Wondering if you still need life insurance once the mortgage is paid off and the kids are out of the house? If you're contemplating canceling your life insurance policy now that you're headed into retirement, you might want to hold off until you've considered the following to determine if foregoing life insurance in retirement is a good idea.
Financial peace for your dependents
During retirement, you're living a lifestyle that's supported by what you've managed to save over the years, as well as other benefits. Even though the kids have left the nest and are now leading independent lives, you may have a partner or spouse who depends on your financial support. For example, do you plan on working part-time in retirement to help supplement your income? If you were gone, would your surviving partner or spouse have enough income to meet daily expenses?
If you don't think you've saved enough for your retirement plan, you may not want to cancel your life insurance policy. You should consider reviewing all of your retirement accounts to determine if your partner or spouse would have enough in retirement assets to meet cost of living expenses should you die unexpectedly. If you find there would be a significant income gap upon your death, then life insurance can help fill the void.
Other considerations would be a special needs dependent. If you have a child or other family member who requires special care, continuing your life insurance policy can help ensure that their ongoing needs could be met long after you're gone.
Another way to help preserve your retirement funds for a partner or spouse is by obtaining enough life insurance to cover funeral and burial costs, as well as outstanding medical bills. Leaving your significant other with enough readily available cash to cover your final expenses allows them to better preserve their retirement savings by not having to liquidate assets.
Estate taxes and estate planning
If you have a high net worth, a large estate, or own a flourishing business, your estate may be subject to estate taxes. The fact is, as the value of your estate increases, so does your potential for an increased tax liability. Keeping your life insurance policy in retirement can provide your family with the immediate cash to help cover estate taxes so they may not have to liquidate assets to cover a potentially large tax bill.
As part of a solid retirement it's always a good idea to talk to a qualified financial advisor or life insurance professional who can help you find an affordable life insurance plan to meet your retirement needs and help you create a solid estate plan.