When you're young and just starting out, there are many important reasons for having a life insurance policy to provide for your loved ones. But what about when you reach retirement age? When the mortgage is paid off and the kids have grown up and are on their own, is life insurance coverage still necessary?
There is no shortage of advice when it comes to continuing your life insurance policy when you are age 60 or older. Some of the more common reasons are to help pay for things such as estate taxes and final expenses. And while those are certainly solid points to consider, we found a few others that you may not have thought about.
Reason to Keep Life Insurance #1: Lingering debt
The economy over the past decade has taken its toll on many Americans. While our parents may have entered into retirement debt-free, many baby boomers are still sitting on a mortgage and other debts that could last another decade or more. If you have debt and don't want to leave it as a parting gift to your spouse or other loved ones after you die, you might consider keeping your life insurance policy when you retire.
Reason to Keep Life Insurance #2: Income replacement
Even though many Americans begin claiming their Social Security benefits between the retirement ages of 62 and 65, some are choosing to remain working on a part-time basis to help supplement their income. According to the Social Security Administration (SSA), Social Security benefits will replace approximately 40 percent of an average earner's income in retirement.1 If you haven't saved enough and have a spouse or other family member who is depending on you to bring in this supplemental income to meet everyday living expenses, then life insurance can help provide for them after you're gone.
Reason to Keep Life Insurance #3: A pension that dies with you
If you have a defined benefit pension, you'll generally have two types of payout options when you retire: a single life benefit or joint survivorship benefit. With the single benefit option, your benefits are based on your expected lifetime. Therefore, when you die, your pension stops. However, a survivorship payout is based on both you and your spouse's lifetime. If you die before your spouse does, he or she will continue to receive benefits from your pension. If you have a pension with no survivorship option, life insurance could replace this lost income.
Discover helpful tips on finding affordable life insurance for seniors or using cash value life insurance as part of your retirement plan.