If you have reached the point in your life when you’re preparing for retirement … congratulations! Assuming you’re like the average worker, you’ve spent nearly a quarter of your time on the job over the course of the typical 50-year stint of employment.1 This is what you’ve worked for your whole adult life!
By the time you enter this phase of life, chances are you own a home, have raised a family, and watched your kids raise their own families. Is there anything better than grandchildren? You may have contributed diligently to one or more 401(k) plans that your employer(s) made available to you over the years. You may even be one of the rarest of the lucky who has an employer-provided pension plan that is still intact. It’s almost a given that you have at least some individual life insurance in addition to any you may have from your employer.
When do I need life insurance?
Life insurance is designed to help protect those who could be adversely affected financially when you are no longer here. Many people recognize the need for life insurance, but may put it off until they think they need it … which may not be when they are young, single, and debt free. They see the need for life insurance as being further down the road, perhaps in conjunction with a major milestone, such as buying a home, starting a business, marriage, or the birth of a child.
On the surface, waiting for one of those major life events to buy life insurance makes sense but the truth is that the best time to purchase life insurance is always today, regardless of your circumstances. Yes, even when you’re young and single, because the two of the main factors determining the cost of life insurance are your age and the state of your health. Aging is a fact of life and good health in the future is not guaranteed. As we age and our situation changes, so do our life insurance needs, so it’s important to periodically reassess our life insurance policies in terms of our current financial needs and goals.
When we’re younger, working, and raising a family, helping to protect their financial needs is about addressing four basic needs: final expenses, income replacement, mortgage, and the children’s education. Beyond that, you may also wish to establish some sort of legacy for loved ones or perhaps plan a gift for a favorite charity. The right kind of life insurance may help you fulfill all these goals.
What about life insurance in retirement?
The kids are grown, you’re no longer working, and conventional wisdom might suggest you no longer need life insurance. Well, you made it this far, but none of us will live forever, so the need to help provide for your final expenses remains. And remember, any life insurance you had through your employer may end when you leave your job. It’s likely you are collecting income from one or more sources that your spouse may depend on for financial security. Maybe your home is paid for, maybe not. Perhaps you are debt free, or you could have lingering medical bills, credit card, or other types of debt. Your kids may be grown, but what if you have an adult disabled child at home who is dependent on you? Or are you caring for elderly parents? Life insurance may still be a valuable part of your long-term financial plan.
Just as in other stages in life, your needs are unique to your situation. Life insurance wasn’t a cookie-cutter solution then, and it’s not now. You can’t necessarily go by what your neighbors or friends are doing. What’s appropriate for them may not be appropriate for you.
Meet with your financial advisor or retirement planner well in advance of retirement to assess your needs and goals in retirement, and discuss whether changes in your life insurance coverage should be made. You may be able to make changes to your existing life insurance which you qualified for when you were younger and possibly healthier. This may be less expensive than qualifying for coverage now because you are older and your health may not be as good.
Don’t stop paying on your pre-retirement life insurance policies until you meet with your retirement planner or financial advisor to determine how much and what type of life insurance coverage will best suit your needs in this new chapter of your life.
PayScale, Here’s How Many Years You’ll Spend at Work in Your Lifetime (July 31, 2020)
Categories: Insurance, Life Insurance, Supplement Health Insurance