I currently have life insurance through work and an additional outside term policy for $300,000. I intend to retire next year at age 63 with $1.2 million in retirement and savings. I will receive a pension of $1,000 per month for life at 65, and will take Social Security at 67. My wife will continue to work for about three more years.
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We have no debt at all. Besides the house, I will own a farm valued at $600,000. Do I still need life insurance once I retire? My wife would receive my Social Security and she will receive a pension, so it seems her lifestyle would be no worse off if I passed.
Dear reader,
There are times when life insurance makes sense to keep in retirement, and there are times when it does not.
Life insurance can be helpful if a retiree has debt, such as a mortgage, said Kasey Buckner, a certified financial planner and owner of Granite Financial Group, because it can help a surviving spouse pay those debts off. Right now, that may not apply to you, but it could if you were to move and take on a new mortgage.
Keeping a policy may also make sense if there’s any doubt your wife’s retirement income would not be able to sustain her living standards. You mentioned she would have Social Security and a pension to fall back on, but it wasn’t clear whose pension. If yours were to disappear if you predeceased her, would Social Security and any remaining assets be enough for her?
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Of course, $1.2 million is a sizable nest egg, but there’s no way to know when either of you will die, or how much money you’ll have at that time. You could have spent very little in that time period, or your retirement savings could be close to depletion.
Before making any rash decisions, do a few quick calculations to determine if what she’d be bringing in will be sufficient for what she’d need to spend on her own. Run a few scenarios, such as various years when she (or you) would be alone, and multiple retirement income levels and needs. And don’t forget to account for emergencies, healthcare and long-term care needs — any of those three things can completely derail a comfortable retirement.
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 will determine how much you’re getting in benefit checks, as well as how much of your investments you’re withdrawing every year. If you can rely primarily on your Social Security checks and pension, that would mean less money is coming out of the retirement and savings accounts, and thus more money available to grow over time. You could also wait to take Social Security as a way to maximize your benefit up to age 70, but how much would you need to withdraw from your assets every month to pay the bills?
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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 your assets are properly maintained and check to see if you’re prepared with or without that extra insurance.
