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How Life Insurance Fits into a Retirement Plan

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.

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.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

President of Prudential Individual Life Insurance, Prudential Financial

Salene Hitchcock-Gear is president of Prudential Individual Life Insurance. She represents Prudential as a director on the Women Presidents’ Organization Advisory Board and also serves on the board of trustees of the American College of Financial Services. In addition, Hitchcock-Gear has a bachelor’s degree from the University of Michigan, a Juris Doctor degree from New York University School of Law, as well as FINRA Series 7 and 24 securities licenses. She is a member of the New York State Bar Association.

Source: kiplinger.com

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Life Insurance for Seniors: Tips on Getting the Best

  • Life Insurance

Life insurance is essential if you want to provide for your family after your death and don’t have substantial assets to leave them. It’s something that everyone should consider when they have dependents, but if you’re over the age of 60 those insurance premiums could cost more than you can afford and more than they’re worth.

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If you need seniors life insurance that doesn’t cost the earth and provides the benefits you need, keep these tips in mind.

Why is Seniors Life Insurance So Expensive?

Insurance is an industry built on statistics and probability. You’ve probably heard detractors refer to it as gambling, using this as a reason to refuse any form of life, travel or home insurance. To an extent, they’re right.

Just like a casino, an insurance company studies the numbers and tweaks the outcomes to ensure they always fall in their favor. A policy may award an individual $200,000 when they’ve only paid $20,000, but for every big loss there are many big gains, just as a jackpot win is offset by the countless players who walk away with nothing.

Insurance premiums are fixed based on a series of probabilities. Where life insurance is concerned, the underwriters will look at previous health conditions, genetic disorders, mental health history, drug/alcohol abuse and more, before determining how likely that individual is to cash-out the policy.

For instance, they know that smokers live 10 years less on average, and that heavy drinking and a sedentary lifestyle are two leading causes of preventable death. The average life expectancy in the US is around 78 to 79 years. If you’re purchasing a 30-year policy aged 40, and you’re a heavy smoker, recovering alcoholic who works as a writer, designer, or IT technician, and doesn’t exercise, you fall into all those demographics. 

There is a high probability that you will not make it to the end of the term, in which case you’re a high risk and may be charged higher premiums, offered a reduced term or denied a policy altogether.

As a senior, you’re high risk because you’re more likely to cash in the policy than someone aged 20, 30 or 40. As a result, many insurance companies may refuse to work with you while others will simply offer you expensive policies and limited terms. To get around this, you may need to work with specialist senior life insurance companies. 

Do you Need Seniors Life Insurance?

At the outset of this guide, we noted that life insurance was essential if you have dependents and no assets. That “if” is key here, because with those things, it becomes less of a concern. It would certainly benefit your family more to have a cash payout on your death, but there is no guarantee and without that guarantee you could be paying into a policy that never pays out, thus taking valuable money from your pocket and your estate.

Life insurance should be considered for seniors who:

  • Have a mortgage to repay
  • Don’t have sizeable cash reserves or assets
  • Are the main breadwinner
  • Have debts

That final point is important, because if you have lots of debt then it won’t matter if you have assets because the debt could take them away. As discussed in our guide to what happens to your money when you die, your debt will be passed onto your estate (and if you live in a Community Property Estate, it could be passed onto your spouse). 

Prioritization will be declared, and tax debt will be placed at the top of the pile, after which all unsecured creditors can collect their pound of flesh.

If your debts are greater than the value of your estate, you could lose everything, assuming those debts are not forgiven upon your demise (as is the case with most student loan debt). At that point, your family will have nothing.

In this scenario, life insurance is essential. It’s also important to assign beneficiaries, ensuring that the money goes to them and not to the estate.

If your mortgage hasn’t been repaid in full and is passed onto your estate, your heirs will either need to continue making those payments or repay in full (either in cash or by selling the house). If there are additional debts that do not exceed the sum of the estate, these will be repaid, and your heirs will get what’s left.

