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Episode 65: Do I Need Life Insurance in Retirement? Thumbnail

Episode 65: Do I Need Life Insurance in Retirement?

Coasting in Retirement Financial Wellness Life Insurance Long Term Care Pre-Retirees Qualified Plans Retirees Retirement Funding

Segment 1: 

HELLO Lower Alabama! Hello Gulf Coast! Welcome in. Welcome to Coasting in Retirement! That’s. Right. Thanks for joining us today, Josh Null here, alongside special guest Jay Stubbs of Providence Partners. Jay, how you doing? We are back in Coastal College’s recording studio, beautiful downtown Fairhope, ready to put together another great show, and a brand-new show, for those of you tuning in!

Listeners: Jay and I are here to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the Gulf Coast. Here’s what we’ve got in store for you today: First segment – deep dive on our topic of the day. 2nd segment - at about 30 minutes past the hour - “Headlines of the Week”. Then at roughly 50 minutes past the hour, stick around for our 3rd segment, we call it” Josh’s Crystal Ball and Big Mouth”. So buckle up, we’ve got a lot to get to!

Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, that is a 100% locally owned, 100% independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and the team at Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, get a pen and pad ready because we will repeat our contact info several times throughout the show!

On with the show. Jay, today I wanted to answer a question we get often when we sit down with pre-retirees and retirees: do I need life insurance in retirement? Most of us, especially those with kids and/or a spouse, carry some type of life insurance during our working years to replace the catastrophic loss of income to our surviving dependents if we prematurely pass away. But what if the kids are grown, the debt is paid, and our surviving spouse has plenty of assets and income to financially survive the passing of a loved one? Let’s start with the reasons you might need life insurance in retirement: 

1. To Cover Debts: If you are entering retirement with a mortgage, car loan, or other significant debts, a life insurance policy can ensure that these financial obligations are paid off after you pass away. This prevents your surviving spouse or heirs from having to sell assets to cover the bills.

2. To Provide for a Surviving Spouse: Many retirees' income sources, such as pensions and Social Security, may be reduced or cease entirely upon their death. A life insurance payout can act as an income replacement to help your surviving spouse maintain their lifestyle and cover ongoing living expenses.

3. For Final Expenses and Estate Costs: The average funeral can be costly, and there may be other end-of-life expenses like medical bills or legal fees. A small policy specifically for "final expenses" can provide peace of mind that these costs won't become a burden on your family. For high-net-worth individuals, life insurance can also be a tool to cover estate taxes, ensuring that your heirs can inherit assets without having to sell them to pay the tax bill.

4. To Leave an Inheritance: For those who wish to leave a legacy, life insurance can be an efficient way to do so. The death benefit is typically received by beneficiaries tax-free, making it a powerful tool for transferring wealth. There are ways to use life insurance to cover estate taxes for those of you that are affected by this.

5. To Equalize an Inheritance: If you plan to leave a family business or property to one heir, you could use a life insurance policy to provide a comparable, tax-free sum of money to other heirs, ensuring a fair distribution of your estate.

Now let’s discuss the reasons why you might not need life insurance in retirement: 

1. You Are Debt-Free: If you have paid off your mortgage and all other major debts, a significant reason for having life insurance is eliminated.

2. You Have Sufficient Assets: If your savings, investments, and other retirement accounts are substantial enough to cover all potential expenses for your surviving spouse and final costs, you may not need life insurance. The death of a spouse will not create a financial hardship for the survivor.

3. No Financial Dependents: If your children are financially independent and you have no other family members who rely on you for support, the primary purpose of income replacement is no longer necessary.

Let’s say you determine you need life insurance in retirement. What are you options? 

  • Term Life Insurance: This provides coverage for a specific period (e.g., 10 or 20 years). If you have a short-term need, such as covering the remaining years on a mortgage, this can be the most affordable option. However, if you outlive the term, you will have no coverage.
  • Whole Life Insurance: A form of permanent life insurance, a whole life policy covers you for your entire life and builds a cash value over time. You can borrow against or withdraw this cash value, and the death benefit is guaranteed. However, premiums are significantly higher than for term insurance.
  • Final Expense Insurance: This is a type of whole life policy with a small death benefit, specifically designed to cover funeral and burial costs. It is generally easier to qualify for than a standard whole life policy.

