Do I Need Life Insurance In Retirement


You Plan To Retire Abroad

Do You Need Life Insurance After Retirement?

Do you plan to spend most of your retirement years in another country? Many countries offer retirement visas where you can legally live. Each country has its own set of rules and requirements when applying for a retirement visa.

Some ask that you have health/life insurance and a set amount of money to live on. Make sure to check the country of your choice to see if you meet the criteria to apply for a visa.

You Have Young Children

Having young children or teens means you have dependents, which means you need life insurance. Your income covers the cost of childcare, school fees, medical bills and everything else they need. Protect this income with life insurance until your children are college age and able to support themselves with their own paychecks. A proud moment for them and you!

Life Insurance Options In Your 60s And 70s

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The value of life insurance to a young parent, homeowner or married couple is fairly clear. For healthy applicants, the cost is low and the choices are abundant. If you die unexpectedly, your family will be able to pay bills, send the kids to school or just manage the costs associated with your burial with less financial strain.

Things get more complex when you consider life insurance for older buyers. Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working and sent the kids off to care for themselves.

Sometimes buying or maintaining a life insurance policy over age 60 makes sense. Whether you decide to double down or drop coverage, your retirement years are often a good time to reexamine your life insurance. Here are some of the options.

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Reason #5 The Cash Benefit Could Support Your Preferred Charity

Perhaps your children dont have any of the financial issues mentioned above.

Even if thats the case, you can still find a use for your policys cash benefit. For example, you may use it to support a charity or cause that you care about.

According to Philanthropy Australia, 80.8% of Australian adults give to charity in some form. This means theres a four in five chance that you have a cause youve actively donated to in your life.

Imagine the difference that the full sum of a life insurance benefit could make to one of these charities if you have validly nominated them as the beneficiary. Your life insurance policy gives you the chance to leave a legacy of helping those who you feel need it most.

Who Needs A Life Insurance Retirement Plan

Life Insurance  What Insurance Do I Need In Retirement? Part 1

Most people wont need life insurance at all by the time they retire. Thats because as you get older, your financial obligations such as paying off a mortgage or supporting dependents usually decrease and so does your need for life insurance.

But using a cash value policy to supplement retirement income can make sense for people with more complex financial needs or people who know theyll need life insurance coverage for the rest of their lives. These include:

  • High-net-worth individuals who have already maxed out other retirement accounts and are seeking an additional vehicle for tax-deferred savings.

  • People with lifelong dependents, such as children with disabilities, who will still need life insurance coverage when theyre retired.

Ready to shop for life insurance?

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Investing With Universal Life

Universal life insurance is another type of permanent coverage. You also accrue cash value as you pay premiums, but the amount of your premiums can vary. This gives you some flexibility if youre having a financially tough year. So in good years, you can pay more toward your cash value. In rough years, you can, if you want, pay only the cost of insurance.

Another way universal life insurance is different from whole life is the investment component. After deducting the costs of the policy from your payment, the insurance company credits the rest to you, in the investment vehicle of your choice. The investment returns are yours and go into the cash value of your policy. You can borrow against them tax-free up to the point that withdrawals exceed what youve paid.

Of course, the big downside to universal life is that returns arent guaranteed. So if you are putting your savings in the policy rather than the stock market because you are worried about risk, you will still have exposure. You may want to review the prospectus carefully before choosing this type of coverage.

Are Your Children And Spouse Self

If you reach retirement and your children are out of your home, providing for their own families, and your spouse is self-sufficient, you probably dont need life insurance. On the other hand, if you have children with special needs or kids who are still living in your home, you might want to keep it. Also, if your spouse would lose a substantial amount of your pension income or other monthly payment, life insurance can fill that gap.

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Don’t I Get Free Health Insurance If I Travel In Europe

As a UK resident , you’re entitled to free or discounted medically nescessary treatment at state-run hospitals and GPs in any European Union country plus a few others. You need to apply for an Global European Health Insurance Card at least a week to ten days before you go away preferably longer to allow for busy periods. There are several ways to apply for a card including the GHIC Website and remember it’s absolutely free to apply. Please beware of scam websites that try to charge you for the card. It costs nothing and you shouldn’t need to part with any money when you apply for a card.

