Why life insurance, retirement planning go hand-in-hand

Why life insurance, retirement planning go hand-in-hand


Why life insurance, retirement planning go hand-in-hand

When you’re in your working years, purchasing the right amount of life insurance might take a backseat to other financial goals like saving for retirement. But it shouldn’t. You see, life insurance plays a significant role in protecting you and your family during your primary income-earning years. Ultimately, striking the right balance between investing for your future so you can retire when and how you want to, and purchasing the right amount of life insurance to protect your interests today is ideal.

Should You Buy Life Insurance Now?

While people need to save money and invest wisely, it’s also important to have the right kind of life insurance. “I recommend a combination of term and permanent,” says Annise Henson, life insurance product manager at Unum. “Term insurance is typically the best product for larger amounts of life insurance that are needed during the working years while there are mortgage expenses, and maybe the cost of raising children, sending them to college and paying for a wedding.”

If you wait to buy term insurance, you’ll probably pay more. “Term insurance gets more expensive as you get older,” says Henson. “It’s often tied to your employment so the same coverage may not be available if you change jobs. I recommend whole life insurance to provide more permanent coverage that will be available to cover any final expenses.”

There are more benefits to buying life insurance now. “Purchasing whole life insurance while you’re young allows you to lock in low rates that don’t increase as you get older and does not decrease with age,” recommends Henson.

Striking the Right Balance

If you’re finding it a challenge to sock away money for your golden years, it may be hard to see the value in investing in life insurance now. Henson puts it into perspective: “If you’re struggling to save for retirement, you may not have enough assets to cover your final expenses, leaving a burden for your loved ones when you pass away.”

You can actually lessen your financial responsibilities later by making this savvy move now. “Purchasing enough whole life insurance to cover your final expenses can ease that burden,” says Henson. “And since premiums are based on your age when you purchase and coverage does not decrease with age, there are no surprises. Coverage may be available through the workplace with a convenient payroll deduction that ensures that your premiums are always paid on time without you ever having to mail a check.”

Also on WorkWell:

How Much Life Insurance is Enough?

Calculating how much life insurance you need depends on a number of variables. “Recommendations vary greatly and are based on your personal situation,” says Henson. “If something happened to you, would your family have enough to cover your final expenses, pay the mortgage, fund the children’s college education and pay for your daughter’s wedding?” These factors should guide your investment in a life insurance policy.

Other considerations should also inform your decision. “Most people need more coverage during the working years or when they have more debt,” says Henson. “As the mortgage is paid and children are financially independent, the need for life insurance decreases. But it’s always good to have a base of permanent life insurance such as whole life in the absence of a large amount of savings.”

Is job-sourced Life Insurance Adequate?

If you have life insurance through your workplace, such as group term life, you may be hesitant to explore additional coverage, thinking you have enough and can shift your focus entirely to saving for retirement. However, you may not have adequate coverage or you may need permanent insurance in addition to term insurance.

An additional factor to note is that group term insurance may not be portable, which creates a need to purchase additional term and/or permanent insurance on top of to what your employer offers so that you can retain it should you change jobs or want to have it after you retire.

Retirement planning is often a complicated process. Work with a retirement planner and life insurance professional to assess your situation and invest in the right products to meet your needs today and down the road.

Tags: | |