Topics To Consider Before Canceling Life Insurance
The lives we love continue long after retirement, which alone is an excellent reason to consider why life insurance should be part of retirement planning. But there are many layers of benefits and benefactors of maintaining life insurance even after retiring.
There are two initial questions to consider on this topic before proceeding to cancel life insurance. One, should something happen, does someone you care for require more money than your retirement savings? Two, are there people or organizations to whom you want to guarantee a considerable amount of money when you pass?
If the answer is yes to either question, then life insurance after retiring is essential. If, however, you have enough assets to cover yourself comfortably and anyone you support once you die, then it is safe to cancel your life insurance policy.
How To Cancel Basic Or Optional Life Insurance Coverage
Federal retirees, unless they haveassigned their life insurance, may cancel Basic or Optional life insurance coverage at any time. Any cancellation or reduction of life insurance coverage must be in writing and have an original signature by the insured retiree. Be sure to include your retirement claim number or social security number and specify what action you want taken.
Please note that you cannot increase your coverage after retirement, or reinstate any coverage that you cancel.
Write to: U.S. Office of Personnel Management Retirement Operations Center P.O. Box 45 Boyers, PA 16017-0045 The FEGLI election form is usually for employees, but I would complete it and send it with your written request for the reduction.
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Life Insurance Can Help If You Own A Business
There are a number of reasons that you might choose to carry life insurance if you own a business. For example, if borrowed a significant amount of money in the form of a business loan, your lender might require you to carry a certain level of life insurance to ensure that they will receive their money in the event of your death. Similarly, if you have a business partner, you may each carry a policy on the other to aid in succession planning. In addition, some families will use life insurance to equalize an inheritance among family members.
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If You Have A Disabled Child
Parents of a disabled child who will need ongoing support such as medical care or assisted living, however, will need to purchase cash-value insurance, advised James Hunt, a life actuary for the Consumer Federation of America and founder of website Evaluatelifeinsurance.org. Coverage should be sufficient to pay for their child’s projected expenses.
Specifically, Hunt recommends a survivorship-whole life or -universal life policy, more commonly called a second-to-die policy, since it pays out to heirs only after both parents pass away.
Selecting A Payout Amount
When determining the payout amount your loved ones will receive upon your death, add up their expected living expenses, emergency costs that may come up, and your potential outstanding debt. Remember to consider how long you want your payout to last for each of those expenses. Life insurance payouts may be distributed all at once rather than over time, so your beneficiaries will need to plan accordingly. Learn more about how much life insurance you might need.
Upon your passing, your life insurer might distribute the death benefit all at once or in payments over time.
Pro tip:
Some industry experts suggest choosing a life insurance policy that lasts longer than you think you’ll need. Premiums are often based on age, meaning your potential monthly payment will never be lower than it is right now.
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Life Insurance For Fcers Members
If you are a member of FCERS, your basic life insurance benefit continues at no cost to you after retirement. Upon retirement or when you turn age 65 , your life insurance coverage will reduce to 65 percent of your original coverage. Coverage will reduce again to 50 percent of your original coverage when you reach age 70. Reductions will occur on the first of the month following or coinciding with retirement, or when you reach specified ages.
FCERS members may continue optional coverage at retirement provided you were covered during the 60 months immediately preceding your retirement. Optional life follows the same reduction schedule as the basic coverage. Premium amounts adjust accordingly.
FCERS members continue to have access to accelerated death benefits for life insurance. Accidental death and dismemberment benefits end upon retirement.
Life Insurance Can Protect Your Retirement Assets From Down Markets
By purchasing a whole or permanent life insurance policy , your policy will accrue cash value as you pay your premiums. This is a source of funds thatâs typically not tied to markets and is available for you to access while youâre still alive. This can make it a powerful tool to combine with investments in retirement.
Because cash value typically wonât decline during a market correction, you could access it instead of selling investments that have lost value to generate income. This provides some cushion to ride out a downturn and wait for investments to recover before you resume selling them.
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Do You Want To Leave Your Loved Ones In Good Financial Shape
Finding the best way to leave money to your heirs can be hard. But with life insurance, you can make it so that your heirs receive a tax-free death benefit when you die. Money from life insurance is usually not subject to probate laws. Probate is the legal process of settling who gets what from your estate.
McCullough describes life insurance as a license to spend as you wish or need to during your lifetime. You don’t have to save every dime for your loved ones to receive when you die. You can use your money for your bills and living costs. “If you want to be 100% certain to leave money to your kids, the cleanest way to do it is with life insurance,” she notes. ” being frugal during retirement and worrying about spending too much, you can rest easy.”
McCullough points out that “life insurance is a unilateral contract. Once the policy is in place, as long as you pay your premiums, the insurance company cannot change it.” That means the death benefit is a way to ensure that the money you want to go to your loved ones when you die does just that. Other money you intend to leave for them may end up being used in a way you did not intend.