GHIC cards ensure you get access to state run medical treatment so it means they are not a substitute for good travel insurance. Depending on where you go, state health provision can be less readily available than in the UK and the standards won’t necessarily be as high. Travel insurance also covers you for a lot more than the costs of any medical treatment including flight delays and lost or stolen belongings, so it’s worth having travel insurance if you are thinking of heading abroad.

Should I Keep Emergency Funds During Retirement

Life Insurance: Do I Need It In Retirement?

Regardless of your age, you should keep an emergency fund for unexpected financial needs. If you’re concerned that an unexpected cost during retirement could leave your family vulnerable to financial hardship, permanent life insurance policies might provide you with peace of mind. If the need arises, a permanent policy can allow you to take out a loan against the policy’s cash value. You can then pay back that amount, or it will be subtracted from your death benefit.

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What Is Life Insurance

First a quick recap about life insurance: Its a contract between you and an insurance company thatin exchange for your monthly paymentsguarantees a sum of money for your loved ones when you die.

Youll hear about a lot of bells and whistles with life insurancefrom child riders to savings accountsbut at the end of the day, the only job of life insurance is to replace your income when you die. Simple!

The beneficiaries who receive the payout will get peace of mind about some pretty important thingshow theyre going to pay the bills, keep a roof over their heads, and put food on the table. This is starting to sound like an all-around winner.

Will You Still Need Income To Meet Your Financial Goals

Given the nature of life insurance, many retirees dont 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.

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Why Do People Buy Life Insurance

The reason people purchase life insurance varies by race and ethnicity, according to the 2022 Insurance Barometer Study by LIMRA and Life Happens, insurance industry groups.

Across all races and ethnicities, including Asian, Black, Hispanic and white, two of the most common reasons people purchase life insurance are to:

  • Cover burial and other final expenses
  • Replace lost wages if the person dies

Black , Hispanic and white individuals most frequently cited burial and other final life expenses as their primary driver for purchasing life insurance. Among Asians surveyed, the most common reason to purchase a policy was to replace lost wages.

Other leading reasons for purchasing life insurance include:

  • Transferring wealth to others
  • Providing funds to pay off a mortgage
  • Supplementing retirement income
  • Providing funds for heirs to pay estate taxes

Nearly half of households said they would face financial hardship within six months if the primary wage earner were to die prematurely, according to the 2022 Insurance Barometer Study. For 13% of households, financial hardship would hit within one month.

Dont Leave Life Insurance Until Its Too Late

Do I Need Life Insurance After I Retire?

Whatever path youre on, always remember that the younger you are, the cheaper it is to buy life insurance.

If youre ready to buy life insurance, we recommend RamseyTrusted partner Zander Insurance. Theyll be able to serve all your life insurance needs. And theyll help you get the best term life policy at the best price!

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.Learn More.

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One Form Of Life Insurance That May Be Worth Investigating For Its Tax Advantages And Estate Benefits Is An Indexed Universal Life Policy


Many people I meet with ask me if theyll still need life insurance after they retire.

Their children are grown and have good jobs. They have put together a reasonably solid income plan with Social Security, pensions and annuities supplemented by investments and retirement accounts. Their surviving spouse will have plenty of money if they die prematurely. So, does life insurance remain a must?

The short answer, under those circumstances, is no. Probably not. If no one is going to be left without resources when you die, your death benefits arent as big of a deal as they used to be.

But its a little more complicated than that. Because the tax benefits of a life insurance policy could be a very big deal.

Life insurance companies use a favorable tax code to give pre-retirees and retirees another tool to grow their money safely in retirement. Indexed universal life policies are permanent insurance policies that can provide guaranteed tax-advantaged lifetime income in retirement along with several other benefits, including long-term care and terminal illness coverage, disability coverage and tax-advantaged wealth transfer and estate planning.

IULs are considered a conservative asset class. A portion of the policy is indexed to a sector of the stock market, although gains are often capped in some way. So your money will grow, but the principal or cash value is protected from losses when the markets dont perform.

