Is Life Insurance Really Considered a Pivotal Part of Retirement?

Did you know that many individuals do not view life insurance as a vital part of a retirement income plan? It is often a conception that life insurance is primarily a way to help protect your family from the early loss of the main income provider during the work years. However, life insurance has the potential to be much more if it is properly utilized in a comprehensive retirement income plan. Unfortunately, many people do not understand the value and benefits life insurance can have for a retirement plan. By having the right type of life insurance and the appropriate amount of life insurance coverage it can help accomplish multiple jobs being: protecting your incoming, providing tax-free cash flow, managing taxes, and helping give your family a peace of mind. Below are a few ways that life insurance can help make your retirement plan easier!

Protect Your Income During Retirement

If one spouse passes away during retirement, the surviving spouse often struggles to meet their income needs. Expenses may be lower, the drop in expenses rarely offset the loss of income. One of the two Social Security benefits the couple was receiving will go away and for many couples, life insurance can be used to replace this loss of income.

Improve Your Investment Asset Allocation and Returns

Interest rates are close to a historical low, which in return makes bonds and CDs, not as an attractive investment for many of those who retire today. However, people still need to have some safe investments and assets in their retirement portfolio! It is suggested that you have life insurance as a substitute for bonds in a retirement income portfolio. Retirees should consider a whole life policy as a substitute for some or all of your bond portfolio. This can cause bond-like returns between 3 to 5 percent without the interest rate risk when having a bond.

Manage Your Taxes

There are a large number of uses of life insurance in a retirement income plan because of the favored tax treatment that life insurance receives! If it structured correctly, life insurance can provide tax-deferred growth, tax-free cash flow, and a tax-free death benefit. Since tax rates are also constantly changing, life insurance can also function as a hedge against future tax rate spikes.

You should be sure to check into all of the ways life insurance could fit into your retirement plan since everyone’s needs are different. You may benefit from a term life insurance plan while your spouse may prefer a permanent life insurance plan. If you have any questions or would like to sit down with one of our professionals, give Care Financial a call today!

Care Financial is a privately owned and operated business providing families, individuals and businesses with comprehensive wealth management strategies. Contact us online at or call us at 251-633-7122.

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