Do You Need Life Insurance In Retirement?

In a recent Gallup survey (1) , 46% of Americans said that they worry about having enough money for a comfortable retirement, and that is not surprising when a recent Northwestern Mutual study (2) found that 1 in 3 Americans have less than $5,000 saved for retirement. This fear has many re-examining their budgets to find additional ways to save for their golden years. One consideration to boost retirement savings is dropping an expensive life insurance policy that you no longer need. The premiums you would potentially save from such a move could be added to a tax-advantaged retirement plan, such as a 401k, IRA, or Roth IRA. Each person’s financial situation is unique so talk with your financial advisor prior to making life insurance policy changes.

Why Life Insurance?

The first question to ask when it comes to life insurance is “if I die, would my spouse or family be struggling financially?” Life insurance can be a great way to protect your family if they are reliant on your income. However, as you are about to embark on retirement, you may want to reconsider whether they still need the same protection.

The Cost of Life Insurance

Whole life, universal life, and variable universal life also have internal costs for the life insurance coverage, but if you’ve had the policy for a long time, it may be that enough cash value has been accumulated in the policy to pay the insurance costs from the policy itself, without having to come “out-of-pocket” to pay the premiums. In these cases, it’s important to recognize that you are still paying for this coverage, even though it might not be out of your checking account. Instead, you are paying in terms of potential lost investment gains that could have been used for retirement instead.

Another possible solution is to consider term life insurance to replace more expensive forms of life insurance (such as whole, universal or universal life). All clients are unique so talk with your financial advisor before making changes to your insurance coverage strategy.

At the end of the day, every dollar in expenses that can be eliminated before retirement is a dollar that can be saved and invested towards retirement.

Reasons to Keep Life Insurance in Retirement

There are some exceptions to the general rule that seniors don’t need life insurance after retirement. Some retirees have pension income that forms a substantial part of their retirement income and in some cases, the pensioners’ spouse could lose some or all of that income at death.  Another scenario is if you have a child with disabilities still at home, you might want to keep your policy for their special needs expenses. Life insurance can also be useful if you have substantial assets and need a funding source to take care of estate taxes. Life insurance can be helpful in providing a cash infusion at death to pay off business debt or fund a buy-sell agreement.

Also, some long-held permanent life insurance policies have potential taxable gains that would be triggered if the policy is surrendered. For all these reasons, it’s important to work with a qualified fee-only advisor to fully understand your options in any of these types of cases.


Life insurance costs money and that’s why it’s important that you only buy it (and keep it) if you need it. It may seem strange to give up a policy that you’ve had for many years but in reality, you may no longer need it if you are financially independent, have self-sufficient children and no costly worries around settling your estate. Talk to your Gratus financial advisor to help answer any questions before making important financial decisions regarding life insurance

*based on a $1M ten-year term life insurance policy for a healthy male ages 45 and 65 respectively.

Authored by:

Curtis Hearn, CFP®
Wealth Advisor
Wealth Management


The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you our your business.


About Gratus Capital, LLC

Gratus Capital is a consultative wealth manager focused on serving individuals, families, foundations, endowments, and other institutions nationwide. We offer comprehensive financial planning and active portfolio management. Clients benefit from having a dedicated team focused on providing counsel, recommending intelligent, custom solutions, and upholding fiduciary standards. Contact us today to learn how we can help you reach your financial goals.