Therefore, when calculating whether you need seniors life insurance, you need to ask yourself the following questions:

  • Do I live in a Community Property State? (includes Louisiana, California, Washington, Idaho, Nevada, Wisconsin, New Mexico, and Arizona).
  • Do I owe a lot on my mortgage?
  • Will my heirs struggle to pay for my funeral?
  • Are my debts greater than my assets?
  • Will I leave my heirs with substantial debts and obligations?

If your answers are negative, life insurance is an optional extra. It’s something that we recommend looking into, but not something you should commit to if you can’t find a suitable deal. 

If you answered yes to most of these questions and you don’t have an existing policy, it’s worth doing all you can to acquire life insurance or to find another means of supporting your family after you’re gone.

Options for Senior Life Insurance

Unlike whole life policies, which are designed to pay out substantial sums of money in the event the policyholder dies, senior’s life insurance is often designed to payout relatively small sums. 

There are typically two options for seniors seeking the protection of life insurance:

Funeral and Burial Insurance

Funerals are expensive and can cost upwards of $10,000 if you want a burial with a premium casket and all the trimmings. That’s a lot of money for your heirs to handle, but it’s something that funeral and burial insurance can cover.

Funeral and burial insurance can either be purchased through an agent or through an insurance company. In the first instance, you can make the funeral home your beneficiary, which allows you to arrange and plan your own funeral in advance, knowing that the costs will be covered and your loved ones won’t have to deal with the stress of planning and paying for a funeral while grieving.

In the second instance, everything is arranged through an insurance company and the money goes to your heirs. There is no prerequisite stating that this money must be used to pay for your funeral, but you can prepare instructions for when you pass.

Generally, these policies cost anywhere from $10 to $100 a month, depending on how much coverage you want. We recommend looking at some catalogs and discussing with funeral homes to discover how much your desired funeral will cost before applying for this insurance.

Term Life Insurance

Whole life insurance is rare for seniors due to the high risk involved. As the name suggests, whole life insurance is designed to be paid for the whole of your life, at the end of which there will be a payout. The alternative is known as term life insurance and is fixed over a specific period.

This way, there is a chance that you won’t die during the term, which means the insurance company doesn’t have to payout, reducing the risk and the costs and allowing them to offer you some favorable terms.

Term life insurance for seniors typically begins at age 60 (if you’re younger, you can apply for traditional term life insurance). Many insurance companies will stop providing these plans when you hit 75, at which point the liability is too high. 

You pay a fixed sum of money every month for a predefined term, often 10 or 20 years. The insurance company will then pay out an amount if you die during that term. As an example, a healthy 60-year-old applicant on a 10-year term can expect to pay anywhere from $50 to $150 a month with a $250,000 payout. 

As soon as you include previous and existing health conditions into the mix, those premiums increase. You’ll also pay a lot more for a 20-year term as that will take you to 80 years old.

The Best Life Insurance Policies for Seniors

Here for a few options to consider for seniors life insurance. But don’t just take our word for it. Do some research of your own, get as many quotes as you can, and choose the best one only when you’re absolutely satisfied that you’re getting the best deal.

Haven Life

With Haven Life, you can begin your cover up to your 65th birthday. The application process is quick and simple and it’s one of the cheapest options around for seniors, with term policies costing between $50 and $100 a month on average. If you’re 59 or younger, you don’t even need a medical exam for your cover to be finalized.

Haven Life policies are underwritten by MassMutual, an insurer that has existed for over 160 years.

AIG Life

One of the biggest insurers in the United States is also one of the cheapest for seniors. You can get up to $25,000 without the need for a medical exam. This is offered to all applicants aged between 50 and 85, with payouts that begin at just $5,000.

Transamerica

Transamerica offers a final expense policy, which provides a cash sum to be used for funeral expenses and other costs. This ranges from $5,000 to $50,000 and there are multiple policy options aimed at applicants up to the age of 85.

Mutual of Omaha

Although the costs can be a little higher and the options fewer, Mutual of Omaha offers coverage up to $100,000 without the need for a medical. This is rare and will come as a welcome relief to countless applicants who don’t want the additional stress and worry of a medical exam. 

What’s more, Mutual of Omaha will release part of your benefit in the event of a terminal or chronic illness.

New York Life

Apply for a policy that lasts for between 5 and 20 years and get a death benefit paid to your family when you die. There are many policy options to add and remove and very respectable premiums and payouts.

