Life insurance is (usually) designed to protect your family if a worst-case scenario happens and you lose your income. Since that is the primary reason to get life insurance, what happens when you retire and you suddenly don’t have an income at all?
This is a surprisingly complicated issue, and there are a lot of factors at play as to whether you should keep paying for life insurance. But to make a complicated question simple, the short answer is probably! You should probably keep getting life insurance. For a more complicated answer, read on.
Are you Still Working?
If you are still earning an income, then it is a good idea to keep life insurance. That way if you were to pass away, that income can be put toward bills, expenses, and anything else that your income was already covering.
If you aren’t working any more, well then you don’t have an income that needs replacing! Just know that social security does not transfer to your spouse. But! A pension, 401k, or IRA do. Just make sure you have your beneficiary named to make that transfer as easy as possible.
Do you have stress around Bills/Mortgages/Debts?
If your household struggles to afford bills or debt, you should keep your life insurance plan into retirement. There is a survivor benefit for social security, but it isn’t much (around $255). For that reason, you should keep your life insurance.
If you don’t have debts, or if your family isn’t struggling to pay them, then the cost of a plan might be counterintuitive. As always, do your own math and figure out if the price of the plan makes sense.
Is your Family making Enough on their own?
This might be a hard question to answer, but if anyone in your family is struggling to make ends meet, a life insurance plan could help them get onto their feet. Additionally, if your income/social security/savings are keeping the rest of your family afloat, then a life insurance policy might be necessary to give them a cushion until they can find a way to replace your income.
Remember, there are estate taxes. A life insurance policy, no matter how small, can be used to make sure those taxes don’t impact the hard work you did to make sure your family would be cared for. But! If you’re not the breadwinner or if your family is self-sufficient, paying into a life insurance policy might just be cutting your own savings short for no reason. If your policy isn’t going to help them, well, you might be better off dropping it.
Ultimately, keeping life insurance is one of those difficult questions with no easy answer. Generally, think about how much the money will make a difference to your family. More of any amount of money is always good, but if the cost for a plan is too high or if the payout wouldn’t really help your beneficiary, then, you might be better off without it. That said, if the price is low enough where it doesn’t impact your own bottom line/quality of life, then a life insurance policy can be a nice way to ensure your family is covered and taken care of.
If you are interested in policies, we can help you make the right call. We have three different life insurance options that you can get on top of the life insurance you get through work. Several of which will follow you into retirement. For more information book a meeting with our life insurance specialist, Will Stover by clicking here.
Additionally, if you have two minutes, we put together a quick survey for our members that asks some basic questions about life insurance. By filling out our survey you'll be entered in for a chance to win a $50 gift card!