Many individuals don’t see life insurance as a crucial component in their comprehensive retirement income strategy. They mainly view it as a means to safeguard their families financially in the event of their untimely death.
Life insurance can be so much more if you use it properly in your retirement. Generally speaking, having the right kind of life insurance policy and the right amount of coverage when you retire would help safeguard your income, give you tax-free income, help manage your taxes, and give you and your family peace of mind.
Below are some strategic ways life insurance policy can help you during retirement:
Safeguard Your Retirement Income Sources
Your retirement plan has to include life insurance coverage, especially if you expect that your family will be solely dependent on your retirement income. You can’t fix anything for them when you’re already dead, right? It’s common for a surviving spouse to struggle financially when their spouse dies before retirement. Although expenses are lower, this decrease in expenses won’t be enough to offset the decrease in income.
At the least, benefits from Social Security will be reduced because of the other spouse’s death. For couples, they can utilize life insurance benefits to replace Social Security benefits or other income sources during retirement. This means that your surviving spouse and children will be able to maintain their current living standards whether they remain in Raleigh or move out after you pass away.
Keep Your Taxes In Check
Life insurance coverage, when structured properly, could offer cash flow and death benefits that are tax-free, as well as tax-deferred growth. This will allow you to have increased flexibility on which funds to use in your retirement and depending on your specific kind of life insurance plan, can likewise be used as an asset in your portfolio for extra diversification. This can be beneficial as a solid hedge against increasing taxes or those in higher income tax brackets.
Ensure That Your Retirement Income is on Track
In some cases, many people find themselves trying to catch up on their retirement income several years or so leading up to their target retirement date. If one of the spouses passes away during this catch-up period, the spouse left behind might end up short on funds.
Due to this possibility, consider purchasing term life insurance coverage with a term of 10 or 15 years for you and your spouse to ensure that your retirement savings will be protected. It’s also a great idea to choose term life coverage that you can convert into a permanent plan just in case a potential life insurance need occurs, so you can ensure your insurability in the event of health changes.
With all these in mind, know how you can use life insurance coverage in your retirement strategy, as it can offer you more than benefits and protection in your working years and throughout retirement. Note that not everyone’s requirements will be the same since permanent life insurance might be better for some people, while term life insurance might be better for others.