The amount of life insurance anyone needs is different from person to person.
Most people need at a minimum a burial insurance policy to cover a funeral and final expenses. You can do this with a preneed insurance policy through a funeral home or with a small whole-life policy from any life insurance company.
If you have a spouse, you may want to leave enough life insurance to replace the lost income to him/her by your death, over their presumed remaining years of life.
You may want to have a life insurance policy that would take care of any remaining debts.
If you are a business owner, you could use buy sell life insurance to enable a partner or relative to buy your share of the business.
You could pass your estate to your children and grandchildren with life insurance. This reduces or eliminates taxation and maximizes what you leave to them.
Finally, life insurance is a simple and quick way to pay for final expenses such as funeral.
First are you retired?
If so then the point may be moot. However,if not you may use a policy to retire with funds that you accumulate over time. Purchased when you are younger the accumulation phase can be very nice.
If you are retired, the average funeral cost today is $7300.00.
So getting a final expense policy may be expensive but you may not save enough money in time to pay for your own funeral.
Let your children contribute and use the funds as your legacy to them.
Marc Crolius 877.894.4643
Enrolled Agent-licensed to practice before the IRS, Samuel N Smith, EA, South Carolina
Let me answer by beginning by asking you a question. How much do you expect your final burial costs to be? Does that cover your wife? What about any "estate planning needs" you may have? Also remember the growth in that policy has grown tax deferred. Are you aware that you can convert that life insurance policy into an "immediate annuity" or you may want to use the cash value for "long term care" planning. If so, are yuo familair with the provisions of the Private Pension Act that allows you to convert that policy into a plan that is covered by the Private Pension Act and when you use the "cash value" to pay qualified medical expense, which includes you paying for care in your home, the cash value is not taxable.
The answer to this is very subjective depending upon your situation, but I'll try to make it a little more simple. The idea has always been that, when you retire, your need for life insurance decreases. Today, that's not always the case. It's much more complicated now, but there are some universal ideas:
What is your need for pure death benefit? How much debt do you have and how long will you have it? How is your pension, 401(k), etc. set up? Will the income from this be set up in a way that can provide both you and a spouse with adequate income should either of you die? If not, how much income do you need to provide in the event of your death? What will your death cost in terms of funeral expenses, taxes, and estate settlement? Do you want to have that provided for? Do you have people or institutions that you want to leave money for? Will one or both of you need special care? When you answer these questions and have an amount in mind, it's time to explore how best to go about setting it up the right way.
I'm not going to go into the type of insurance or any income you may need to offset a shortfall in your retirement. That's a much larger discussion that I'll leave for you and an agent you can trust. He/She will be able to talk with you and come up with the program that fits your need and your budget.
Some reasons you might need/want life insurance in retirement are:
1) To pay for funeral or memorial service, grave site, transportation for family to attend your funeral, etc.
2) To pay for outstanding personal or business loans.
3) To pay off mortgage.
4) To pay off credit cards.
5) To pay estate taxes, probate costs, and other costs of settling your estate.
6) To leave an inheritance.
7) To transfer ownership of business or property.
8) To provide retirement income for yourself (this would need to be a cash value policy started years before retiring)
9) To provide money for living expenses for your surviving spouse or other dependents.
10) To provide a gift to a charitable organization.
The amount of life insurance you need in retirement will depend on which of these or other needs/desires you have, and the amount needed to fulfill those.
The amount of insurance needed at retirement is totally dependent on your financial condition including long and short term obligations. Final expense is a static obligation you will have at any life stage. Find an insurance agent that can assist you in calculating the amount of life insurance that will take care of your obligations to the end of your life.
President, Lane Independent Agency, Southern California
Do you own a home? Do you have a mortgage? Do you have a spouse? Children? How many? What debts do you have? Are your kids going to enter college? Do you have grandkids? All these things need to be considered. For this reason New York Life suggests between five and ten times your annual income, which is more than most folks seem to have, unfortunately for them.
Licensed Life Agent, Life and Finance/ 50 States, New York
Usually when a Life Insurance policy is written. The agent will qualify the the buyer with what is called Human Value Life Approach which simply means the financial value of the policyholder. The value is judged on the financial needs of the family id the policyholder is no longer there to support the family after any unfortunate mishap as a result. Bills must be paid. Funeral expenses. Child support, or any other financial regard to support the beneficiaries of the policy. A future analysis is given as to the present financial situation compared to what will be needed upon distribution of the benefit. There is also the consideration to purchase high amounts of a tax free lump sum benefit in order to create an estate, and distribute wealth for generations to come.
There are policies that have a retirement value other than traditional cash value policies. Some may call it modified endowment, but, other names are according to how the company names it. Paid up policies are very much a benefit to this question. Like a Trans-Security policy from Trans America.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
I have helped many people purchase substantial amount of life insurance in their retirement years. Here are some examples.
One gentleman used it to maximize his pension distribution. When he retired, he took the distribution option from his pension plan that gave him the highest monthly income. However, because he chose that option, the distribution would last for his life only. It would not be passed on to his wife, should he predecease her.
So, he took out life insurance to pick up the difference. When he passed away, the pension distribution stopped, but the life insurance benefit was paid so that his wife could continue to receive money. She was able to maintain her quality-of-life.
