Do You Still Need Life Insurance in Retirement? Ep #155

Aug 31, 2020

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Have you thought about what you’ll do with your life insurance policy in retirement? One listener is considering what he should do with his policy. Find out 3 options you have available as well as my opinion on whether you still need to carry life insurance in retirement. On this episode, you’ll also hear a retirement headline about the entrepreneurial boom that’s happening now as well as how you should calculate your home equity when using a retirement calculator. Press play to hear about all of these topics to help you prepare for an amazing retirement

Outline of This Episode

[2:02] More people are working for themselves now
[4:07] What is the best way to fund a trust for a special needs dependent?
[9:32] A thought experiment
[12:10] When using retirement calculators how much weight to put into home equity?

Would you delay your retirement to become an entrepreneur?

According to a recent article in Bloomberg, more Americans have started working for themselves during this pandemic began. Self-employment brings more flexibility so that you can have time for work and play. For those on the cusp of retirement, becoming an entrepreneur could mean extending your work life. The longer you work the less time you will have to live off of your savings. If you were able to have more flexibility in your work, how many more years would you work?

Life insurance in retirement

One listener has a question about his life insurance in retirement. He is considering using it as a trust for a special needs dependent. With life insurance in retirement you have 3 options:

Cancel the policy the day you retire. Term insurance has no cash value, so when you cancel the policy you are done.
Keep paying your premium until the end of the contract.
Convert the term insurance policy into a permanent insurance policy. If this option interests you, contact your insurance adjuster to see which kind of insurance would best suit your needs. Keep in mind that your premium will change but you may not have to go through a health screening in underwriting.

Do you really need life insurance in retirement?

Whether or not to keep your life insurance policy is a very personal decision. It’s actually a decision that shouldn’t be made by you. Your life insurance isn’t for you. It’s for your dependents. Since your dependents are the recipients of the policy upon your death they should have a say in this decision.

I personally don’t recommend life insurance in retirement since being retired means being financially independent. If you have a hard time envisioning your life without life insurance, then listen in to hear my thought experiment that explains why I don’t think that retirees need insurance.

How to use your home equity in a retirement calculator

When using retirement calculators, how much weight should you put into your home equity? While your home equity is a part of your net worth, you don’t necessarily want to include it in your retirement plan. The value of your home functions differently in retirement. It can be used as part of a contingency plan if all else fails, but you shouldn’t use your home’s value as part of the calculations of your retirement funds. Instead, consider your home equity more like a multi-line insurance policy.