Law Requires Postal Retirees To Enroll In Medicare
The landmark Postal Service Reform Act Congress passed this week ends the mandate that the Postal Service pre-fund its retiree health benefit costs and requires postal workers to enroll in Medicare Parts A and B when they turn 65. The latter provision could end up affecting all federal employees.
All current federal retirees, including current postal retirees, can choose whether or not to enroll in Medicare Part B. Plans in the Federal Employee Health Benefits program cover retirees whether they enroll in Medicare or choose to maintain coverage under FEHB only.
In the private sector, very few Americans have a choice of whether or not to enroll in original Medicare at age 65 if they want to maintain their employer-sponsored health insurance in retirement. Some companies offer retiree health benefits exclusively through Medicare Advantage plans.
Of course, many employees lose their employer-sponsored health insurance entirely when they retire. They can enroll in either a Medicare supplement plan or a Medicare Advantage plan. Both are available to people who have Medicare Part A and Part B. Most private sector retiree health plans are designed to supplement Medicare, and might not pay your medical costs during any period you were eligible for Medicare but did not sign up for coverage. Military retirees also must prove they are enrolled in Medicare Parts A and B if they want to continue coverage under TRICARE, which is then called TRICARE for Life.
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How The 50 Percent Reduction Works
With the 50percent reduction option for BIA, the retiring employees BIA on the day ofretirement is reduced by 1 percent of the original BIA per month starting themonth after the retiree becomes age 65 until it reaches 50 percent of the BIA onthe day of retirement. This will take 50 months, or 4 years and 2 months tohappen. Unlike the 75 percent reduction option, the 50 percent reduction is notfree. The cost is $1.035 per $1,000 of coverage per month until age 65 and $0.71 per $1,000 of coverage per monthstarting the month after the annuitant becomes age 65 .
With the No Reduction of BIA option, there is no reduction to the amount of BIA on the day of retirement. The annuitant keeps the full BIA amount throughout retirement, but a significantly higher premium cost compared to the BIA cost as an employee. The cost for the No Reduction BIA is $2.455 per $1,000 of coverage per month until the annuitant becomes age 65 and $2.13 per $1,000 of coverage per month starting the month after the annuitant becomes age 65 .
Do I Need Life Insurance After Retirement
Every year, thousands of people who outlive their term life insurance policies face the question of whether or not they should renew it. Although it’s recommended that most people have some type of life insurance policy, there might not be much need for one after your current policy expires. Once the term on your policy runs out, you’ll probably be near or already into retirement age, at which point there probably aren’t too many people relying on you for income anymore. Children are all grown up and you’re probably living off retirement investments by now, so why do so many people keep their policy well after they retire? There are a few valid reasons, but surprisingly, many people simply have trouble letting go of their life insurance. They’ve already put thousands of dollars into it and now they would like to see some kind of return on it for their beneficiaries. Regardless, keeping term life insurance past retirement is usually just a waste. Most financial advisors will tell you that there’s no point in using your retirement money for an investment no one needs. Here’s some tips for helping you decide whether to renew your term life insurance policy after retirement:
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Can Whole Life Insurance Be Used For Retirement
Whole life can supplement other retirement savings, such as an IRA or 401K plan. However, it is usually not recommended as the sole source of funding for retirement. Whole life builds guaranteed cash value, making it a wealth-building vehicle that can be used for retirement income or other needs. Most importantly, it also provides a lump sum to your beneficiaries in case of your death.
Life Insurance For Retirees: For Some It Makes Sense
You’re retired. Your kids are self-sufficient and the house is paid off. There’s no need to continue carrying life insurance, right?
For the most part, that’s correct, said Bob Adams, a certified financial planner with Armstrong Retirement Planning. Life insurance is intended to replace lost income if the policyholder dies prematurely, he explained. If you’re no longer working, there’s no income to replace.
Before you let your policy lapse, however, it’s important to consider your unique financial picture. There are plenty of exceptions for which continuing to pay those premiums into your 60s and beyond might make sense.
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“When I sit down with new retirees, we look at whether they need life insurance at all and how much their policy costs,” he said, explaining that many people don’t understand that their premiums may rise.
“We also look at whether they might be able to achieve what they want with a cheaper policy,” he said. “You never want to cancel life insurance without analyzing those questions, because you can’t usually recover your policy at the same rate again.”
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Life Insurance Is Always A Good Policy
Retiring in wealth, health, and happiness is a goal you work towards your entire life. And in the case where you can afford to maintain a life insurance policy even after retiring, there will almost always be a grateful recipient of these purposeful allocations that will forever keep you in memory.
A trusted financial advisor who truly understands your lifestyle is best equipped to guide you on making the right choice about life insurance after retirement. This wealth management expert is undoubtedly the one to help insure you support your loved ones financially, and they are often the ones who will keep your legacy alive forever.
