Do You Need Life Insurance When You Retire?

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Do You Need Life Insurance When You Retire?
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• The traditional thinking about life insurance is
  that you only need it when you have an income to
  protect, when you have a mortgage or when you
  have kids to support.
• And while its true that having life insurance
  after 65 isnt right for everyone, there are some
  good reasons you might want to consider it.

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• 1. Supplement your retirement income.
• If you have an existing permanent life insurance
  policy, for example, you may be able to tap into
  accumulated cash value as a form of retirement
  income. You can incorporate the funds inside your
  permanent life insurance policy to complement
  other forms of retirement income such as Social
  Security, 401(k) plans and IRAs.
• Drawing on the cash value of a permanent life
  insurance policy enables people to use other
  resources to guarantee lifetime income.
• There also comes a point when people become
  concerned about outliving their retirement
  savings. Drawing on the cash value of a permanent
  life insurance policy enables people to use other
  resources to guarantee lifetime income, such as a
  longevity annuity or a guaranteed living benefit.

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• 2. Transfer wealth.
• Life insurance can be an effective vehicle for
  transferring wealth to your heirs while avoiding
  inheritance taxes. While the federal exemption
  for estate taxes have been raised to 5.43
  million for 2015, there are still state
  inheritance taxes to consider. There are several
  states where you wouldnt want to be caught dead,
  from an estate-planning perspective.
• Of course, such policies have to be set up
  correctly. Life insurance payouts are generally
  free of income tax, but they are still subject to
  inheritance taxes if they are owned by the
  insured. That is, if you own a policy on
  yourself, then it is considered part of your
  estate.
• Here are three examples of how permanent life
  insurance can be used for wealth transfer

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• Set up an irrevocable life insurance trust. You
  would then gift premiums to the trustas long as
  the gifts are under the annual gift tax
  exemption, you wouldnt have to worry about
  paying gift tax. The beneficiary of the policy
  would be the trust rather than your estate, so
  the policy wouldnt be included in your estate
  for estate-tax purposes. The proceeds of the
  trust would then be distributed to your children
  or grandchildren, however you set it up. The
  downside of this approach is that, because the
  owner of the policy is an irrevocable trust, you
  have no access to that policy. You give up any
  access to it in exchange for the tax benefits.
• Use a survivorship policy. If you might need
  access to the cash value of the policy, you can
  use a survivorship policy, one that covers
  multiple people and doesnt pay out until the
  last person passes away. Initially, the policy
  would be owned by one of the insured, but when
  the first insured passes, the policy would then
  move into a trust. The trust becomes the
  beneficiary, avoiding estate tax because the
  survivorship policy pays the death benefit on the
  last death, not the first death.

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• Insure the children for the benefit of the
  grandchildren.
• This can be a very cost-effective way for people
  in their 60s or 70s to use Retirement Insurance
  Company for wealth transfer in a skip
  generation strategy. Generation 1 owns the
  policy, so they can have access to the cash if
  they want, but then when they die, the policy
  goes into a trust for the benefit of generation
  3.
• These are complex matters, so you will want to
  discuss these items with your financial and legal
  advisors to determine what post-retirement life
  insurance strategies make sense for you.

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