Is life insurance needed during retirement? The answer is not as simple as the question. Many factors need to be contemplated when looking at the need for life insurance. When we are younger the need for life insurance is obvious. It is needed to cover debts, take care of dependents, and to provide an income to the survivor during our working years. If none of these needs exist in retirement then why should we still be concerned about having life insurance coverage?
Well the reasons may change but there is still a definite need for some life insurance past our working years. Many retirees continue to carry debt into their retirement and life insurance to cover these debts can ensure that upon death your assets do not have to be liquidated. (You can keep the family cottage in the family).
Another important consideration in retirement is the tax implications of your death. When you die, there may be a substantial tax bill to the estate as a result of income from RRSP’s or RRIF’s, capital gains on investment portfolios, capital gains on real estate other than your principal residence, or other sources of income. Ask yourself: do I want my family to lose half of my estate value to taxes or to inherit the full value? Life insurance can be used to ensure there is enough money in the estate to pay the tax liability. You can’t avoid the tax man so plan for this.
Final expenses will always exist. These include funeral expenses, legal fees, executor fees, accounting fees and more. Every estate has expenses so ask yourself where will the money come from? It is important to ensure that there are enough liquid assets to pay these expenses.
Do your dependents require income? Are there still dependent children? Are there any special needs children? Does your spouse require care? All of these questions need to be considered when planning for life insurance in retirement.
Do you want to leave a larger estate to your beneficiaries? With life insurance you can spend your retirement savings and be comfortable knowing that when you die your life insurance will provide the inheritance you want to leave behind.
Do you need life insurance to equalize an estate? Do you have beneficiaries that will be receiving property or business assets? Life insurance can provide a pool of cash to allow your executor to divide your estate equally.
Do you want to leave a legacy to a charity? Again life insurance can provide an affordable way to leave a large donation upon your death.
As you can see there are still many reasons to have life insurance during your retirement years. The reasons may differ from when you were younger, but reasons still exist. Don’t wait until you retire to consider these things. If all you have during your working years is term insurance you might find that when the term expires it is difficult to qualify for more life insurance due to health concerns. Or even more common, you may find that purchasing life insurance when you are older is much more expensive and difficult to fit into your retirement budget. Also, don’t count on group coverage from your work benefit plan. Many life insurance coverages through employee benefit plans expire at age 65 or must be converted to a personally held life insurance program. When this happens cost will again be a major issue and may be prohibitive.
If you are unsure of your life insurance needs or which products are best for you now and in retirement call today. Our Certified Financial Planner, Jennifer Dick B.Sc.N, CFP, CHS, will be happy to meet with you.