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Do You Need Life Insurance During Retirement?

by Emily Guy Birken

As the date of your retirement nears, it’s likely that your term life insurance policy is also coming close to the end of its term. Now what? Do you renew your life insurance, even though you will soon be living off your retirement investments, or do you let the insurance lapse altogether? Though this question should have a fairly rational and cut-and-dried answer, many people base their decision on emotions rather than dollars and cents. While it may feel like you’re losing out on all that money you paid into your term life insurance if you simply let it lapse, there are only a few instances when it makes sense to renew life insurance during retirement. Here’s why:

Do you need life insurance during retirement?

1. Term life insurance keeps getting more expensive as you age. Eventually, the amount of money it takes to renew your insurance for another 10 to 20 year term becomes prohibitive. While it is possible to convert your term life insurance into a permanent (or whole life) policy, that will be more expensive than renewing a term policy. The benefits for permanent policies tend to be much larger, however, and can provide peace of mind if you are one of few individuals who might need it.

2. Most families are not in the position to need your life insurance after you retire. Unless they had late-in-life children, most retirees can count on their spouses and children being financially stable even after they are gone. Term life insurance is geared toward young families who could not take the financial hit of losing one parent’s income. If you have not saved enough for retirement so that your spouse will be taken care of without you, or you have minor children still at home, then it’s probably a good idea to maintain your life insurance. Otherwise, you could probably find something other than premiums to spend your money on.

3. Even if you do need further insurance after retirement, you probably don’t need nearly as much as you once did. Someone who is at the mid-career stage of life needs to buy enough life insurance to take care of a family’s current financial needs as well as their future needs. But life insurance after retirement does not need quite the same level of payout. In many cases, you would only need to make sure that your final expenses are taken care of.

Life insurance is a difficult topic to think about, let alone discuss. No one wants to think about what will happen to his family after he is gone, and it can be easier to just throw money at the problem in the form of insurance premiums. But rather than waste your money on something you don’t need, do yourself the favor of thinking about what is really necessary. That will leave you and your family more money to enjoy while you’re here.


Published or updated July 6, 2012.
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{ 5 comments… read them below or add one }

1 Dave Bernard

I have a ten year term life insurance policy that has another 5 years on it. Both kids have recently graduated, the balance on the house is down to a minimum amount, and our savings should be sufficient. With no major financial responsibilities, I plan on letting the policy expire and using the monthly premiums to enjoy retirement. Although my folks have a few prepaid insurance policies to leave something to the kids, I figure in 5 more years my kids will be pretty well on their way making their own livings (fingers crossed) and what is left when I die is what they will get. Happy Retirement!

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2 krantcents

I view life insurance as income protection during your working years. Do I need it in retirement, not as much. Hopefully, I accumulated enough assert to replace income in retirement.

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3 K.C.

We retired early at age 56. Once my wife began to receive her pension, we cancelled her insurance policy. I’ll keep mine in force until I begin to draw my pension at age 65.

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4 Bernard

I’m on the other side: I put my money towards whole life insurance. Now, I’m not an agent, but I’ve learned how to use my policies as a personal bank just like big banks, big corporations, and the wealthy.

I will be able to use my policies to create wealth today and well beyond my golden years. It beats the pants off of what my 401k would have been doing (I cashed mine out).

Sure, I get a death benefit. But that’s just icing on the cake. I’m just glad I can access all of my cash value tax free. Sorry Uncle Sam!

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5 robert

You have to take a loan out on your cash value.
Why get a ROR around 2-3% (not keeping up with inflation) and when you need YOUR MONEY loan it 6-8%?

You could put the difference of a term and the whole ina sock drawer. Then you can use it when needed.

Bernard, You better actually read and interpret your won policy

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