How To Use Life Insurance To Pay For Retirement

Most people think of life insurance in terms of the payout it provides beneficiaries after the policyholder dies. But certain types of life insurance can provide financial benefits, including a stream of income, for the policyholder during his or her lifetime. The main objective of life insurance, though, is to take care of loved ones should you die. So if you dont have dependents, there are better ways to plan for retirement. At least, life insurance shouldnt be your main retirement savings vehicle. But if youre ready to find the right life insurance then you should compare quotes to see what you might qualify for.

Do you have retirement planning questions? Speak with a financial advisor today.

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Multiple Your Income By 10 And Add $100000 Per Child For College Expenses

If you want your life insurance policy to help pay for your childs college tuition and other related expenses, multiplying your income by 10 may not be enough. For instance, if you make $90,000 a year and have two children, your total life insurance need would be $1.1 million.

This equation may offer a simple strategy to determine need, but doesnt account for other expenses, assets or unique situations. A life insurance calculator will offer you a more accurate representation of your needs.

Retirement Doesnt Have To Mean The End Of Your Policy

Why You Need Life Insurance in Retirement with Tom Hegna

There are many reasons why you may want to keep your policy active when you retire.

Ensuring your family is better placed to handle your final expenses and any debts you leave behind may be the most immediate. However, your life insurance benefit also gives you the chance to leave a legacy. Whether thats for a charity or your own family is up to you.

Your policy could also provide support for your significant other if you pass away earlier than expected.

So, this leads you to the key question:

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Use The Cash Value To Supplement Retirement

Many financial experts recommend the 4% rule, withdrawing no more than 4% of your savings in each year of your retirement. When you own a cash value life insurance policy, youll have access to your policys cash value in addition to your retirement accounts.

This allows you to be strategic about your retirement spending. For example, after a down year in the stock market, you can withdraw money from your policys cash value instead of drawing down from your IRA, which will replenish your IRA savings.

How To Minimize Life Insurance Costs

If youre worried that you cannot afford life insurance in retirement, here are some ways to lower your monthly payments.

  • Reduce Your Death Benefit – Consider the reasons why you are buying life insurance and get a policy with the minimum coverage amount. While having extra is nice, it can increase your costs.
  • Consider Guaranteed Universal Life Insurance – If youre not going to utilize the cash value portion of whole life insurance, theres no reason to get it. Instead, a GUL policy will last forever but wont create a separate fund. Because of this system, GUL coverage is much more affordable without adding any risk.

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Ask Yourself These Questions To Decide

If you follow the common wisdom that life insurance protects your loved ones against the loss of your income, it may seem like a good time to let your policy lapse when you retire. You may even think about turning it in for its cash value. Before you decide to get rid of your life insurance when you retire, you should think about it as more than just a way to replace your income.

“Retirees may consider carrying life insurance if it’s important to them to leave a financial legacy, or if they need an asset whose value is not tied to the stock market, which they can pull from during times of market downturns,” says Stephanie McCullough, financial planner and CEO of Sofia Financial.

If you’re thinking about getting or keeping life insurance after you retire, ask yourself these questions to help you decide.

How Much Is A Good Amount Of Life Insurance

Do I Need Life Insurance In Retirement?

Most insurance companies say a reasonable amount for life insurance is six to ten times the amount of annual salary. If you multiply by ten, if your salary is $50,000 per year, you’d opt for $500,000 in coverage. Some recommend adding an additional $100,000 in coverage per child above the 10x amount.

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What Else Do I Need To Know About Pet Insurance

Depending on which benefits you’re claiming, you may be able to get help treating your pet without making a claim on pet insurance.

The People’s Dispensary for Sick Animals offers discounts and some free treatment to anyone receiving means-tested help with their rent or Council Tax liability , and live within a defined catchment area around a PetAid hospital, branch or practice.

And if you’re receiving Pension Credit, it’s possible the Dogs Trust may be able to help you with treatment costs for your dog, depending on where you live in the UK.

I Have Several Pets Do I Need To Insure Them As Well

Pet insurance can be ideal, particularly if you’re relying on an animal for companionship and you’re on a limited regular income in retirement. But there are some key things to consider before you take out a policy :

  • Can you afford to keep up the premiums on a limited income?
  • What will the premium cover will it cover every routine check-up as a lifetime policy?
  • Would you prefer accident insurance only, which is likely to be cheaper?
  • Does your pet have any illnesses that you do need to declare?

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