CALL US AT (804) 285-7333

U

Q&A: Should I keep my life insurance after I retire?

Senior Couple on a Hike
Life insurance serves an essential purpose during your peak earning years. Providing financial support for your loved ones in the event of a premature demise is incredibly valuable. Later in life, the question becomes, “Now that my children are fully grown, and we are financially selfsufficient in retirement, should I keep my life insurance policy?” The answer, like most financial advice, is “It depends.” The following questions provide general guidance when considering your policy.

DO I NEED LIFE INSURANCE IN RETIREMENT?

Will someone in your family experience a financial loss when you die (such as a reduced pension)? Do you have significant debt? If the answer to both questions is no, then life insurance is likely not a necessity. Be careful to consider how much any pension will pay to a surviving spouse. Some pensions have a 100% survivor benefit, but others will be reduced or eliminated when the owner dies. This can leave your spouse with less income.

ARE THERE OTHER BENEFITS TO HAVING IT?

Your legacy-planning goals or philanthropic desires may impact your decision depending on the cost of insurance premiums. While it can be expensive, life insurance can also be a cost effective way to provide a tax-free inheritance to family members or a charity. When deciding if you should keep life insurance in retirement, it is helpful to complete a cost-benefit analysis. This will evaluate the effect it will have on your finances versus any benefits.

ARE THERE BETTER ALTERNATIVES?

A customized cost-benefit analysis may offer better uses of your resources. Depending on the policy you may experience escalating premiums that can grow quite large. If you are paying tens of thousands of dollars in premiums each year, there are likely other investment vehicles that would provide a better return. Everyone’s situation is unique, and there are many factors to consider before making a decision on life insurance. If you would like to learn more, have questions, or are interested in having a cost benefit analysis completed, please reach out one of our Wealth Management Advisors.

Author: Kyle Fischer, CPA, CFP® | Wealth Management Advisor
Written: January 15, 2021