Do I Need Life Insurance When I Retire?
When approaching retirement, some people find it hard to decide whether they will need a life insurance policy or not. The answer to this question depends on your preparedness. For instance, if your children are grown and can fully support themselves, and you have accumulated enough wealth to comfortably support your spouse when you die, then you might not need a life insurance policy. In some cases, you might also need life insurance after retirement, if you still need to finish paying off loans, mortgage, and final expenses.
Why You Might Not Need Life Insurance After Retirement
A life insurance policy is not meant to build wealth for you, it is meant to protect what you already own. So, it might not make sense to buy life insurance to build wealth for retirement, considering that some cash value policies usually have very high premium payments. So, purchasing life insurance when you retire might not help as much, since you have already accumulated and build your wealth.
Oftentimes, these retirement investment incomes are usually passive, so whether you work or not, there will be a constant source of income for your loved ones. As important as life insurance is, it might not make sense to you at retirement. Below are some of the reasons you might not need life insurance after retirement.
Cash Value Policy Fees
Life insurance policies with a cash value component have very expensive premiums. When you retire, you might not need to pay for the high premiums for policies such as whole life insurance. What’s more, you might not be able to afford to pay for it and also support your lifestyle. Also, your source of income might be from your retirement plan, so it does not make sense to use the money for insurance.
Life insurance policies are often cheaper when you are younger, meaning that if you decide to pay for a policy when you are older, you will pay higher premiums. This is because you are a high-risk individual, and you are likely to die when older than when you were younger. Rather than paying expensive premiums, it would be better to invest the money elsewhere.
Asset Transfers to Beneficiaries
Life insurance might also not be necessary if you own other assets like real estate, stocks and bonds, bank savings accounts, or mutual funds. Such assets are transferable to beneficiaries, so a life insurance policy to protect your loved ones once you are gone might not be necessary.
Why You Might Need Life Insurance
There are different case scenarios where you will need life insurance when you retire. Regardless of how old you are, as long as your finances are not enough to support your loved ones once you leave the workforce, then chances are that you might need life insurance. Whether you are 5 or 10 years away from retirement, you can always put together a plan for your retirement.
So what are some of the reasons why you need life insurance when you retire?
Estate taxes can eat up your retirement income and other investments. To avoid depleting your retirement nest egg, then you will need to purchase a life insurance policy. Oftentimes, individuals with estates worth more than $5.25 million are subject to huge estate taxes. One of the best ways to pay off these estate taxes comfortably is through a life insurance policy.
If you have no source of income for your final expenses, you will also need to purchase a life insurance policy for your retirement. Some of the final expenses you might need to cover include burial expenses, unsettled loans, and mortgages, just to mention a few. A final expense, or burial insurance policy is simply a smaller amount of whole life insurance that is designed to cover end of life expenses. Many popular life insurance companies such as Mutual of Omaha, Transamerica, and Gerber Life Insurance company offer popular plans to the senior community.
Working After Retirement
Another reason why you will need life insurance when you retire is if you are planning to work after you do. Retirement for some people does not necessarily mean exiting the workforce completely. If you choose to work after retirement, it means that you still have a constant income flow, so you can afford to pay for policy premiums. Your life insurance policy benefits will help to replace your income after you pass away.