Andrew Rosen
Is The Postal Service Which Officially Lost $568 Billion During The Years 2007
As an example of this position, Ralph Nader said in 2011, The deep hole of debt that is currently facing the U.S. Postal Service is entirely due to the burdensome prepayments for future retiree health care benefits imposed by Congress in the PAEA. If the prepayments required under PAEA were never enacted into law, the USPS would not have a net deficiency but instead be in the black. More recently, the American Postal Workers Union asserted, The USPS financial crisis is a manufactured one. If not for that requirement, the Postal Service would have done quite well financially over the last few years. The basic flaw in these arguments is that they try to wish away the Services retiree health care obligations. If those obligations did not exist, the Postal Service would indeed be close to profitable and the RHBF would be unjustified. As explained earlier, however, the Services retiree health care promises, and the costs associated with them, are very real and very large.
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Life Insurance For Vrs & Erfc Members
If you are a member of VRS, your basic group life insurance benefit continues at no cost to you, provided you meet the age and service requirements for normal retirement or have been approved for disability retirement.
Securian Financial, the VRS group life insurance provider, bases the amount of your basic group life insurance on your annual salary at the time of your retirement. If you have 20 or more years of service, your life insurance at retirement will be equal to twice the highest annual salary you earned during your career. Your basic life insurance begins to reduce January 1 of the first full year after retirement at a rate of 25 percent per year, until it is valued at 25 percent of your coverage amount at retirement.
You may continue a portion of your optional group life insurance coverage for yourself, your spouse, and your dependents into retirement if you were covered continuously under the optional plan during the 60 months immediately preceding your retirement. You must elect optional coverage within 31 days of terminating service in a VRS-covered position, and you will make payment directly to Securian Financial. Optional and dependent life insurance amounts reduce 25% each year upon attainment of ages 65, 70, and 75. Optional and dependent life coverage ends at age 80.
VRS members continue to have access to accelerated death benefits for life insurance. Accidental death and dismemberment benefits end upon retirement.
Optional Retiree And Dependent Coverage
Retiree Coverage
Purchase or Increase Coverage Prior to Retirement
Complete and submit the Enrollment/Change-Optional LifeInsurance and Standard Medical History Statement at myMOSERS if you want to increase your coverage.
- The Standard will contact you directly if they need additional information.
- Acceptance is not automatic.
- Allow adequate time to complete the application process.
Retain Coverage After Retirement
If you retire within 60 days of leaving state employment, or retire directly from active employment, you may be eligible to retain some of your optional life insurance coverage.
- You may retain up to $60,000 in coverage if you are a member of the MSEP. Your coverage cannot exceed the amount your carried while actively employed.
- You may retain all of your optional coverage until age 62 if you are a general state employee who retired under the Rule of 80 or the Rule of 90 . At age 62, your coverage will automatically reduce to a maximum of $60,000.
To keep your optional coverage, you must submit the Retain/Change Optional Life Insurance form . Use the same form to reduce or terminate your coverage at any time.
- Once you terminated coverage, it cannot be reinstated.
- You cannot increase your coverage after retirement.
You have 60 days from your retirement date to port or convert your remaining optional life insurance through The Standard.
Use the Optional Life Insurance Calculator to determine your monthly premium.
Dependent Coverage
Spouse
Child Continuing Coverage
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Coverage After Retirement With Retiree Status
Information about coverage after retirement with retiree status for the Family Adjustment, Family Income and Contributory Group Life Insurance Plans
Coverage after retirement with retiree status
What is on this page
A retiree is generally one who retires with 15 or more years of benefit service and is at least 55 years old. Such a person is said to have attained retiree status. Retiree status is also given to those who terminate with 15 or more years of benefit service and who are entitled to long-term disability benefits under the ExxonMobil Disability Plan, regardless of age. When you become a retiree, your protection automatically continues under the Family Adjustment and Family Income Coverage.
Using Life Insurance To Fund Retirement
Building cash value
One of the benefits of a permanent life policy is the ability to accrue cash value. In its simplest form, the cash value within a policy is the balance remaining after a portion of a premium payment is applied to insurance costs. It is this feature that provides a few different uses for life insurance in retirement.
Using life insurance for retirement income
As the Simple Dollar explains, the cash-value account grows over time and can be withdrawn as a source of income in retirement. And provided the amount withdrawn doesnt exceed the amount youve paid in premiums, its not subject to taxes either.1
Borrowing from yourself
You can also use life insurance for retirement by borrowing from your cash value. Think of it as a loan youre getting from your future self. Technically, youre not required to re-pay it, although it will accrue interest and ultimately, the loan amount will be deducted from the death benefit .
Paying your policy with your policy
If youre reassessing your budget items in prepping for retirement, another thing worth noting for permanent life policyholders is the ability to pay upcoming policy premiums with your cash value.
What about term?
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