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Question: When, if ever, should I look at updating my life insurance?
Answer: As you approach or begin retirement, there’s much to look forward to for you and your spouse. The easing of stressful work, relaxation time and enjoyment of things long put off may come to mind. Insuring for replacing your income for children, their education and upbringing are gone. And life expectancy statistics put many years ahead of you to enjoy.
But, unfortunately, these statistics also imply that some will die early with a probability that increases faster after age 55. If so, would a premature and unexpected death for you or your spouse leave the other financially strapped?
Beyond insuring for a legacy to your children and final estate costs, there are five reasons to update life insurance now for ensuring your spouse of the relaxing retirement you’re in the processes of creating.
You may consider more life insurance:
n To cover an adult child who is having a hard time in life. This may be because of a mental or physical disability or a shortcoming.
n To cover the Social Security blackout period for your spouse. Social Security pays nothing from when the youngest child leaves high school until the surviving spouse applies for benefits based on the deceased spouse’s record (minimum age for eligibility is 60). You anticipated qualifying for a certain amount of Social Security benefits as part of your retirement income, but there’ll be no help during the “blackout period.”
n To offset reduced benefits anticipated from Social Security and saving plans. As the main breadwinner with some high income years left, you plan to contribute heavily to qualified plans you’re in. These years also may boost your Social Security benefits, too. Your early death would preclude the extra retirement income you thought these savings and benefits would produce.
n To supply your commitments that relied on two incomes. Perhaps both spouses work in your family. You may have committed to mortgages, loans or other obligations that depend on both your incomes. You need to insure that at least the deceased spouse’s income is replaced to allow the surviving spouse to maintain those commitments.
n To create an emergency fund to handle both the first spouse’s death expenses and other unforeseen expenses that may come up in subsequent years.
Insuring for these needs not only allows the surviving spouse to enjoy at least the income and asset benefits you anticipated for both of you, but won’t undermine the legacy you both wanted to leave to your children and charity.
Steve Wright is managing member of The Wright Legacy Group LLC.