Most clients of ours have made plans for their estate and documented them in their Will and through beneficiary designations on their financial accounts. This is a must, and we’re happy to help our clients check those boxes. But part of planning your estate is also about trying to balance protecting it (through insurance) and spending dollars in order to do so (on insurance premiums). Two big questions we face with our retired clients are “should I have life insurance at this age” and “do I need long-term care insurance”?
While insurance is an emotional topic for some people and clearly involves a process for assessing how you feel and what’s feasible (a deep dive into your health records), we generally feel everyone should consider it. And once work stops, group coverage typically stops too. Do you still have goals or people to protect? Probably. Here are 5 questions to ask yourself, prior to getting into the nuances of strategies and policy features. In short, see a planner BEFORE you see an agent:
- Do you feel your age? 60% of surveyed retirees say they feel younger than their age[i]. For those that don’t, what’s your family history? Do you feel your current health will impede your ability to secure coverage if you want it?
- Have you ever provided unpaid care to a relative or friend to help them take care of themselves? 1 in 3 have[ii], and other research shows that many caretakers become depressed[iii]. For most people, having first-hand experiences shape how they feel about insurance. Who is going to care for you if you need care? With transient lifestyles, your children may not even be close TO help care for you, if needed. Maybe paid care is your only option in which case, it’s best to start planning or transferring that risk to an insurance company now.
- Are you familiar with typical estate expenses? Attorney fees, executor fees, taxes at the state level or asset level, burial/funeral expenses… These are all a part of passing assets on and while acknowledging these expenses ahead of time may not change your viewpoint, some may wish to consider how insurance can help pay for or replace some of these expenses as lost inheritance for their heirs.
- Do you already have life insurance anyway? It’s not uncommon to meet people with cash value in policies from a long time ago, maybe even multiple policies. When’s the last time you did an audit on them? If you’re in good health, would you accept a larger death benefit if you didn’t have to pay more? Of course, you would! Would you throw a couple extra dollars at a policy, so you never had to make another premium payment again? You might. So get an audit and see what’s possible.
- Are you forced to take out IRA money you don’t plan to spend? Once you turn 70.5, the IRS mandates a minimum withdrawal amount. Why? So you’re forced to pay taxes. And if you pass away and leave that IRA to your heirs, they will pay taxes too. This would be a scenario where having life insurance could make sense, as the IRA distributions might help pay for a life insurance policy while you’re still alive and leave a tax-free death benefit for your heirs at death. This is more of an estate planning strategy leveraging your IRA dollars than it is about protecting your life.
There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.