Congratulations, you’ve reached your golden years! Or maybe they’re just on the horizon. Either way, the end of the working era marks a critical time to review finances and understand how to make sure your money is working best for you.
That process includes taking a look at your investments, home equity and other assets to determine whether they’ll be able to support you for what could be a decades-long retirement. Near-retirees often overlook the role that life insurance can play when it comes to retirement planning.
Retirement is a huge life event that could potentially change your life insurance needs. Answer these questions to decide whether you have appropriate coverage for this next stage of your life.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Is your life insurance tied to your employer?
More than half of American consumers have life insurance through work. Once you stop working, you may no longer have access to that employer benefit. Not every retiree needs life insurance, but if you want or need a policy, it’s worth considering your options.
Some plans allow you to convert your group coverage into an individual plan, though you’d no longer have access to subsidized premiums. If you’re interested in that option, it’s important to get in touch with the insurance provider within 30 days of leaving your job. In addition, this might be a good opportunity to shop around for another life insurance policy that’s tailored to meet your current and future life insurance needs.
Have your debt levels, dependents or other priorities changed?
Many consumers purchase life insurance to offer financial protection to young family members, often selecting a policy that can help survivors pay off a mortgage or cover future college tuition bills. Decades later, the mortgage may be paid off (or close to it), and the kids long finished with their degrees.
If you’ve also managed to build up your assets during that period, with 401(k) contributions and other savings, or if you’ve received an inheritance, you may no longer believe you need to carry the insurance you originally purchased. If you have a term life policy that was purchased for a specific time period (10, 20 or 30 years), this might be a time to review both the coverage amount and time remaining on the policy. On the other hand, if you’ve taken on additional debt or are concerned that surviving loved ones might struggle financially after your death, it may make sense to hold onto an existing policy. Also, if you have purchased a policy with accumulating cash value, you may be pleasantly surprised by the many ways that policy can be an asset to your retirement.
In any case, this is a great time to review what you have and how you may be able to use the existing coverage and policy features for your retirement.
How will the premiums fit into your retirement budget?
One of the adjustments many new retirees face is learning to live on a fixed income, making sure they’re not overspending in the early years but also doing their best to enjoy the nest egg that they’ve spent a lifetime building up. If you and your financial professional have decided that life insurance makes sense for you, it’s important to make sure to factor your premium payments into your retirement budget.
We are also seeing many who retire from a full-time job or career continue with some form of income-producing work or activity. Almost half of Americans aged 60-75 say they plan to work part time after they retire from full-time jobs, according to a survey by AAG. This may also factor into your budget considerations.
Thinking of your life insurance premiums as a need rather than a want, and budgeting accordingly can ensure that your policy remains in effect for when you or your family need it. Some policies offer the option to use the cash value of the policy to pay the premiums, meaning that you no longer have to make payments out of pocket.
Are you worried you’ll outlive your money?
Longer life spans and earlier retirements can extend the retirement period to three decades or more. With health care costs continuing to rise, it’s no wonder that fear of running out of money in retirement is among Americans’ top financial fears. Despite continued strong investment markets, volatility concerns are common, especially in times like retirement when you are likely drawing on invested assets. The right life insurance policy can create an additional option for tax-deferred accumulation that can be accessed as an additional emergency fund in retirement or an additional income stream.
A permanent life policy can build cash value that you can tap into or borrow against if you need money. And if acquired early on, it can also be a tax-deferred way to save for retirement. That might make sense for individuals who’ve already maxed out traditional retirement plans. Life insurance policies offer some flexibility that 401(k)s and IRAs don’t, including no required minimum distributions, and can often have minimum guarantees.
In addition, some insurers now offer life insurance policies that have an additional feature to help pay for long-term care and other medical expenses, one of the largest buckets of expense that retirees face.
Is leaving a legacy important to you?
Sharing your time and creating memories with your family is one way to leave them with a legacy after you’re gone, but some people also want to provide a financial legacy for loved ones or a charity that they care about. Life insurance can help you meet that goal, providing funds that can go directly to your beneficiary(ies), typically tax-free and without probate.
Having life insurance in place to take care of your legacy goals may allow you more freedom to spend down your assets while you’re alive.
While the primary purpose of life insurance may be to provide security for your loved ones, it’s important to understand the role it can also play when it comes to retirement planning. You may never use your life insurance during your golden years, but knowing that it’s there may give you some additional peace of mind, especially during these uncertain times.
Life Insurance is issued by The Prudential Insurance Company of America, and its affiliates Newark, NJ. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations.
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional.
1052409-00001-00
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
Want To Retire at 55? See If You Can Answer These Five QuestionsWho said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your WalletInterest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
I'm a Retirement Planner: These Are Three Common Tax Mistakes You Could Be Making With Your InvestmentsDon't pay more tax on your investments than you need to. You can keep more money in your pocket (or for retirement) by avoiding these three common mistakes.
