Life insurance in retirement: planning for security.

Information courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York

Imagine having the ability to foresee your financial future. While a crystal ball won't provide such insight, following the adage "save early and often" can improve your outlook. Yet, today's economic landscape paints a weary picture. Safeguarding your financial resources and planning for potential risks are keys to retirement. By taking proactive steps now, you can feel more prepared as retirement nears.

How Americans save and build wealth over time

Excluding the outliers of 2020 and 2021, Americans are saving at their lowest rates since the mid-2000s. While today's savings rates have decreased, they're also some of the lowest observed going back to the 1960s.

If you're one of the many Americans grappling with the challenges of covering daily expenses and rising costs, you're not alone. Wages have seen modest growth over the past decade, but housing prices have outpaced this growth since 2010. Similarly, average rent prices have consistently outpaced wage inflation, leaving a large percentage of your income devoted to basic needs and making it difficult to allocate toward retirement savings.

Meeting retirement challenges with life insurance

Regardless of when you plan to retire, the importance of starting to save early is a must. The hurdles faced by current retirees can serve as lessons for future savers. As traditional pension plans give way to 401(k)s and IRAs, it's clear that adapting your approach to retirement planning is essential.

For many retirees, Social Security forms a significant part of their retirement income. However, relying solely on Social Security may lead to future financial constraints. Consider the potential burden of out-of-pocket health care costs during retirement. These costs can be substantial, requiring a greater percentage of income, which in turn can affect your long-term plan. This is where life insurance, particularly permanent life insurance, can help.

Life insurance for your future

The goal of this conversation isn't to paint a bleak picture but to inspire planning. Life insurance is often viewed as a tool to handle debts and final expenses. But it should also play a role in your retirement income strategy by providing a safety net for your spouse or partner.

Consider the reality that women typically outlive men. In a scenario where a couple shares income and expenses, the loss of one partner can lead to financial challenges. As more individuals turning 65 today need long-term service or support during their lives, financial preparedness becomes imperative.

When combined with effective Social Security and survivorship benefit planning, permanent life insurance becomes a valuable tool during retirement. For one, it can be a tax-efficient resource that replenishes spent-down assets. But with its potential cash value and various riders, it can also provide a living benefit to offset costs like that of long-term care.

Taking meaningful steps for a secure retirement

While a detailed exploration of financial products is possible, let's focus on actionable steps.

1. Assess your retirement income sources, like Social Security and retirement accounts, and potential gaps by consulting a retirement income specialist.
2. Understand your financial options for health care and long-term care, ensuring you're prepared for any unforeseen expenses.
3. Review your existing life insurance coverage. If you have coverage, examine its type, features, benefits and options to ensure it remains relevant in the later stages of life.

Your financial future is within your control. By incorporating life insurance into your retirement strategy, you can navigate the path to retirement with confidence, ensuring a secure and fulfilling future.