Life Insurance in Retirement: Is it Necessary? - Rodgers & Associates
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Life Insurance in Retirement: Is it Necessary?

Many clients come to us with the question, “Do we need life insurance in retirement?” The answer to this question isn’t always easy to uncover, since it depends on the situation of the individual or family. Everyone has different goals, asset levels and health histories, which help determine whether life insurance could be beneficial.

Life insurance, for the most part, is meant to protect families from loss of income. Naturally, many hold life insurance policies during their working years, so if the family loses their income they don’t find themselves in financial trouble.

Consider the following questions to help determine if you still need to cover this risk in your retirement

Will you still need income to meet your financial goals?

Given the nature of life insurance, many retirees don’t need coverage because they have saved enough resources to provide for themselves and their families without working. If you are living off your investment accounts, social security, and possibly a pension, you might not need life insurance.

Many individuals receive pension benefits when they retire, and when they leave their jobs they are given different pension options to choose from. Some people have survivorship benefits that can be left behind for the surviving spouse. Individuals and families who rely on pension income may want to consider life insurance as a tool to protect against the potential loss or reduction of this income.

Do you still hold debt?

Not everyone is able to retire debt-free. Actually, 32% of homeowners age 70 and older still have mortgage debt.1 Sometimes carrying debt into retirement warrants the need for life insurance coverage, and other times it doesn’t. If the debt is small enough that it won’t impose financial diffi­culty on you or your family, you may not need life insurance.

Do you need life insurance for estate planning?

Many times, life insurance can be used as an essential estate-planning tool for families expecting to leave assets to their heirs. For example, in Pennsyl­vania many heirs can expect to pay inher­i­tance taxes to the State, and life insurance proceeds can be used to pay for the taxes. This can be handy for estates that aren’t liquid, which might hold business interest or be comprised of different real estate properties. If this is the case for you, you’ll want to carefully discuss life insurance as an estate-planning tool with your estate attorney and financial adviser.

Deter­mining whether you need life insurance in retirement can get compli­cated. Yet with the proper infor­mation and planning, you can determine what’s right for your situation before purchasing a policy you don’t need or not having one your family needs.

Jeremie’s Insights

  • Whether you need to maintain life insurance during retirement depends on your unique situation.
  • If you’re living off investment accounts, social security, and a pension, you might not need life insurance.
  • If you maintain debt or expect to pass on non-liquid assets to heirs, life insurance might be right for you.