Should You Add Life Insurance When Retired?

Why is it Important to Supplement Life Insurance?

Recent data shows that only slightly more than half of all Americans have life insurance, [1] and only half of those policyholders are adequately insured.[2] That means three-quarters of American families will struggle after the death of the insured because there’s not enough money to settle all debts, funeral costs, and more. Because life insurance can play such a pivotal role in asset protection plans, it makes sense to consider buying or supplementing life insurance when retired.

Life Insurance as an Income Replacement

One of the more common reasons to own life insurance is to replace income once you’re no longer working. In addition to the loss of regular income from a job, your retirement plans will no longer be funded, and other employee benefits may be discontinued. 

While you’re still employed, give some thought to the dollar figure you’d need to replace your lost income and retirement plan value. Also, consider purchasing a policy outside of your employer benefit plan; in the event you change employers or retire, that policy stays with you. 

And during retirement, if your spouse predeceases you, one of your Social Security benefits will be eliminated, and it’s even possible that your pension could be reduced or eliminated. Life insurance will provide protection under those circumstances.

Leave a Legacy for Children and Grandchildren

Life insurance can provide an income tax-free benefit to your children and grandchildren that will inherit your estate. Simply name your trust as the beneficiary. The benefit is paid to the trust tax-free and paid out through the trust per your wishes.

Life Insurance for Long-Term Care Benefits

The insurance industry has come a long way in providing products that can offer a benefit to your family in the event of death or a long-term illness. 

For example, let’s say you purchased a life insurance policy with a $500,000 death benefit. The typical “long-term care” rider allows the insured to use up to 2% of the death benefit. That 2% amounts to $10,000 per month for up to 48 months for long-term care. In other words, you can spend a portion of your death benefit during your lifetime. 

Wealth Protection Tax Strategies for Life Insurance

Even in death, taxes can take a bite out of your estate. There are income taxes due on IRAs and 401(k)s. Or there may be federal and estate taxes that exceed the exemption. But if you create an irrevocable trust that can own the life insurance, the beneficiaries will pay neither income tax nor estate tax on the death benefit.

Life Insurance Can Protect You and Your Family from Both Unforeseen and Predictable Events

If you’re nearing retirement, it’s a good time to examine and evaluate your current life insurance coverage and overall asset protection plan. And if you do decide to purchase or supplement life insurance when retired, you’ll have to consider:

  • The amount of coverage you’ll need
  • The type of policy you want – for example, term, universal life, guaranteed universal life, etc.
  • Who to designate as owner and beneficiaries

With so much competing for our attention these days, it’s understandable if the idea of life insurance in retirement isn’t on your radar. The Alpha Wealth Group wants to help make sense of this for you because we believe investing in life insurance could help safeguard your future.

We’ll be happy to provide a complimentary life insurance analysis. Just contact us here to schedule an appointment. You can also reach Tom directly at (630)519-4742 or at


[1] LIMRA 2020 Insurance Barometer Study

[2] Got Life Insurance? You May Not Have Enough – NerdWallet

Investment advisory services offered through Retirement Wealth Advisors, LLC (RWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. RWA and Alpha Wealth Group are independent of each other. Insurance products and services are not offered through RWA but are offered and sold through individually licensed and appointed agents.