Do You Need Insurance for Retirement? (2024)

FAQs

Do You Need Insurance for Retirement? ›

You could need life insurance in retirement if you want to cover your final expenses and estate taxes, have outstanding debt, still earn income, or want to provide a tax-free inheritance to your loved ones. Otherwise, you probably do not need life insurance after retirement.

Since Medicare pays first after you retire, your retiree coverage is probably similar to coverage from a Medicare Supplement Insurance (Medigap) policy. Both are likely to offer benefits that fill in some of the gaps in Medicare coverage—like coinsurance and deductibles.

Getting life insurance for retirement isn't mandatory, but it can help when you pass away in your retirement years. For example, final expense life insurance can help your loved ones pay for expensive costs after you pass, like medical bills and funeral expenses.

Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working, sent the kids off to care for themselves or accumulated enough assets to offset the need for life insurance. But sometimes buying or maintaining a life insurance policy over age 60 makes sense.

By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.

You'll need to pay monthly premiums, copayments, coinsurance, and deductibles. You can pay for premiums and other Medicare costs in several ways. While you could budget and save for healthcare throughout your life, other programs can help: Paying with Social Security.

California Employers' Retiree Benefit Trust (CERBT) Fund.

Generally, when term life insurance expires, the policy simply expires, and no action needs to be taken by the policyholder. A notice is sent by the insurance carrier that the policy is no longer in effect, the policyholder stops paying the premiums, and there is no longer any potential death benefit.

It depends on your other obligations and plans for the future. For example, a young parent or couple with no debt should still consider life insurance to provide for their children unless they have enough saved to support them through adulthood.

However, a 401(k) typically makes more sense as your primary retirement income because it's more affordable and offers better returns than a LIRP or other types of life insurance.

At what point is life insurance not worth it? ›

Key Takeaways

You can buy either term or whole life insurance; which is best will depend on your needs and financial situation. Life insurance may not be worth if you have no dependents, if you have a tight budget, or if you have other plans for providing for them after your death.

How much is $100,000 life insurance per month? Healthy adults who don't smoke usually pay less than $20 monthly for $100,000 term life insurance, which can last from 10-40 years. However, monthly rates increase to $200 or more for a permanent policy, which lasts your entire life.

Retirees must balance life insurance benefits against the ongoing costs, especially if they lose their job-based coverage. If you retire with debt or still earn some income for your family, keeping life insurance in retirement is a good idea.

The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule). However, 3% is now considered a better target due to inflation, lower portfolio yields, and longer lifespans.

Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.

If you've been relying on your employer's group health insurance, your coverage will likely end, although 21% of large firms extend healthcare coverage to retirees, so check to see if your employer is one of them.

If you decide to retire or leave your current employer, your coverage will end, although many employers' plans offer options to continue your coverage.

Health Insurance Options

Medicare: Most people who are 65 and older can get free Medicare Part A Hospital Insurance, which covers hospital visits. If you don't qualify for free Medicare Part A, you can purchase private insurance.