If your retirement is just around the corner, life insurance may not seem a top priority. You have beach vacations, long days on the golf course, and quality time spent with family to look forward to, after all!
You may even be wondering if you should allow your policy to lapse and keep your premium payments in your pocket. Yet, depending on your unique financial situation, maintaining life insurance during retirement may be the right choice for you. Contrary to popular belief, life insurance can be beneficial to keep in the retirement life stage.
Reasons to Keep Your Life Insurance During Retirement
There are several reasons why maintaining your life insurance during retirement can be beneficial:
Replace Your Income
You may choose to invest in life insurance while you’re working to ensure a source of income replacement for your loved ones if you pass away. Yet, once you leave your job and start winding down for retirement, you may assume that you don’t need life insurance coverage since family members are no longer dependent on your working income.
Depending on your unique financial circumstances, you may have a pension or other retirement income coming in that is solely yours. However, if you pass away, your spouse might not receive those funds anymore. The death benefit from a life insurance policy like Canada Protection Plan can replace that income for your spouse. A life insurance benefit can also supplement their government pension plan, like Canada Pension Plan (CPP) and Old Age Security (OAS).
Pay Off Debt
Retiring doesn’t necessarily mean that you’ve paid off all your debt. Unfortunately, household debt has been on the rise for Canadian families. Whether it’s your mortgage, medical expenses, education or other personal debts, there’s plenty of reasons why you may be carrying debt (and mounting interest) into your golden years.
If you were to pass away before you paid off these outstanding debts, then your estate would need to cover these debts. Your life insurance policy will leave behind a death benefit upon your passing to cover your outstanding debts.
Leave a Legacy
You may have the desire to leave behind a financial legacy to your loved ones, but deciding the best way to do so can be challenging. Life insurance can help you leave behind a tax-free benefit for the ones closest to you in a clean, uncomplicated way. Whether you want to continue supporting your children’s education costs or help them purchase a home, you can ensure funds are readily available through your life insurance policy by naming them as beneficiaries. You’ll rest easy knowing the benefit will always payout when you pass away. You won’t need to worry about being frugal and saving over your lifetime to make this money available to loved ones; instead, you can simply enjoy your retirement the way you want.
Upon your retirement, you may want to consider how you can leave a meaningful legacy to causes that you support now. Whether it’s an animal shelter or a community sports initiative, you can decide how you leave your funds to move their mission forward. You can leave a legacy by naming the charity/organization the beneficiary of your policy or even the policy owner.
Did you know a permanent life insurance policy with a cash value component allows you to pull from that cash value during your lifetime? Cash value is the amount of money you’ve paid on top of your premiums towards the agreed-upon death benefit. Usually, the cash value builds up over the years you hold the policy. Depending on the policy, it may not be easy to access the cash value in the policy’s early years because it may be subject to withdrawal penalties. However, you’ll have a more significant cash value to pull from by the time you’re in your retirement years.
Perhaps the stock market is taking a downturn, or you have unexpected expenses; you can access the cash value from your life insurance policy during retirement to cover any necessary expenses. First, however, talk to your Life Insurance Advisor before making a cash-value withdrawal to ensure that you understand the taxation implications of this transaction, as well as the impact on your death benefit.
If you’re close to retirement, maintaining your life insurance may be in your best interests. If you have an existing policy, however, there are several ways you can leverage it to ensure your loved ones are financially protected.
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