Most people understand the reasons for having life insurance during their working years. But, sometimes people wonder, “Do you really need life insurance in retirement?” Fair question.
In some cases, people obtain life insurance in their working years. First, they do this to protect their household income. If one spouse dies, for example, the idea is to keep the same standard of living possible for the other spouse. Presumably, retirees have enough saved to live out the rest of their lives without working. So, do you still need life insurance protection if your spouse already has enough income without a life insurance death benefit? The answer? It depends.
Why You Might Not Need Life Insurance In Retirement
Some people may not need life insurance in retirement. For example, if your current retirement income is reliable and pays all your bills, you may not need life insurance. Also, some retirees have whole life insurance policies. With this type of life insurance, policyholders may have accrued a cash value in their policy. Therefore, they may want to include this insurance as part of their overall retirement strategy. In addition, your current life insurance policy may be sufficient for your retirement needs. In that case, no further insurance products may be needed.
Three Main Reasons Retirees May Keep Life Insurance
There are several reasons for purchasing or keeping life insurance in retirement. However, there are three main ones to consider. First, if you retire with debt, a life insurance policy may be a good idea. For one thing, the death benefit may help provide your living spouse with the funds necessary to pay off the debt. Living a debt-free lifestyle after the death of a spouse may make things a little easier. If nothing else, the additional funds could give your loved ones more stability.
Secondly, if your retirement income will decrease if your spouse dies, life insurance may help fill the gap. For example, 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 may change as well. In fact, some retirees may find themselves having to cut back expenses if they have not properly planned for this change.
Thirdly, life insurance may help if you have a child or spouse who relies on you for care. For instance, a couple’s retirement income may be enough to cover their own expenses. However, if that couple also provides care for their adult child who has disabilities or medical issues, income alone may not be enough. In this case, if one of the spouses dies, the family may need more income. For example, you may need money to pay for someone to help with caregiving now that you are alone. These additional funds can also be useful in cases where either the husband or wife requires support as well. Do you really need life insurance in retirement? As you can see, that depends on your situation.
Estate Planning Reasons For Life Insurance
In addition to income and lifestyle protection, retirees may choose life insurance for estate planning reasons. Note, you should always consult a qualified estate planning attorney and tax professional for specifics. However, retirees may consider life insurance in retirement if they have large total assets. If your portfolio consists of millions of dollars, it is possible for life insurance to assist in the payment of your estate taxes when you die. Also, life insurance can sometimes be used to help pay for any buy/sell business agreements you may have. Again, using life insurance for this purpose is complex. Therefore, be sure to consult with an estate planning attorney before considering life insurance for these purposes.
Questions About Life Insurance In Retirement?
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