The Uses of Life Insurance When You Retire

The Uses of Life Insurance When You Retire

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Do you need life insurance when you retire?

Life insurance needs in retirement are similar to those who are in their working years. 

Life insurance is a tool to replace the loss of income. If you are in retirement and someone depends on your income, you may want to consider owning permanent life insurance.

For example, in Social Security retirement planning, life insurance is a tool that can give a recipient peace of mind if they decide to wait until age 70 to start receiving benefits.

The life insurance premium can be paid for with the increased income from delaying Social Security benefits and be used to create a larger estate. Before the benefits begin

though, the death benefit of the life insurance policy will ensure the recipient gets everything they are entitled to, even if it isn’t the Social Security Administration who is giving that money to their estate.

The life insurance company will provide their heirs with the lost money if they do not live long enough to break-even.

Another use of life insurance in retirement involves the survivorship benefits of a pension. 

If you have a pension, you will notice that the lifetime income benefit based on your life only is higher than the income you will receive if you wish to leave your spouse a benefit in the event you pass away first. 

The difference between those two incomes is the premium you pay for a form of life insurance policy that the pension carries to ensure survivor benefits.

You may not have realized you have the choice of purchasing either the life insurance plan the pension offers (where the pension company keeps the proceeds regardless of which spouse passes away first) or buying your own permanent life insurance plan that can be used to create an estate, used to provide money for potential long-term care needs in the future or even sold to a life settlement company.

Other reasons to own life insurance in retirement

Life insurance is a contract where the death benefit passes to beneficiaries efficiently. These benefits pass on to named beneficiaries without going through probate and are provided to them income tax free. In addition, permanent life insurance contracts such as whole life and universal ensure that funding goals are accomplished regardless of how long a person lives. If an insured individual lives one day or 50 years, life insurance’s guaranteed death benefit provides a stated amount of money to ensure long-term estate planning goals are met.

Lastly, some retirees buy life insurance to cover final expenses. 

Isn’t Life Insurance Too Expensive When Someone is Older?

Purchasing life insurance at or near retirement requires more premium than when purchasing this coverage at a younger age. Therefore, the correct way to judge if owning life insurance when you retire is the right strategy for you is to compare it to your other alternatives in order to see if it can help you accomplish your goals more efficiently.

Because buying life insurance in retirement almost always involves the purchase of a permanent life insurance policy with a significant financial commitment, Decision Tree Financial suggests you fully understand what any alternative options you have available to accomplish your goals, how you will pay the required premiums for the policy during your retirement and what you can do in the future if the policy no longer is wanted.

Confussed About The Choices You Have In Retirement?

These are just a few of the ways life insurance could help you with a more secure retirement. 

The problem is that, without a comprehensive view that considers ALL aspects of your financial life, it is nearly impossible to know what to do.

Our Wealth Manifestation Process helps retirees make smart financial decisions so they can manifest the future they desire. It helps by organizing all parts of your financial life so it is organized, coordinated and easy to understand.

You can learn about the process here…