Wednesday, April 21, 2010
Do “Empty Nesters” need life insurance?
Quite possibly. In fact, there are many reasons why you may want to consider life insurance after your children have left home:
To help meet goals
If your children are in college and/or not completely financially independent, life insurance may help "finish the job." Although you may have provided for tuition, what about your kids' ongoing living expenses (e.g., room and board, laundry, entertainment/activity costs, etc.)? And, while Social Security benefit payments for your surviving spouse and children may be available, they stop when your kids leave high school.*
To support other dependents
If you have parents, disabled adult children or others who depend on you for financial support, life insurance could help continue this support if you die before they do.
To offset "lost" retirement savings
If you die unexpectedly before retirement, your Social Security survivors' benefits and pension, if you have one, are based on your salary at that time. And your retirement savings contributions stop, of course. If you're early or even midway in your career, that might create a big gap between needs and resources. A life insurance policy may help fill that gap.
To meet commitments based on two incomes
Most two-earner couples make financial commitments (e.g., home mortgage, loans, leases, etc.) based on their combined income. Life insurance covering each earner may help the survivor continue to meet those commitments.
To pay final expenses
Perhaps you don't have enough savings available to pay for funeral and burial costs, final medical expenses, estate administration and transfer costs, and federal and state income and estate taxes.† Life insurance may help cover these costs, which can easily reach tens of thousands of dollars.
To create a financial "safety net"
Conventional wisdom says each household should have an "emergency fund" to meet surprise unavoidable outlays. If you don't have an emergency fund and something happens to you, it might be more difficult for your family to obtain immediate cash. Life insurance may help solve this problem.
To offset lost income if a spouse dies after beginning Social Security retirement benefits
When a couple retires and begins receiving Social Security retirement benefits, each one receives an income. The earner with the larger pre-retirement income gets a benefit based on that income, and the person with the smaller (or no) pre-retirement income gets either a benefit based on his or her own earnings record or half of the spouse's Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues but the second benefit stops. Life insurance may help offset this income drop.
To provide for your charities
Life insurance can be an effective way to make a final gift to your favorite charity.
Call me to learn more about how life insurance can benefit you and your loved ones or beneficiaries.
*Surviving spouse may receive benefits at any age if caring for a child younger than age 16 or disabled; unmarried child may receive benefits if under age 18 (19 if attending secondary school full time) or disabled. Source: http://www.ssa.gov/pubs/10084.html.
†This document is for informational purposes only. You should consult your attorney, accountant or tax adviser for legal or tax advice.
Life insurance issued by Farmers New World Life Insurance Company, Mercer Island, WA 98040.