Life insurance can still be useful in retirement.
You are nearing the end of your career.
Retirement is just around the corner.
Is now a good time to drop your life insurance policy?
Not so fast.
According to a recent Kiplinger article titled “Don't Overlook Advantages of Making Insurance Part of Your Retirement Plan,” life insurance can do more than provide your family with income if the breadwinner dies.
Your death may leave your spouse with one fewer mouth to feed and one fewer insurance policy to keep active, but these savings may be less than you think.
When you die, your household will go from two Social Security checks to one.
The difference could be a great as much as a 50 percent to 75 percent reduction.
Life insurance can be helpful here to make up the difference in available cash.
Life insurance can also be a useful estate planning tool.
Some tax laws allow for the death benefits of a life insurance policy to be paid income tax-free to beneficiaries.
What if benefits were paid out for terminal or chronic illness?
These payments are also tax-free if you have an accelerated death benefit rider on your policy.
Lastly, cash value can grow in a permanent policy free from current income taxation.
This means you can borrow from the policy without triggering income tax while the policy is in effect.
It should be noted, your loan amount and interest from the loan will be deducted from the death benefit if you neglect to repay the borrowed money.
Sometimes the potential hazards of losing the policy, shrinking the benefit, and incurring taxes by not paying off the loan is more trouble than it is worth.
Be sure to borrow wisely.
Work with an experienced estate planning attorney and financial advisor to determine whether keeping a life insurance plan in retirement is right for you.
By the way, I have never met a widow who complained about the life insurance her husband had.
Reference: Kiplinger (July 10, 2019) “Don't Overlook Advantages of Making Insurance Part of Your Retirement Plan”