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Do You Need Life Insurance In Retirement?

Most big life insurance companies such as Hartford Life or Aetna Life Insurance offer a wide variety of life insurance products to best suit each stage in life.  This is good news for retirees who may not need or want the typical term life insurance policy that many adults carry.  This doesn't necessarily mean you should go without any life insurance in retirement, but you do want to re-asses your situation and financial needs whenever you have any major life change, especially retirement.

It seems relatively obvious why you may need life insurance when you are working.  This is typically when your income is supporting the highest amount of expenses such as a home mortgage, raising children, college or car payments.  When you retire, replacing your income becomes less important because you generally have less expenses during these years - houses get paid off, children go off on their own, and bills are paid down.  Unfortunately, this may be the ideal, but it's not always the case.  And even if your expenses are way down, your pension and social security incomes still go towards important bills that could cause someone financial stress once you pass away.

An important question to ask yourself when deciding whether or not to carry life insurance is in retirement is whether your passing will cause financial hardships on any friends or family.  If you answer is yes, then it's very important to protect your assets and have a plan ready.  If you receive a pension there is a handy strategy called Pension Maximization.  The article "Should I Own Life Insurance in Retirement" by Scott M. Kahan on discuses how this strategy works.  Basically, with pension maximization, you use the additional income you receive by choosing the single life annuity instead of the joint life annuity that will go towards monthly life insurance premiums.  Kahan points out that life insurance costs are generally based on age and health, so it's crucial to balance the higher income with higher life insurance premiums, especially if you have any health issues.

Even if you decide you have no long term need for life insurance, it may be worth considering a smaller, less expensive policy that would cover some short term costs such as a funeral or burial.  Funerals can cost up to $10,000, sometimes more, and if this money is not sitting aside then a policy might be right for you.  Some funeral homes even offer such a program where the payout of the life insurance policy gets paid directly to them for funeral costs.  Whatever you determine your needs to be, check with a financial advisor to size up your assets and your true need for life insurance.

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