Do You Need Life Insurance in Retirement?
As you age, the idea of life insurance seems increasingly unnecessary. Many retirees prefer not to continue paying life insurance premiums when they no longer have young families to take care of. However, before you shrug off the idea of life insurance in retirement, it's a good idea to consider that life insurance still has its virtues.
[See 5 Life Insurance Strategies for Retirement Planning.]
You may still have dependents. Many retirees no longer have young children who will suffer financially if they pass on. But even once your children have established their own lives, you might have another dependent: Your spouse.
Your spouse might need to be protected from the loss of your income, even if you are retired. Check out the conditions of your pension or annuity. Also, consider that your Social Security check forms a portion of your retirement household income. When you die, your spouse's income is likely to be affected. Pension payments might stop, Social Security income often decreases, and annuity payouts might also cease, or getting at the remaining benefits might prove expensive.
[See How to Protect Your Retirement Savings From Creditors.]
It's important to look over the conditions attached to the income your spouse receives upon your death. If you care for your spouse, you want to make sure he or she is taken care of financially. The right life insurance policy can ensure that, when you pass, your spouse can make up the shortfall that comes with the loss of income from sources tied to your lifespan.
Life insurance can be used in estate planning. Heirs generally do not have to pay taxes on life insurance benefits. In some cases, retirees can use life insurance as a way to help their heirs pay estate taxes. Life insurance trusts, when used properly and set up with the help of a knowledgeable estate planner, can be a valuable tool for a retiree.
For some people, life insurance in retirement isn't very practical. However, for others, life insurance coverage can provide a solid estate planning strategy, as well as provide for a spouse later on.
[See The 10 Best Places to Retire in 2012.]
Remember that you are more likely to save money by renewing an existing policy than by purchasing a new life insurance policy after age 50. So, before you let your life insurance lapse, make sure you run the numbers. You might need life insurance in retirement after all.
Jeff Rose is a certified financial planner and U.S. combat veteran. He blogs at Good Financial Cents and Soldier of Finance.
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