Life Insurance has always been an essential tool in financial planning, but historically has been reserved for younger people who plenty of kids and a large mortgage. The myth that seniors don’t need it hasn’t kept up with the world we live in today. Let’s discuss why.
Seniors are parents longer
What’s different about today’s retirees versus those thirty years ago? Plenty. For starters, parents are starting families later. According to the CDC, the average age of first-time mothers increased from 21 to 25 years between 1970 and 2006, with the largest portion of the increase being for births in the 1970s and 1980s. This statistic only pertains to first births, meaning those families with multiple children are having them well into their 30’s.
More kids go to school
According to the Bureau of Labor Statistics, 68.6 percent of 2008 high school graduates were enrolled in colleges or universities. With more kids going to college, and on average taking more than six years to graduate, the financial responsibility typically falls on the parents. With college cost rising twice the rate of inflation, around 5-8%, this represents a large financial burden for parents.
Adult children won’t move out
Just under than 60 percent of 22 to 24 year olds are living at home. If you consider adult children ages 25 to 29, it’s around 30 percent. Also, young adults are waiting longer before getting married. Between 1970 and 2000 the average age at first marriage for women increased from 20.8 to 25.1; with men, it went from 23.2 to 26.8 years.
Why is Senior Life Insurance important?
Seniors simply have more financial responsibilities for a longer duration of time. They are working longer, and require more income to sustain not only their living, but those of their dependents around them. The old rules assume virtually no debt and a fairly sizeable retirement for those nearing retirement. That’s just not realistic for many of today’s baby boomers. According to the Bureau of Labor Statistics, the average value of a retirement account for baby boomers was $49,944. Life insurance can be a powerful tool for retirees because of two primary benefits: it provides financial security and it's a wealth transfer vehicle.
It provides financial security
The primary purpose of insurance is to help protect people from expenses that would be impossible to recover from if something unexpected happens. The real issue is whether there any financial obligations that would put your family (surviving spouse, children, etc.) in jeopardy if something were to happen to you. Life insurance isn’t necessary for people who have enough liquid assets to cover any unforeseen circumstances. The truth is that few people in retirement find themselves in that situation. While you may not need the same amount of coverage that you had when you were younger, some amount of protection may still be prudent.
Life Insurance has inheritance planning benefits
Not only does life insurance provide protection against unexpected events, it can also be used as a powerful wealth transfer vehicle, since the benefit pass tax free to your beneficiaries. This can be valuable to estate and inheritance planning. If you need protection to cover your financial obligations, you may find that having the right type of insurance and keeping it in force will allow you to transfer some wealth to your heirs in a tax favored way even after your financial obligations are gone.
Consider Life Insurance for your retirement
Life insurance is a flexible tool for retirement and estate planning. If you are concerned about your retirement income being able to withstand an unexpected life event, consider life insurance as an effective planning option.