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Friday, 28 January 2022

Do "empty nesters" need life insurance


10 reasons to own life insurance after your kids have left home

There are various reasons to keep a life insurance policy after your children have become financially self-sufficient.

1. To meet goals

If your children are still in college and/or aren't financially self-sufficient, life insurance can help "finish the job." Despite the fact that you may have saved enough for tuition, the kids' living expenditures (e.g., room and board, laundry, entertainment/activity bills, etc.) remain, but Social Security benefit payments for the surviving spouse and children do not.

2. To support other dependents

If you had parents, disabled adult children, or others who rely on you financially, life insurance would ensure that they continue to be supported if you died before they did.

3. To cover the Social Security “blackout period”

According to a recent survey, 5% of married women aged 51 to 64 were impoverished, but 20% of widows aged 51 to 64 were destitute. This occurs because many people fail to plan for life insurance to provide money to their surviving spouse once their children have grown up. As previously stated, from the time the youngest child graduates from high school until the surviving spouse claims for benefits based on the deceased spouse's record, Social Security pays nothing (minimum age for eligibility is 60). The "blackout phase" is the term for this period.

4. To offset reduced Social Security survivor’s benefits

If a survivor starts collecting Social Security survivor benefits before reaching full retirement age (66-67, depending on when the survivor was born), the amount of benefits is permanently decreased. Furthermore, due to the deceased's premature death, he or she did not get wage raises that would have increased Social Security benefits. The consequence of these "missed" raises can be mitigated with a life insurance policy.

5. To offset other “lost” retirement savings

Furthermore, due to the deceased's early death, he or she did not receive wage raises that would have increased company pension benefits and/or IRA contributions. A life insurance policy can help compensate for the loss of retirement savings.

6. To meet commitments based on two incomes

Most two-earner couples make financial commitments depending on their combined income (e.g., home mortgages, loans, leases, and so on). Each earner's life insurance allows the survivor to keep up with their obligations.

7. To cover unexpected costs incurred as a result of a premature death

Funeral and burial expenditures, final medical bills, estate administration and transfer charges, and federal and state income and estate taxes are not typically planned for by young individuals. These expenditures, which can quickly exceed tens of thousands of dollars, can be covered by life insurance.

8. establishing a financial "safety net"

According to conventional wisdom, each household should save a "emergency fund" of around half a year's income to cover unexpected expenses. If the family did not have an emergency fund before the death, they will be much more financially insecure after the death. It's also possible that obtaining credit may be more difficult for the surviving. This is a problem that can be solved with life insurance.

9. To offset lost income if a spouse dies after beginning Social Security retirement benefits

Each person obtains an income when a couple retires and begins collecting Social Security retirement benefits. The individual with the higher pre-retirement income receives a benefit based on that income, while the person with the lower (or no) pre-retirement income receives either his or her own earnings record or half of the spouse's Social Security benefit, whichever is greater. When one spouse passes away, the higher retirement benefit continues, but the second benefit ceases, resulting in a 33 percent loss in income. This loss of income can be compensated for with life insurance.

10. To provide bequests to heirs and charities

You can specify some or all of your life insurance coverage to go to your heirs and/or favored charities if you want to make sure they get money after your death. This is especially important if your executor would have to liquidate other assets to accomplish this goal if you didn't have life insurance.

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