As you move into retirement, it’s common to think about managing your finances in a new way, including reviewing your various insurance policies, including life insurance. While we often think about assessing life insurance during life changes like marriage, the birth of a child, or higher earnings, it’s essential to remember that retirement can be another critical time to evaluate your coverage. After many years of paying premiums, you may be over-insured and need to adjust your coverage.
Here are some reasons why reviewing your life insurance during retirement could help:
First, your dependents’ financial needs may have changed, and you may no longer have dependents who rely on your income. A life insurance policy is meant to replace lost income for someone like a spouse, children, or elderly parents if you were to pass away. In retirement, you may no longer need as much life insurance if you have saved enough to support yourself and your dependents no longer rely on your income.
Second, your other retirement assets, such as your 401(k), investment accounts, and social security benefits, can also provide for your dependents upon death. Thus, life insurance may have a different value after you retire since your family may be adequately supported through these sources. It’s essential that you review your estate plan or beneficiary designations on these accounts so that these funds are accurately distributed when the time comes.
Finally, it is essential to note that premiums for life insurance policies are often higher for older than younger individuals, so it can be more costly to maintain your current policy into retirement.
As we look into term life insurance rates, one thing is clear – the price difference between a policy for a 70-year-old compared to a 30-year-old is astonishing. We’re talking about a 10-fold increase in cost. But did you also know that seniors over 60 may not even have the option to purchase a 30-year term? That’s why it’s essential to understand your entire financial picture rather than look at life insurance during retirement through tunnel vision.
Life insurance becomes less important in retirement due to possible decreases in financial obligations to dependents. If you pass away, other retirement assets may provide the necessary income for dependents. Before making any policy changes or coverage changes, confer with a financial or insurance professional for guidance. Reviewing your life insurance and adjusting coverage can help ensure that you’re not over-insured and you’re not needlessly paying premiums towards a policy you don’t need. At 83rd Street, we understand that retirement planning requires reviewing all pieces of your financial puzzle. If you need help with how all these pieces fit together, get in touch and we can walk through it together.
Disclosure: Additional information about 83rd St. Wealth Management, LLC is available in its current disclosure documents, Form ADV and Form ADV Part 2A Brochure, which are accessible online via the SEC’s investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using CRD # 172115. 83rd St. Wealth Management, LLC is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.