Do You Still Need Life Insurance When You Retire?
Are you in the final years of your career? Or did you recently retire? If so, you may be in the process of evaluating your financial strategy and making adjustments. You may be analyzing your investment strategy or developing a retirement budget. Perhaps you’re deciding when to file for Social Security benefits. This is likely a busy but exciting time!
This may also be a great time to review your life insurance policies. You may have acquired a variety of life insurance policies over the years. Many people purchase life insurance of various kinds while they are working to protect their spouse, kids and other loved ones in the event of their death.
Many retirees feel that they don’t need life insurance coverage anymore. In fact, some even cancel their policies. However, there may be good reason to keep your life insurance or perhaps even even increase your coverage in retirement. Below are two common reasons why retirees ditch their life insurance and why these reasons may not be the best idea. If this is something you have been thinking about doing, you may want to reconsider after reading this…
Myth #1.) Empty nesters with grown children don’t need life insurance.
The most common motivation to buy life insurance as a parent is to protect young children. If that was the reason you bought insurance, you may feel like you no longer need that coverage once your children are grown. If you’re an empty nester with significant assets and little debt, life insurance may seem unnecessary.
Don’t cancel those policies just yet, though. Life insurance can serve a variety of purposes, and it can actually be a very helpful resource in retirement. This is especially true if your policy has accumulated cash value. You can use that cash value as an emergency reserve or supplemental income source. You may even be able to take tax-efficient loans or withdrawals from the policy in retirement. (See this post for more information on this strategy.)
You can also redirect the purpose of the death benefit. Just because it was originally intended to protect your young children doesn’t mean it has to stay that way. Consider using the policy to fund college for your grandchildren or to leave a charitable legacy.
Myth #2.) I have plenty of retirement savings to support me and my spouse, so I don’t need life insurance.
Many retirees enter retirement with more assets than they’ve ever had in their life. After all, you’ve (hopefully) been saving for retirement for decades. Surely those assets will be sufficient for both you and your spouse. If you have plenty of retirement assets, you might think there’s no need for life insurance.
Remember, though, that retirement can span several decades. It’s possible that your assets may not last as long as you expect. You may spend more than you’d planned, or the financial markets could take a downturn. You may face significant medical and long-term care costs in the final years of your life, and those costs could deplete your assets very quickly.
Life insurance gives your spouse a boost in assets upon your death. He or she can use that money to fund living expenses, provide gifts to family or pay for his or her own long-term care. If you pass away relatively early in retirement, your spouse may need to support himself or herself for many more years. Life insurance could help your spouse overcome that challenge.
Ready to review your life insurance as you head into retirement? Contact us today to discuss your needs and goals. We can help you analyze your policies and your needs and develop a strategy that will help you achieve the retirement goals you desire!
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