5 Important Considerations of Life Insurance for Your Retirement

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The most obvious use for life insurance is to help cover the costs related to the funeral of a recently deceased loved one and to help replace any income that person may have generated in their remaining living years.

This kind of consideration becomes especially important for anyone in retirement or nearing retirement age. There are several reasons that those in retirement, or approaching retirement, will want to carefully consider their life insurance options.

This article will review several of these considerations.

Consideration #1: Life Insurance for Sudden Death of a Partner

Life insurance is especially important for retirees who depend on multiple incomes to cover the bills.

For example, a couple which plans to enter retirement together, relying on both incomes in order to cover the necessary household bills, could be devastated by the sudden loss of either partner. Not only could the emotional toll be debilitating, affecting work and possibly productivity and earnings, but the sudden loss of an income would probably disrupt the entire household budget.

An adequate life insurance policy on both partners could never mitigate the emotional loss, but the financial loss could be replaced or at least lessened.

Consideration #2: Life Insurance to Sustain Minor Dependents

More Americans than ever are having families later in life. If you are nearing retirement age and still have minor children or other dependents, holding a life insurance policy into retirement could be part of a strategy to ensure that they have the necessary financial resources should something happen to you.

Consideration #3: Life Insurance for Estate Planning

If you are the owner of a family farm, business or other property which could be subject to estate taxes, obtaining a life insurance policy could be an important means to keeping the asset in the family after your death.

If you do not have the liquid assets needed to cover any estate taxes after your death, the property could be in jeopardy. Tying a life insurance policy into the estate plan can help reduce the risk that the property will be lost in such a situation.

It is a good idea to talk to a reliable tax attorney about such a plan before making any firm decisions on whether or how to do this.

Consideration #4: Life Insurance as an Investment for Retirement

Life insurance can serve as a retirement investment which will presumably build value over time.

In a whole life policy the idea is that you pay premiums for a certain number of years – until the growth in the cash value of the plan nixes the need for additional premium payments.

When you enter into retirement you can withdraw cash from the policy in the form of a tax-free loan which never has to be repaid. There are many variables which may affect this outcome including if the portfolio does not perform as expected, if for some reason you are unable to continue to making premium payments or if you withdraw funds before retirement.

The decision of whether or not to hold a life insurance policy going into retirement will depend on your individual financial and familial situation.

It is a good idea to discuss the issue with a professional such as an estate planner or tax professional. It is best to avoid consultations which rely too heavily on insurance salespeople who stand to gain by selling you life insurance, or by your continued payment of premiums.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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