Retirement can be a time of great transition in your life. You may be leaving behind a career you loved or excited to begin doing all of the things you never had time for. As you move from one life stage to the next, it’s important for the newly retired to make sure they have all of the protections in place they need as they embark on the next chapter.
So, should retirees buy life insurance? Like so many things, it depends.
Typically, people purchase this type of insurance product when they have someone who is dependent on their income — a spouse, children, elderly parents, or a business partner — and they want to protect them in case of premature death. Retirees who have launched their children, paid off the mortgage, and saved enough for retirement that their spouse is taken care of, don’t need life insurance. If that describes you, then you’ll likely want to pass on this product.
But what if…
- Your adult children have moved home?
- You have older parents you are supporting?
- You have a special needs child?
If you haven’t put other financial obligations behind you? The picture gets more complicated. In all cases, take a few minutes to do the following:
Use an Insurance Calculator
It’s a good idea for everyone to reevaluate their insurance coverage needs as they mark various milestones in life. One way to do this is by using a life insurance calculator like the ones at lifehappens.org or insure.com. Both will ask you a series of questions to help determine your specific requirements.
Some older adults may still need a life insurance policy. For example, you may need to keep such a policy after you leave the full-time working world if your spouse is dependent on a pension or annuity that will end or decrease payments upon your death, or if Social Security benefit payments will be reduced.
Explore Estate Planning Strategies
You may also need a plan if you intend to use a life insurance payout as part of an estate planning strategy. If you plan to pass on a large amount of money, some people use a life insurance policy to pay for estate taxes. You can also set a life insurance policy to pay into a trust, if you have one, that goes to your family or whomever you designate. Some people also buy a small policy to cover their final expenses — because their passing will create a financial burden for their loved ones.
Talk to a Financial Advisor
It’s important to note that purchasing life insurance when you are well into retirement is often extremely expensive, even if you are in good health and you’re looking at a term policy. The high premiums may not be worth it. In fact, you may be better off investing that money elsewhere. If you’re planning to go this route, consider working with a fee-based financial advisor who focuses on estate planning. That way you can make sure you’re taking the correct approach. You can find a list of such professionals at the National Association of Personal Financial Advisors.
Consider Term Life Insurance
For most purposes, I recommend term life — it’s less expensive and usually the best way for many people to get as much as they need. However, as the name suggests, this type of insurance terminates, which means the death benefit may no longer be in place when you die. Plus, term life policies get pricier as you age (whole life policies do, too), but the hope is that by the time you get into your retirement years, you’ll have saved enough so that you no longer need it. To see what’s available, Forbes Advisor offers a list of life insurance policies for seniors, that’s been updated for February 2023.
Evaluate Living Expenses Beyond Insurance
Your retirement evaluation should go beyond life insurance needs. For example, you may be driving less if you don’t go into an office everyday. That could lead to a reduction in your auto insurance premiums. Plus, staying home during the day for longer stretches may be able to help you get a better deal on homeowners insurance. To see how you may be able to save money on other forms of protection, search online and check with the agents you already have relationships with to see who can offer you the best deal for your changing needs.
With reporting by Casandra Andrews