Whether you have a retirement plan or not, it’s not too late to start planning for your future. Here’s what you need to know about life insurance and how it should factor into your retirement plans.
Why do you need a life insurance policy when you retire?
- Your financial responsibilities don’t retire when you do: Loan commitments like mortgages as well as accounting for the care costs of any dependents or an ailing spouse can mean substantial bills past retirement age
- Your life insurance policy can protect your legacy: Worried about the estate you’re leaving behind? Life insurance can be a valuable component of estate planning
- Some policies offer living benefits if you have a terminal illness or need long-term care: Life insurance with certain riders can be part of an end-of-life care plan
What’s the difference between a life insurance policy and a retirement plan?
You can use your life insurance policy to protect your family after you die. So, it’s the safety net that secures the people that you’ll leave behind. The purpose of life insurance is to replace your income and pay a death benefit to your beneficiaries. The benefit of senior planning is that it will allow your loved ones to pay for a funeral, burial, pay off any debts, and maintain household bills.
There are two main categories of life insurance that you should know about. The first is term life insurance, and it provides you with coverage for a set term that is usually between 10 to 30 years. The second is permanent life insurance, which is a lifetime policy, and it’s typically used in estate planning.
There are minor life insurance types, which have different purposes. A good example is an income protection cover provided by Australian companies like Spotter Life. It aims to pay the insured if they can’t work due to an illness or an injury.
Your life insurance policy should not be used as your primary source of retirement funding. It should be used in addition to the retirement savings you’ve invested in over the years.
While your life insurance policy is what benefits your family when you pass away, your retirement funds are what financial support you throughout your golden years. Your retirement is the time in your life that you decide to leave the workforce behind you and play golf, travel the world, start a garden, or do absolutely nothing at all. You’ve worked long and hard for it, and you deserve it.
In order to get to the point where you’re turning in your workboots for flip-flops, you need to have a retirement plan in place. The process of planning for retirement includes defining your income goals, risk tolerance, and what needs to happen to achieve the goals you’ve set. Typically, people decide to retire when they can receive their full social security benefits, which is around age 65, while others retire when they’re no longer able to work due to health complications.
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How long will you need life insurance after you retire?
The length of time you need life insurance depends on a few factors including your savings and investments, lifestyle, debt, and health care costs. Another thing to consider is If you have dependents such as a spouse, children, or grandchildren. You’ll want to consider their needs after you die as well and make sure they’re taken care of financially.
A term life policy might work best for you if you have very little debt, or are not interested in life insurance as a more integrated financial tool. You may need a permanent policy if you have a spouse who is not employed, a child with hefty student loans you’d like to help out with, or any family that depends on your financial support for long-term care.
On the other hand, you may no longer need a life insurance policy after retiring if you have no income to replace, no debts to pay, and your family members are financially self-sufficient.
Essentially, what works for one person may not work for another. So, be sure to do your research and consult a financial advisor before making your final decisions when you retire.