Do Retirees Need Life Insurance?

You’ve worked your fingers to the bone for 40 years or more and finally reached those glorious retirement years. The days of uncomfortable suits, boring business meetings, and endless office hours are behind you. But are the days of paying into a life insurance policy behind you, too?

For some people, it simply does not make sense to continue to carry life insurance after retirement. However, many retirees cannot imagine getting rid of their life insurance policies. To some, it seems incredible to cancel an approach they’ve paid into for years, especially when they haven’t gotten anything out of it yet.

It’s important to remember that life insurance is not meant to insure your life. After all, you can’t put a price tag on your life. Life insurance protects those who rely on your income from financial hardship if they die. If you were to pass away during your working years, an adequate life insurance plan would ensure all your family’s financial needs will be covered, from the monthly mortgage and utility bills to your child’s college education.

But most retirees no longer have children who rely on their income. By the time you retire, your children will likely grow and earn their pay. Plus, at this point in your life, your spouse would probably be covered by revenue from your retirement investments. However, in some instances, retirees may still need a life insurance policy-whether they have family members who still rely on their income or it simply gives them peace of mind.

As you decide whether or not to cancel your life insurance policy post-retirement, here are a few things to keep in mind:

No loss, no gain

Ask yourself this question: Will any of your loved ones suffer from a financial loss if you were to die? If you answered “no,” then there’s probably no need for you to keep your life insurance policy.

For the most part, only the following people need life insurance:

• Couples in their peak earning years
• Parents of non-adult children or grown children with special needs
• Retirees who will lose a substantial portion of income if one spouse dies
• Families with a large estate that will be subject to estate tax
• Business owners and business partners

If you are retired and do not fall into one of these categories, you probably don’t need life insurance. Because you are no longer working, you are not bringing in a work income, and there’s no need to cover the payment that isn’t there. On top of that, if you are married and your spouse is also retired, they will continue to receive a steady income from your retirement funds. Therefore, their income would remain the same after your death.

Leaving a legacy

While you may no longer need life insurance, you might still want life insurance. Maybe you’re just comforted knowing your family will receive some payout after your death. Even if they don’t need this money, perhaps it’s worth it to you to give up some of your income now to make sure they benefit later.

On the other hand, you may want to donate your life insurance death benefit to your favorite charity. If this thought brings you peace of mind, keeping that life insurance policy may be worth it. You could ultimately leave a large amount of money to a charitable cause.

Protect your estate

If you own a successful small business or have a high net worth, your estate may be subject to estate taxes after death. Depending on the value of your estate, these taxes can be steep-and this could create severe financial hardship for your loved ones, especially if your estate isn’t easily liquidated. Death benefits from a life insurance policy can help pay these taxes.

Of course, whether you keep or cancel your life insurance policy after retirement is entirely up to you, and the correct answer depends on your unique situation. If you’re struggling to make this decision, discuss the pros and cons with Brian Gruss.