Final Verdict:

The best way to answer the question is to ask yourself: "If I were to die today, would my death create a financial hardship for anyone I care about?"

  • If the answer is yes, then life insurance is a valuable tool to protect your loved ones and is likely a wise investment.
  • If the answer is no, then you have likely achieved financial independence and can confidently let go of your life insurance policy.

Listeners, if you’ve liked what you’ve heard and want to set up a follow up conversation with the team at Gulf Coast Financial Advisors, it’s easy. You can call us at 251-327-2124 or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtwon Fairhope, Orange Beach just down the road from the Wharf, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you! 

Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour the internet for financial articles relevant to those of you in or near retirement, then give you our honest opinion about these headlines. So join us after the break to hear me discuss this week’s relevant headlines in our “Headlines of the Week” segment. Stay tuned!

Segment 2 - News of the Week:

Welcome back to Coasting in Retirement, your host Josh Null here, alongside guest co-host Jay Stubbs of Providence Partners. As we discussed before the break, every week we scour the world wide web for financial articles that pertain to those of you in or near retirement. Our job, or at least we tell ourselves it is, is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links in our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. Now without further adieu, here’s the Headlines of the Week! 

1. First up is an article from Kiplinger titled “Five Options for Retirees Who No Longer Need Life Insurance”. This article is specifically for retirees that have permanent cash value life insurance. Some of these options around permanent insurance include surrendering, or cancelling, the policy and taking the cash value as a lump sum payment, using the cash value to pay the premiums and taking loans against the policy, which we will discuss. I also want to discuss the last 2 options, which many listeners may not know are an option: selling the policy, or exchanging it for an annuity in what’s known as a 1035 exchange. What say you Jay? 

https://www.kiplinger.com/retirement/options-for-retirees-who-no-longer-need-life-insurance 

2. Jay, speaking of annuities, I don’t know if you’re familiar with Stan the Annuity Man? I’m sure that name works as a great pickup line for the ladies. Anyway, for those of you not familiar with Stan the Annuity Man, he’s a fairly prolific online explainer of annuities, and while he often takes a critical bent, he’s actually an insurance producer himself. He has an article titled “MYGA-2-SPIA for Full Control Annuity Income” that I wanted to discuss with you. I think Stan makes an interesting case for a particular method of utilizing annuities to protect principal and produce income in retirement, which we will discuss, but more importantly this article gives us an opportunity to discuss the different types of annuities available to pre-retirees and retirees. (Note – be sure to mention the MYGA rate sheet available on Providence Partners site and if these high rates will be available much longer):

https://www.stantheannuityman.com/learn/myga-2-spia-for-full-control-annuity-income-shootin-it-straight-with-stan 

3. So far in this episode, we’ve concentrated on life insurance needs in retirement, along with a discussion on annuities. My bet is that some of you listening are asking, “that’s all well and good, but what about HEALTH insurance in retirement”. Especially for those you that want to / can retire before age 65 and Medicare. It’s a somewhat complicated discussion but we're going to try to hit the high points and give you all an excellent resource for this very question. The article is from Michael Kitces and it’s titled “Figuring Out the “Best” Healthcare Option for “Early” Retirees”. I think this is a hugely important topic for those of you fortunate enough to retire before you’re eligible for Medicare, and I know that Providence Partners has recently expanded their health insurance presence, so I wanted to discuss this with you Jay:

https://www.kitces.com/blog/best-healthcare-early-retirement-medicare-cobra-aca-exchange/ 

4. As we discussed, life insurance is an option in retirement, it all depends on a person’s individual situation. For our last article, I wanted to pivot to a risk management strategy that I would argue most if not all retirees need to consider carrying: long term care insurance. Your side providencepartners.org has great resources to answer long term care questions, I decided to go with your guide titled “6 Ways to Get Long Term Care Insurance”. Regular listeners will know that you and I have discussed long term care insurance at length previous episodes, but I think it’s good to remind folks about their different options:

https://www.providencepartners.org/sites/default/files/ltc/PP_6%20Ways%20to%20Get%20Long%20Term%20Care_6.2024.pdf 

Listeners, if you’ve liked what you’ve heard and want to discuss your own personal retirement dreams and goals, then us a call at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach, or Mobile, near the intersection of Dauphin St and I-65. Reach out to us - we would love to meet you! 

Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? How wrong? What do I think is going to affect investors in the near future, or maybe the distant future? We talk about all of these things and poke a little fun at my big mouth. Stay tuned! 

Segment 3 – Josh’s Crystal Ball and Big Mouth: 

Welcome back! Your host Josh Null here, all by my lonesome today in studio. So, I am opinionated, I have strong opinions at times, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And I am paid in my profession to offer professional guidance and opinions to my clients, otherwise what use am I? Just replace me with AI. Speaking of AI. I wanted to use this section to discuss how AI is already affecting your risk management business Jay, and I would like to get some predictions around the future with AI, specifically our topic of the day, life insurance. If you listen to some of the talking heads all of us service industry folks should all be quitting our jobs and getting trained to be plumbers and car mechanics. Are life insurance agents going to be replaced by Tesla service robots? Are humans becoming obsolete in the risk management industry? 

Reference: https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-ai-in-the-insurance-industry 

Well, listeners, I hope you enjoyed a little peek into how we form our opinions and make predictions. We invite you one last time, if you would like to have a no-pressure, no-obligation conversation about your investing goals and retirement dreams, you can call us at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations. You can find GCFA offices in downtown Fairhope, or Orange Beach off Canal Road, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you! 

That’s our show for this week! I want to give a huge thank you to my guest co-host, Jay Stubbs, and for his company Providence Partners being our show sponsor, thank you to our awesome radio station, FM Talk 106.5 out of Mobile, many thanks to the provider of our show music, local band Sloth Racer, huge thank to the show producer, my son Payton Null, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well! Until we talk again, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null! 

GCFA Disclosure:

Gulf Coast Financial Advisors, LLC ("GCFA”) is a registered investment adviser offering advisory services in the State of Alabama and in such other jurisdictions where it is registered, filed the required notices, or is otherwise excluded or exempted from such registration and/or notice filing requirements. Registration does not indicate or imply that GCFA has attained a particular level of skill or ability, nor does it constitute an endorsement of the firm by the Securities and Exchange Commission (SEC) or any state securities regulator.

The Coasting in Retirement radio program serves mainly to disseminate general information including those pertaining to GCFA’s advisory services, together with access to additional investment-related information, publications, materials and links. The publication of this radio show should not be construed by any client and/or prospective client as GCFA’s solicitation to effect, or attempt to effect transactions in securities, nor should it be interpreted as GCFA providing personalized investment advice, or any type of professional advice, for compensation, wherever this program is broadcast. Any subsequent, direct communication by GCFA with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

Certain information, news stories, headlines, data, charts, graphs, figures or statistics presented on this radio program may have been obtained from third-party sources that are believed to be generally reliable but which GCFA may not have independently verified. GCFA does not and cannot guarantee the timeliness, accuracy, or reliability of any such third-party information and undertakes no obligation to update or correct any information that may become obsolete, unreliable, or inaccurate. The radio program also contains the opinions, views, and perspectives expressed by Josh Null and any other GCFA representatives which are solely their own, and do not necessarily reflect the opinions, views, or perspectives of GCFA as a firm. Such personal views and opinions should not be construed as endorsements or professional advice from GCFA. GCFA makes no representation or warranty regarding the accuracy, completeness, or reliability of any information on this radio program, and disclaims any liability for any direct or indirect loss or damage incurred from using or relying on such information.

GCFA, Aptus, Providence Benefits and Providence Partners are not affiliated, nor are any of their respective representatives.