life insurance

Financial planning: How to determine if you need life insurance in retirement

Many Baby Boomers will have unanswered questions regarding life insurance when they reach retirement age. The insured person wonders if a life insurance policy’s death benefit is truly required to support the insured’s dependents. According to Howard Pressman, an expert financial counselor with Egan, Berger & Weiner in Vienna, Virginia, the answer depends on the specifics of the situation.


Here are some suggestions from experts in the field Is your preparation sufficient?There are others who say life insurance isn’t necessary if you’ve saved enough for retirement to cover your expenses elsewhere. Because of your ample assets and cash on hand, your loved ones won’t have to worry about making ends meet when you die. This seems great in theory, but it won’t work in practice.


Examine the numbers. Tell me about your financial circumstances, both before and after the death of your husband. If your retirement assets will be enough to take care of your spouse in their old age, you may not need as much life insurance. Pressman recommends getting life insurance if there isn’t enough money coming in, even after taking into account the couple’s resources and whether or not they can reliably support the surviving spouse.


If one spouse receives a pension but has not elected a survivor benefit, the other spouse will be left with a significant financial burden if they do not have life insurance. To reiterate, just because a family loses, say, a third of its income due to the death of a spouse, that does not mean that it automatically cuts its expenses by the same amount.


After a spouse passes away, it is not unusual for the surviving spouse to continue to need the same degree of financial support as before the death.In addition, have you been taking care of your own finances thus far? This suggests that it may be time to bring in some outside assistance.


Ignoring your own financial situation until it’s too late?Sooner or later, you’ll get to it.More: There are four reasons for monetary lag, and here’s how to fix them.There are many reasons to invest in life insurance coverage.Life insurance has several uses beyond making up for lost income and paying off debts. It can be used for charitable giving strategies, inheritance tax payments, taxes owing on inherited IRA payouts, and last-minute Roth IRA conversions.Certified financial planner Steven Podnos of Wealth Care in Cocoa Beach, Florida, suggests that retirees whose descendants will inherit a farm or business worth more than $22 million may prefer that their heirs utilize life insurance proceeds to pay estate taxes rather than selling the asset.


Greg Hammond, a certified financial planner with Hammond Iles Wealth Advisors in Wethersfield, Connecticut, suggests making a charity the final beneficiary of an IRA and then utilizing RMDs to purchase life insurance that will provide a tax-free legacy to heirs. His method “doubles the effect of a retiree’s retirement account while avoiding income taxes on the retirement funds,” he says.

Life insurance for retirees may be necessary for business succession planning, says Rita Cheng, a certified financial advisor with Blue Ocean Global Wealth in Gaithersburg, Maryland.Long-term care and alternative ways of living should be taken into account Financial advisor Thomas Yorke of Oceanic Capital Management in Red Bank, New Jersey, recommends that retirees who anticipate the need to pay for long-term care services do so by acquiring a permanent life insurance policy that includes a rider for such costs.

Michael Smith, a certified financial planner with D3 Financial Counselors in Chicago, thinks that a sizeable death benefit from an insurance policy might sometimes serve as a suitable substitute for long-term care insurance for the beneficiary, the surviving spouse Many Baby Boomers will have unanswered questions regarding life insurance when they reach retirement age.

Like so many other aspects of personal finance, the answer depends on specifics. When it comes to life insurance, how much do you suggest I get? If you decide you do want life insurance, you can choose from a variety of methods used by financial professionals to calculate the amount of life insurance a surviving spouse actually requires. This includes maintaining one’s own life and physical needs as well as protecting one’s financial standing.

Human life value estimates future earnings to calculate the death benefit, while the financial needs approach looks at the amount of money the survivors will need to replace their lost income. Finally, the death benefit provided by the capital retention method can be used in conjunction with the family’s other assets to support a comfortable standard of living without having to dip into the primary death benefit. Most financial planners avoid the human life method since some retirees continue to have earned income, and the capital retention method requires more life insurance purchases than the other two approaches.

Many financial advisors, including Pressman, advocate paying more attention to clients’ wants than to their portfolios. The financial needs approach considers the survivor’s mortgage, the cost of higher education for any dependent children, and any emergency medical expenses. There is a financial needs calculator available online at

What sort of insurance should I buy?If you need life insurance in retirement, certified financial planner Ian Weinberg of Family Wealth & Pension Management in Woodbury, New York, advises going with a pure policy that doesn’t build cash value and only guarantees the insurance will pay out.As Weinberg points out, there is no chance of the policy falling behind as long as the premiums are paid, and only a small number of insurers provide universal life insurance with secondary guarantees. Adjustments can be made to the policy’s premiums, cash value, and death benefit under a universal life insurance plan.

Those in their golden years face a hefty premium for life insurance.”Generally, the older you are, the more expensive life insurance becomes,” says certified financial planner Matthew Gaffey of Corbett Road in McLean, Virginia. The affordability of health insurance is a major concern for retirees. The premiums could be better put to use elsewhere if the insurance isn’t essential to the future of their retirement plan. One day, the customer will have to determine if the insurance premiums are worth it for the peace of mind they’ll get.More:Consult Dr. Powell:


I am a 63-year-old man who is drowning in debt and can’t seem to get ahead financially. Ought I to file for bankruptcy?Here you may learn more about Powell’s suggestions for taking calculated risks and making wiser investment decisions in the financial sector.reduction in assets in reserveCertified financial planner Michael Resnick of GCG Financial in Deerfield, Illinois, says retirees should have life insurance, but in a perfect world, the policy would be paid out and guaranteed before retirement, so there would be no premium payments during retirement.

He suggests getting life insurance in order to provide for a surviving spouse or other loved ones financially. Life insurance death benefits are like a “permission slip” to squander assets, he argues.Robert Powell, a frequent contributor to USA Today, also edits Retirement Daily ( for The Street. Having some questions about your finances? If you need to get in touch with Robert Powell, his email address is The thoughts and opinions expressed here are those of the author and do not reflect those of USA TODAY.


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