Will You Need Life Insurance in Retirement? Ep # 91

Are you planning to keep up your life insurance in retirement? One listener asks if I think it’s necessary. I also answer another question from a listener about diversification. As you approach retirement, you may want to rethink your risk tolerance. Do you feel secure in your asset allocation? Many people prefer to stay safe and others wish to continue accumulating assets. Listen to my thoughts about these questions plus the retirement headline segment about exercise in retirement on this episode of Retirement Starts Today.

Are you planning to keep up your life insurance in #retirement? Find out my opinion on keeping #LifeInsurance in retirement on this episode of #RetirementStartsToday Click To Tweet

Outline of This Episode

[2:22] In retirement your personal trainer may be more important than your financial advisor
[7:20] Should Janet give up her life insurance?
[13:15] Why diversify?

How important is exercise in retirement?

In this retirement headline segment, I discuss an article I found that highlights how important exercise should be in your retirement. Living an active lifestyle is the way to stay younger longer. In 1950 the percentage of the population that was over 85 was 1 million, or ⅔% of the population, now its 1.9%, and in 20 years 3.8% of the population will be over 85. So, chances are, you will live longer than you imagined. The quality of your life in your later years will depend on your ability to develop and continue healthy habits now. Listen to hear how you can build an exercise regimen in early retirement and how I incorporate exercise into my life.

The quality of your life in your later years will depend on your ability to develop and continue #HealthyHabits now. Click To Tweet

Why you won’t need life insurance in retirement

You are probably used to carrying life insurance for most of your life. Life insurance protects your family if the worst would happen to you. But life insurance isn’t necessary once your unfunded liabilities (children) grow up. Once your house is close to being paid off then there is no longer a need to carry life insurance. Think about reallocating that money into a Medicare Part B plan or long-term care insurance instead.

A question from a listener named Janet asks if she still needs to carry life insurance in retirement. She mentions that her daughter’s college is funded and that her house is nearly paid off. My advice is to either lapse or surrender the policy. Before cashing in, it is important to check on the taxability of the money. You don’t want to be stuck with a hefty tax bill at the end of the year. Are you still carrying a life insurance policy?

Why diversify?

Generally speaking, financial advisors encourage their clients to keep their investments in a ratio of about half stocks and half bonds. But if your risk tolerance can handle it you can keep your money in a higher ratio of stocks for as long as you’d like. Stocks will most certainly out-perform bonds but we like to provide a bit of stability to our clients. Bonds and cash can provide some certainty for your retirement income You may think you’re 5 years away from retirement, but nothing in life is certain. You could be wrong and a layoff or medical event could move up your retirement date. Getting the risk-return ratio just right is the goal of every investor.

Over-focus on returns can keep you from focusing on the actual goal of #retirement, which is a sustainable #RetirementIncome plan. Do you have a sustainable #RetirementPlan in place? Click To Tweet

Are you an accumulator?

Michael asked why he needs to diversify. He would prefer to hold mainly stocks in his portfolio. He sounds like an accumulator. Accumulators have a difficult time coming out of accumulation mode and into decumulation mode. Retirement focuses more on sustainability and less on accumulation. A temporary setback in the stock market can keep you from retiring if you have the majority of your portfolio invested in the stock market. Over-focus on return can keep you from focusing on the actual goal of retirement, which is a sustainable retirement income plan. It’s important to focus on rational decumulation in your sustainable retirement plan. Think about how sustainable your withdrawals will be. Do you have a sustainable retirement plan in place?