Why Retirees Still NEED Life Insurance

Why Most Retirees Still NEED Life Insurance

It seems like a million years, but it was only about 40 years ago that most workers could still look forward to a pension when they retired. The income came from money contributed by the employer, not the employee, and offered a guaranteed income as long as the employee lived. When the employee retired, it was likely that he or she would have paid off the house, been debt-free, and the kids would have left a long time ago. There also were no taxes on the employees earnings from Social Security.  So, with low expenses, a life expectancy of less than 20 years, income from the pension and Social Security, and home equity in case of emergency, the popular feeling was that there was no need for life insurance.

But things have changed.  In 2013, there is a very good chance that at least one spouse will live to reach the high 80’s or 90’s.  Most retirees still have house payments, car payments, and may have other debts.  Not only is the house not paid off, it may be upside down!  They may be supporting children or grand-children.  There’s a good chance that part, if not most, of their Social Security income is taxable but they probably already know that they did not save enough money to last until their 90’s.  They are staring directly at a financial disaster.

It’s not a stretch to think that MOST people who just retired, or soon will retire, do not have enough money to get through their retirement years.  If they need long term care at some point, they will not be able to pay for it and won’t get help from the government unless they are already broke (see Medicare and Medicaid pay down rules).  If one of the spouses dies, the surviving spouse is going to lose a big chunk of income.

For many of these people, their best hope is going to be a life insurance policy or annuity.  Some life insurance policies and annuities offer GUARANTEED LIVING BENEFITS such as an income for life (just like the old pensions), market-based rates of return on cash values, money for long term care or major illness costs not covered by Medicare without pay downs, zero-or lost cost policy loans, plus death benefits with large cash payouts that are free of income taxes.

This is why I call life insurance the most misunderstood financial tool.  But you MUST be working with an agent that really knows what he’s doing.


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