Do I need life insurance when I retire?
This is a big question many people have, and it’s a good one. The answer is – it depends.
Generally, life insurance is used to replace income. When you’re no longer working, it stands to reason that you may no longer need life insurance. However, you will have other forms of retirement income, like social security. Many are surprised to learn that if one of you dies, the other gets only the higher of the two social security payments. Or, you may choose less than a 100% survivor benefit for your pension, leaving an income gap that needs to be filled. You may have liabilities going into retirement that you would like to take care of, or an inheritance to a child to equalize the funding to all children.
What type of life insurance do you have?
If it’s a group policy at work, you usually have 30 days to decide if you want to convert it to individual coverage. Pay close attention to the costs and possible reductions in the amount of insurance at a certain age.
If it’s term insurance, how long is the term? It’s painful paying for 20 or 30 years of life insurance and outliving the term.
If it’s permanent insurance, have you, or will you, borrow against it? Understand the costs of borrowing the insurance company’s money (after all, it’s there to pay future insurance premiums!)
If it’s universal life insurance, is it guaranteed or could increasing premiums deplete your cash value and cause it to lapse?
If you don’t need life insurance and you have cash value in your policies, could it be used better elsewhere with no tax consequences, perhaps with a life/long term care insurance combination?
Along with making retirement and investment decisions, it’s not one that should be undertaken without professional advice and a thorough understanding of all other income, assets, and liabilities.
I encourage you to plan today for a great tomorrow!
Laura Mickels has spent more than 30 years working for investors with both Wall Street and independent firms. CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement.
These are the opinions of Laura Mickels and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.