The standard retirement planning handbook, whichever you may read, tends to focus on some general topics like diet, exercise and a secure income/cash flow.  Rarely do you see a discussion about life insurance as a financial asset in retirement.  So my topic for today’s blog is exactly that……thoughts about life insurance benefits in your retirement planning.

As a refresher- Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries when the insured dies.   For a premium paid, the insurance company guarantees cash will be available to the beneficiary of the insured. 

If a solid retirement plan has sufficient cash flow to provide the lifestyle desired, why would the plan need to include any life insurance?  I answer this question with three words - leverage, cost and contingency. 

*Contingency – In 1785 Robert Burns wrote a poem, “To a Mouse” that became the foundation for John Steinbeck’s book- “Of Mice and Men”.  From that we have the phrase- ‘The best laid plans of mice and men, often go awry’.  As solid as a plan may be, unexpected events do occur and building in contingencies is good planning. 

Are there life jackets on a boat because anyone plans for the boat to sink?

*Cost- The current Baby Boomer generation is heading into retirement healthier than any before it, with a life expectancy, on average, for both men and women into their early 80’s.  This means that the mortality cost for insurance has not gone up significantly, making a policy much more affordable.

* Leverage- Basic financial planning concepts talk about using an asset to create an increased pool of money.  In the case of life insurance, you are using your good health as an asset to create a larger pool of money from the insurance company.

As you build your plan, remember to outline your goals/desires, identify your challenges and consider all tools that can help you on your road to financial freedom.  It is fair to say that most all the financial products work, just a question of if they work for you. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  Investing involves risk including loss of principal.  No strategy assures success or protects against loss.