Life can change quickly, and when it does, it’s helpful to review your financial strategy. For example, when you have children, you may start exploring options to save for college. When you buy a home, you might increase your emergency savings to cover potential repairs. And as you get older, you may shift to a more conservative investment allocation.
It’s often helpful to include life insurance in these periodic financial reviews. There are some life changes that represent obvious times to review or adjust your coverage. For instance, many people purchase life insurance when they have kids or buy a home. Others do so when they start a business or accept a promotion.
There are other, less obvious times when it’s appropriate to review your protection. Below are three such instances. If any of these sound familiar, you may want to meet with your financial professional and determine if your life insurance strategy is still the right one.
Many people purchase life insurance as an income replacement tool. They’re the primary breadwinners in the family, and they want their spouse and children to have financial resources if they should pass away. If you purchased life insurance for income replacement, you may think you’ll no longer need the policy after you retire. After all, you’ll no longer work and earn income in retirement.
However, there are still reasons why life insurance is important when you retire. It’s likely that you may face long-term care or other costly medical services in the final years of your life. Those services could drain your assets. Life insurance can help your surviving spouse replenish their savings.
Life insurance can also serve as an effective tool to leave a legacy. You could use the policy to help your children and grandchildren achieve their biggest goals after you pass away. You also may use your life insurance as a tax-efficient income vehicle.
Don’t assume that life insurance is unnecessary in retirement. While you may no longer need an income replacement tool, your insurance policy could serve other important purposes. A financial professional can help you determine what changes you need to make to your coverage.
Accepting a Pension
Are you one of the fortunate individuals who will have a pension in retirement? If so, you may need to decide which payment option you want. Most plans offer some form of joint life option in which you take a reduced payment, but it covers both your life and your spouse’s.
At first glance, it may seem like the joint option is the best way to protect your spouse in the event that you pass away first. However, it may be more effective to simply purchase life insurance as a protection tool. That could allow you to accept a higher pension payout. Every situation is unique, so it’s important to consult with a financial professional before you make a decision.
Divorce impacts nearly every corner of your financial life. It’s a complex and exhausting process, so it’s easy to overlook some areas of your financial strategy. During this busy time, don’t forget to review your life insurance.
You may not need as much life insurance protection after your divorce. On the other hand, if you have children, you may not be confident that your former spouse can fully support them. In that case, you may want to maintain a significant amount of coverage.
Also, don’t forget to check your beneficiaries. Too many people make the mistake of keeping their former spouse on their insurance as primary beneficiary. If you do, he or she will receive the benefit upon your death, even if that’s not your intention. Make sure your beneficiaries are correct, and consider setting up a trust as beneficiary for your minor children.
Ready to review your life insurance strategy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and objectives and determine which type of coverage is right for you. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
17962 – 2018/9/4
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