Life Insurance in Retirement
By: David Smyth, October 1, 2020
As we wrap our series on employee benefits, we've discussed that many of you have group life insurance and perhaps an additional term policy outside of work. For you, we talked about the possibility that we could save you some money if you're over 50 and healthy. I'm sure a few of you reading this may be thinking, "Okay, I've done that, and there's nothing more I need to do. I'm set. When I retire I won't need life insurance because I'll have saved up enough money."
I hear this all the time from about half of our client families. What I can tell you from experience is that the majority of you who have planned and saved will be in a place in retirement where you won't need life insurance. But just because you don't need it doesn't mean it's not a valuable tool if you can still get it.
So, why would you want to keep a policy in retirement? Simply put, life insurance can fill the same void in your investment portfolio that home and car insurance fill. If your home burns down, you have some coverage to rebuild. If you have a car wreck, you have something to replace your vehicle. If your investment portfolio hasn't performed the way you thought it would, life insurance can replace that nest egg upon the death of the first person.
I know the last thing people ever want to talk about is insurance. You see it as a frustrating cost you have to deal with because it's required, but if given the opportunity to get rid of it, you would. I also know there's a small minority who have personal experience where you needed that coverage, and you wouldn't trade it for the world.
At the same time, I know many of you will run to Google when the Family Financial Partners team says you need to consider life insurance and find dozens of articles that say you don't need it, and that most term insurance goes unused. You can Google all you want, but those who have had an event and needed coverage, or who retired in the spring of 2008 (just about the worst time to retire) were probably better off if you had a policy in place than those who didn't.
My point is this: when we look at your unique situation, we are looking through the lens of an advisor, and we are doing anything and everything we can to make sure your best laid plans come to fruition. While the topic of employee benefits, life insurance and disability coverage aren't really fun and exciting to talk about, the reality is that over the rest of all of our combined lives, those areas can have a big impact on our collective financial plans. It really is that important.
On behalf of our team, we truly appreciate you taking the time to read our benefits series, and if you, a colleague or family member have any questions, please do reach out to us.
Please keep in mind that past performance is no guarantee of future results. This commentary is for educational purposes only and should not be construed as individual investment advice nor a recommendation to purchase or sell any specific product. Please consult your own tax, accounting or other professional advisors regarding all personal finance issues and before implementing any strategies that were discussed. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased.
Life insurance guarantees are based on the claims-paying ability of the issuer.