Most people think of life insurance only in terms of the monetary benefits after their passing. However, it offers many other advantages, particularly when it comes to retirement. In fact, getting the right policy can play a significant role in supplementing your income during your senior years. Here’s a closer look at this commonly overlooked financial strategy.
What Concerns Do Seniors Have About Retirement and Finances?
As a rule of thumb, people need to set aside at least 75% of their pre-retirement income to live comfortably into old age—a high bar for some who barely considered saving up for retirement. For those nearing retirement age or those who have already retired, below are a few concerns that have to be addressed.
Financial Vulnerability: Retirees who were breadwinners think about what happens to their family in the event of untimely death or disability; are they prepared for financial strains with the loss of income?
Outliving Savings: With people living longer, there’s an increased chance of emptying out the nest egg more quickly. It’s not rare to find retirees with little to no money in their old age.
Rising Taxes: Even if retirees have lower deductions, increasing tax rates can still take a huge chunk out of their fixed income during retirement.
How Can Life Insurance Augment Income?
Savings and pensions are often not enough for a comfortable retirement. That’s why some retirees choose to return to the workforce to earn and supplement their income. However, there’s another way to add to your retirement income—through life insurance. Whether you have a universal or whole life insurance policy, each can add to your income stream.
With a universal life policy, you can either borrow its cash value or take partial surrenders to augment your income. Bear in mind that when you do this, the policy’s death benefit and cash value will be reduced, too. Some carriers even allow the conversion of a permanent policy to life annuity as an income stream in your retirement.
Meanwhile, universal life insurance lets you adjust your death benefit. A portion of your premiums is allocated to policy cost, with the rest placed in different investment vehicles. You earn returns based on your investments’ performance. Whichever you choose, ask your financial associate about the best strategy.
When you want to know more about life insurance and how it can augment your retirement, talk to Christina Mendoza & Associates LLC Insurance and Financial Services of San Antonio, TX. As a licensed insurance agent with years of experience, she has offered invaluable advice to numerous clients on retirement and financial planning throughout Bexar County and the surrounding areas. Call (210) 389-5289 to learn how she can help you or visit her website to submit an inquiry.