Another gentleman was technically retired, but decided to start a business. He had many contacts, some ready capital, and time. That’s a good start for any entrepreneur :) Nonetheless, he did need a bank loan to jumpstart the enterprise. The bank required a life insurance policy to a indemnify the debt. So he purchased one.
A couple were both retired, and heavily involved in volunteer work. There were a number of charitable organizations close to their heart. They wanted these causes to remain viable long into the future. So they purchased life insurance policies for the benefit of these charities.
Yet another couple had a sizable estate. When they both passed on, Uncle Sam would come in and demand a huge amount of estate taxes to be paid. They had accumulated a number of business and personal assets, and there was no way they wanted their children to liquidate these just to pay the taxman. So they bought life insurance to take care of the tax obligation, and were able to pass on the assets intact to their heirs.
I have met a number of retired couples who bought life insurance for the benefit of their adult children. Unfortunately, these children had become divorced and ended up “back in the nest,” at least temporarily. Once again, they had become financially dependent on their parents. Mom and Dad then took out policies to make sure that should their children tragically lose them, money would still be available to help to them get back on to their own two feet.
And you thought your days of owning life insurance were over, didn’t you? :)
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Most people need at a minimum a burial insurance policy to cover a funeral and final expenses. You can do this with a preneed insurance policy through a funeral home or with a small whole-life policy from any life insurance company.
You may want to have a life insurance policy that would take care of any remaining debts.
If you are a business owner, you could use buy sell life insurance to enable a partner or relative to buy your share of the business.
You could pass your estate to your children and grandchildren with life insurance. This reduces or eliminates taxation and maximizes what you leave to them.
Finally, life insurance is a simple and quick way to pay for final expenses such as funeral.
If so then the point may be moot. However,if not you may use a policy to retire with funds that you accumulate over time. Purchased when you are younger the accumulation phase can be very nice.
If you are retired, the average funeral cost today is $7300.00.
So getting a final expense policy may be expensive but you may not save enough money in time to pay for your own funeral.
Let your children contribute and use the funds as your legacy to them.
Marc Crolius 877.894.4643
What is your need for pure death benefit? How much debt do you have and how long will you have it? How is your pension, 401(k), etc. set up? Will the income from this be set up in a way that can provide both you and a spouse with adequate income should either of you die? If not, how much income do you need to provide in the event of your death? What will your death cost in terms of funeral expenses, taxes, and estate settlement? Do you want to have that provided for? Do you have people or institutions that you want to leave money for? Will one or both of you need special care? When you answer these questions and have an amount in mind, it's time to explore how best to go about setting it up the right way.
I'm not going to go into the type of insurance or any income you may need to offset a shortfall in your retirement. That's a much larger discussion that I'll leave for you and an agent you can trust. He/She will be able to talk with you and come up with the program that fits your need and your budget.
1) To pay for funeral or memorial service, grave site, transportation for family to attend your funeral, etc.
2) To pay for outstanding personal or business loans.
3) To pay off mortgage.
4) To pay off credit cards.
5) To pay estate taxes, probate costs, and other costs of settling your estate.
6) To leave an inheritance.
7) To transfer ownership of business or property.
8) To provide retirement income for yourself (this would need to be a cash value policy started years before retiring)
9) To provide money for living expenses for your surviving spouse or other dependents.
10) To provide a gift to a charitable organization.
The amount of life insurance you need in retirement will depend on which of these or other needs/desires you have, and the amount needed to fulfill those.
Keith Prim - Dallas - 214-435-0791
There are policies that have a retirement value other than traditional cash value policies. Some may call it modified endowment, but, other names are according to how the company names it. Paid up policies are very much a benefit to this question. Like a Trans-Security policy from Trans America.
One gentleman used it to maximize his pension distribution. When he retired, he took the distribution option from his pension plan that gave him the highest monthly income. However, because he chose that option, the distribution would last for his life only. It would not be passed on to his wife, should he predecease her.
So, he took out life insurance to pick up the difference. When he passed away, the pension distribution stopped, but the life insurance benefit was paid so that his wife could continue to receive money. She was able to maintain her quality-of-life.
Another gentleman was technically retired, but decided to start a business. He had many contacts, some ready capital, and time. That’s a good start for any entrepreneur :) Nonetheless, he did need a bank loan to jumpstart the enterprise. The bank required a life insurance policy to a indemnify the debt. So he purchased one.
A couple were both retired, and heavily involved in volunteer work. There were a number of charitable organizations close to their heart. They wanted these causes to remain viable long into the future. So they purchased life insurance policies for the benefit of these charities.
Yet another couple had a sizable estate. When they both passed on, Uncle Sam would come in and demand a huge amount of estate taxes to be paid. They had accumulated a number of business and personal assets, and there was no way they wanted their children to liquidate these just to pay the taxman. So they bought life insurance to take care of the tax obligation, and were able to pass on the assets intact to their heirs.
I have met a number of retired couples who bought life insurance for the benefit of their adult children. Unfortunately, these children had become divorced and ended up “back in the nest,” at least temporarily. Once again, they had become financially dependent on their parents. Mom and Dad then took out policies to make sure that should their children tragically lose them, money would still be available to help to them get back on to their own two feet.
And you thought your days of owning life insurance were over, didn’t you? :)