Do I Need Life Insurance After I Retire?
Understand the Importance of Life Insurance in Retirement
The reasons for buying Life Insurance in your 20s, 30s, and 40s may no longer apply after you retire, but don’t be too quick to cancel an existing insurance policy or believe that life insurance can’t support your financial goals; you may still need life insurance after you retire.
Keep in mind that life insurance benefits are tax-free. Because of that, there’s another important reason for retired people, in particular, to buy life insurance or keep it: tax planning. Suppose you’ve saved well and spent carefully all your working life, and you want to continue to live similarly in retirement.
Protect your loved ones against financial hardship
Here are 10 reasons to consider maintaining Life Insurance during retirement
Gain insights into how Life Insurance can help pay off debts or other obligations
1. A Life Insurance policy’s death benefit is a source of cash for final expenses and estate settlement costs, including estate and inheritance taxes
We all want to be free of outstanding financial obligations at death to avoid passing financial burdens on to our families. The proceeds from a life insurance policy can be used to help pay funeral costs and last expenses. They can also help pay estate and inheritance taxes on the legacy you may hope to leave behind. Life Insurance is part of Estate planning. Wealthy retirees sometimes use Life Insurance as an estate planning tool. For example, Life Insurance death benefits could be used to pay estate taxes and capital gain tax instead of having to sell assets at an inopportune time.
2. You may still be working! Life Insurance can help replace lost income
Many people at retirement age will continue to work full or part-time and there is a need to replace their income in the event of their death. Life Insurance can help ensure that income is there in the future for those who depended on it.
3. Life Insurance can be used to replace all or a part of your spouse’s pension benefits
If your spouse dies, you may no longer be eligible to receive his or her Social Security or full retirement benefits. The death benefit from a Life Insurance policy can help replace these lost benefits.
4. The Life Insurance policy death benefit can be used to pay off mortgages or other debt.
It would be nice to imagine living debt free in retirement, but the reality is that most of us will continue to carry debt, including a mortgage. Life Insurance proceeds provide a safe, secure way to help your loved ones pay off debts you may have in retirement.
5. Responsibilities don’t retire when you do.
Today, many people heading into retirement still have people depending on them, from a spouse and children to elderly parents. If a large part of your retirement income is furnished by your pension, you might need Life Insurance proceeds as a pension replacement for your spouse or another dependent because they cannot receive your pension after your death.
6. Life Insurance can help create or protect a legacy
Inherited assets, such as traditional IRAs and tax-deferred annuities that bring with them an income tax liability, may benefit from Life Insurance proceeds. Planning techniques can also enhance your legacy. These planning techniques usually require or benefit from the liquidity that Life Insurance can provide.
7. Your employer-sponsored group Life Insurance plan could retire when you do.
An individual Life Insurance policy can replace any group coverage you lose when you retire. While you may have some Life Insurance through work, if you retire, change jobs, or become self-employed, you may lose that coverage. To make sure you have enough Life Insurance after you retire, buy Individual Life Insurance now – premiums will increase as you age and if you develop health issues.
8. Policy withdrawals or loans can be used to supplement your retirement income
Employer-sponsored retirement plans typically replace only a part of pre-retirement income. A Permanent Life Insurance policy offers access to policy cash value during retirement, which you can use whether you decide to start a business, pursue a hobby or handle an emergency – or supplement your retirement income. A cash value of a Life Insurance policy can help you pay for unexpected expenses either by withdrawing some of the cash value or by taking a loan against the policy as it is an asset.
9. If your policy has a Living Needs Benefit a portion of the proceeds can be accessed if you become terminally ill or confined to a nursing home
Living longer means more time to enjoy your favourite things, but how will this affect your retirement resources? You may live 20 or 25 years or more in retirement – if you have health issues, the costs of daily living can really add up. Ask about the Living Needs Benefit Rider, which accelerates the death benefit to help pay related expenses if you become terminally ill or need to live in a nursing home.
10. A Life Insurance policy may have other features and benefits that can help provide you and your family with insurance protection/options in retirement
Protect against stock market downturns. If you’re concerned about how a market crash could affect your investments, cash Value Life Insurance could provide a backup plan if your portfolio value goes down so much that it reduces your income stream and impacts your lifestyle. Or you can use the policy as colleterial at the bank and for a bank loan which is then paid on your death. If you wish to distribute assets equally among your heirs. An example could be if you wanted to leave your stock portfolio to child number one and the house to child number two, you could use your Life Insurance death benefit to equalize those gifts for child number three.
Glenn Stewart can help with your retirement, estate planning, Life Insurance needs at any stage call him now
at 519-896-9970!
Email: glenn@glennstewartinsurance.com
No matter what stage of life you are in, it helps to have a trusted, knowledgeable financial advisor in your corner.