Clients frequently ask whether they need life insurance since they’re retired. I wish I could give an easy “yes” or “no” response but the answer varies, depending on your personal financial situation. These are the key reasons you have or buy life insurance when you’re retired:

• To increase your pension income by 30%
• To provide a guaranteed inheritance
• To provide a significant charitable gift
• To (possibly) pay estate taxes

Consider this example…

The chart below shows the options faced by one of our clients, Jim and Marge, who recently retired. 

Despite it being the lower payout, most couples end up choosing the joint life (also called joint and survivor) pension option to ensure that the surviving spouse continues to receive payments.

In this example, Jim is giving up $700 per month or $8,400 annually in income in order to guarantee an income stream to Marge.

This sounds like an insurance premium to me.

The question then becomes whether there is a less expensive way to acquire enough insurance to guarantee Marge a $4,300 monthly check for a monthly premium cost that is less than $700.

We checked with commercial annuity companies to see what single payment/deposit they would require in order to provide Marge with a $4,300 monthly annuity for the rest of her life no matter how long she lived. In this case, she would need $750,000. This is the amount of life insurance that Jim should have.

He could buy this policy for $3,500 per year, which gives the couple an extra $4,900 per year in income! Over 20 years that’s an extra $98,000 of income. If Marge outlives Jim, she has enough insurance money to purchase a lifetime annuity for her to maintain the same income stream. If, on the other hand, Jim outlives Marge, he is not stuck with a lower pension income.

Life insurance is just one element of a full retirement plan. Not sure where to start for your incredible retirement?

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