Therefore, it’s worth asking: Do you still need life insurance protection, when your spouse already has enough income without a life insurance death benefit? The answer to this depends.
Why You Might Not Need Life Insurance in Retirement
Some people might not need life insurance for their retirement. For example, if your current retirement income is reliable and pays all your bills. Some retirees also have whole life insurance policies. With this type of life insurance, policyholders may have accrued additional cash value. For this reason, they may want to include this insurance as part of their overall retirement strategy. Furthermore, your current life insurance policy may be sufficient for your retirement needs. In that case, it’s possible no further insurance products will be needed.
Why You Might Want to Keep Life Insurance
There are several reasons for keeping or purchasing life insurance in retirement. There are three main reasons to consider, however.
First, if you retire with debt, a life insurance policy could be a good idea. The death benefit could help provide your spouse with the funds to pay off the debt. Living a debt-free lifestyle after the death of a spouse could make things somewhat easier for them. If nothing else, the additional funds can help give your loved ones more stability.
Second, if your retirement income will decrease when your spouse dies, life insurance could help fill the gap. For instance, some pensions continue to pay a spousal benefit when the former employee passes. The amount could be much less than before the death of your spouse, however. Your household social security income could change as well. Some retirees may even find themselves having to cut back expenses if they’ve not properly planned for this change.
Lastly, life insurance could help if you have a child, spouse, or another family member who relies on you for care. For example, while a couple’s retirement income could be enough to cover their own expenses, 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 case, if one of the spouses dies, the family could need more income. You may need to pay for someone to help you with caregiving now that you’re alone. These additional funds can also be useful if either the husband or wife requires support as well.
As you can see, whether you need life insurance in retirement or not depends on your situation.
Estate Planning Reasons For Life Insurance
In addition to income and lifestyle protection, retirees might choose life insurance for retirement for estate planning reasons. (Note: You should always consult a qualified estate planning attorney and tax advisor for specifics.) Retirees may consider life insurance in retirement if they have large total assets. If your portfolio contains millions of dollars, it’s possible for life insurance to assist in the payment of your estate taxes when you die. Life insurance could also be used to help pay for any buy-sell business agreements you may have. Again, using life insurance for this purpose is a complicated matter. Therefore, be sure to consult with an estate planning attorney before considering life insurance for this.
Do you have any questions about life insurance in retirement? Cornerstone Wealth Management can help answer them. Schedule a meeting with us or register for one of our upcoming events to learn more.