I currently have work life insurance and an additional $300,000 term insurance policy. I plan to retire next year at age 63 with $1.2 million in retirement and savings. I will receive a pension of $1,000 a month for life at age 65 and I will receive social security at age 67. My wife will continue to work for about three years.
We have no debt. In addition to the house, I will own a farm valued at $600,000. Do I still need life insurance after retirement? My wife would receive my social security and she would receive a pension, so it seems that her lifestyle would not be worse if I died.
See: I am 52 years old, single with no children and only have $190,000 in 401(k) assets. “I don’t want to die alone and forgotten at home.” What should I do?
Dear reader,
There are times when it makes sense to keep life insurance in retirement, and there are times when it doesn’t.
Life insurance can be helpful if a retiree has debt, such as a mortgage, said Kasey Buckner, certified financial planner and owner of Granite Financial Group, because it can help a surviving spouse pay off those debts. Right now this may not apply to you, but it could if you were to move and take out a new mortgage.
Maintaining a policy may also be wise if there is any doubt that your wife’s retirement income would not be able to sustain her standard of living. You mentioned that she would have social security and a pension to fall back on, but it wasn’t clear what pension. If yours were to disappear if you died before her, would Social Security and the remaining assets be enough for her?
Sure, $1.2 million is a big nest egg, but there’s no way of knowing when any of you will die, or how much money you’ll have at that time. You may have spent very little during this time, or your retirement savings may be near exhaustion.
Before making any rash decisions, do some quick math to determine if what she would bring will be enough for what she would have to spend on her own. Run a few scenarios, such as multiple years of her (or you) being alone, and multiple retirement income levels and needs. And don’t forget to factor in emergencies, health care, and long-term care needs — any of these three can completely derail a comfortable retirement.
Also see: I’m 64, I make $1,500 a month driving Uber, and I get close to $5,000 a month in pensions and social security. Should I pay off my mortgage before I retire?
If you don’t want to keep paying for the policy – and that’s understandable – work with the numbers. For example, when you choose to take Social Security, it will determine how much you receive in benefit checks, as well as how much of your investments you withdraw each year. If you can rely primarily on your Social Security checks and your pension, that would mean less money flowing out of retirement and savings accounts, and therefore more money available to grow over time. You could also wait to take Social Security as a way to maximize your benefits until age 70, but how much should you withdraw from your assets each month to pay the bills?
Employer life insurance plans are usually term policies, but if you have a permanent policy there are additional options, such as cashing out the policy or taking a reduced benefit.
Of course, a qualified financial planner can also help you crunch the numbers, check that your assets are properly maintained, and see if you’re ready with or without that extra insurance.
Readers: Do you have any suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@Crumpe.com
2023-07-14 16:20:51
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