Life stages series: Life insurance for retirees

By Maryalene LaPonsie on June 29th, 2011

Happy retireesRetirement can change everything: from how you spend your free time to how you spend your money. As retirees adjust to living on lower incomes, it can be tempting to drop life insurance coverage. Some retirees may be able to forego this financial protection, but they should think carefully before eliminating their life insurance coverage.

Do retirees need life insurance?

Your need for life insurance will depend largely on your financial situation upon retirement. For those who have planned appropriately and have ample retirement savings, a surviving spouse may be able to live comfortably. Although having a large savings account upon retirement may be the ideal, it is far from reality for many couples.

"It's not uncommon for people in their 50s or 60s to have a 10 or 20 year mortgage," says Marv Feldman, President and CEO of The Life and Health Insurance Foundation for Education (LIFE). He notes that retirees should consider whether their pension has a survivorship provision and whether they will need to replace lost income to make debt payments and maintain quality of life.

Beyond paying off debt, there are other reasons to maintain life insurance. Life insurance can be used to pay off final expenses, such as funeral costs and estate taxes. Feldman also points out that there may be other reasons to hold on to life insurance protection, "There is a possibility that many retirees may become caretakers for grandchildren." He also states that life insurance can be an affordable way to leave a legacy to a charity or school of your choice.

The right life insurance for retirement

Retirees who decide to maintain their life insurance should take the time to review whether their current coverage level is appropriate. The Illinois Department of Insurance recommends that older couples consider the following to assess their life insurance needs:

  • Medical bills
  • Funeral expenses
  • Outstanding debts
  • Impact of income changes on discretionary spending
  • Impact of death on assets to be left for children and grandchildren

"As you get older, term life insurance gets more expensive," says Feldman. "For someone older, I would gravitate toward whole or permanent coverage."

According to the Connecticut Insurance Department, permanent life insurance, such as whole life insurance, builds cash value that can be used later to pay premiums for long-term care insurance.

Finally, don't forget to update your beneficiary information. If your spouse has died or you have remarried, you will want to update this information. Others may want to change their beneficiary designations to share a portion of the death benefit with a favorite charity.

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