Summary: When to Apply for Seniors Life Insurance

The sooner you apply, the greater your options will be. Whether you’re 29 or 59, if you need life insurance then now is a good time to apply. A single year can make a massive difference the older you get, potentially adding tens of dollars to your monthly premiums and reducing your chances of getting the payout you seek.

As soon as you have dependents, bills, and responsibilities, look into getting a whole life or extended-term life insurance.

Source: pocketyourdollars.com

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Moving Abroad? The Importance of a Life Insurance Review

Life insurance is never a pleasant topic of conversation – let’s face it, none of us relish having to contemplate our own mortality – but if you have any dependents or financial commitments such as a mortgage, it is an absolute must-have. When we talk about dependents, that doesn’t only mean your children – if there is anyone who would be negatively affected financially if you were to pass away, life insurance is a necessity. That includes a husband or wife, a partner you cohabit with and possibly elderly parents.

The Basics About Life Insurance

Life insurance is a means of protecting your loved ones financially after your death. It compensates them for the loss of your income by paying them a lump sum (or regular payments) to mitigate the financial impact of your passing away. The cover you have in place should take into account all your regular outgoings, particularly those with large debts such as a mortgage, but also day-to-day expenses, education costs, childcare requirements and other loans.

Why You Should Review Your Policy

Any major life event will affect your life insurance requirements and necessitates a review of your policies to adjust cover to take account of your new situation. Such events include the birth or adoption of a child, a marriage, a divorce, the purchase of a property or business and even the taking up of a new potentially dangerous hobby such as skiing. However, perhaps the most important time to review your life insurance cover is when you move out of the country.

If you are about to become an expat, chances are you have a to-do list as long as your arm. It inevitably includes informing everyone of your change of address, liaising with moving companies and packing – but does a review of your life insurance requirements appear on the list? In the chaos of an international move, this is one area that often gets overlooked, but failing to address the issue can have devastating consequences. If you have already moved abroad but have failed to review your life insurance, you need to do this without delay.

The reason is that life insurance premiums are worked out taking into account a whole host of factors including age, health and where you live. Any changes to any of these factors could alter the premium, and omitting to notify your insurer of them could render a policy null and void.

Keep your loved ones protected in the event of your passing.

You May Need New Coverage

Becoming an expatriate can actually invalidate your coverage altogether, especially if you are moving from a low-risk country to somewhere considered to be high risk. Insurers will, unfortunately, use any excuse not to pay out, so it is essential to contact your insurer or broker and ask them to check your policy. If you are covered in your new country of residence, you should ensure that you get written confirmation of this from your insurer, just to avoid any room for error.

In fact, the chances are that you will not be covered and will need to alter your policy or take out a new one altogether. Life insurance coverage can be very reasonably priced, but it is important that it takes into account your unique circumstances, and this can make it complicated to set up. This is particularly true for expats, who are more likely to have additional considerations to bear in mind including mortgages on dual properties, high school fees and the repatriation costs of your loved ones in the event of your death. If you are divorced, you may also have obligations from a former marriage to take into account. A professional financial advisor will be invaluable in guiding you through the life insurance minefield, reviewing your requirements and exploring the options available to you.

In Conclusion …

It is also worth remembering that a move abroad will mean a change of domicile and of jurisdiction, which will have an effect on the laws governing succession in the event of your death. This could significantly affect the amount payable on your estate in inheritance tax, and life insurance coverage should be adjusted accordingly to take into account your obligations and to cover taxes due to save your loved ones from having to pay these. Your death would be difficult enough for them to deal with, let alone finding themselves in a financially precarious situation. Depending on where you move to, there could be tax-effective steps you can take to safeguard your estate.

A professional financial advisor in your new country of residence will be invaluable in helping you structure your life insurance in the most cost-effective way possible.

Infinity Financial Solutions is a leading provider of financial services to the expatriate community across Asia and beyond. With offices in six regional centres, a staff team of 15 different nationalities and clients from over 80 different countries, the company is genuinely international in its focus. Infinity provide individually tailored financial planning to protect, build and maximize the wealth of their clients.

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Source: mint.intuit.com