Maybe, maybe not. Ideally, our children blossom into adults and sustain themselves without our financial support. But unfortunately, they have the same problem the rest of us do: We are all human.
They can lose their jobs, for instance. They can get sick or injured. They can battle addictions. They can get ripped off or embroiled in legal disputes. They might simply struggle to stay financially independent. The list of possible problems is endless.
Clients can never say for sure what will happen once the nest empties. Will they really say no when one of their kids needs money for a beloved grandchild’s medical care? Or refuse to help pay for a lawyer to get a daughter out of an abusive relationship? Probably not, so we need to be prepared to help them assess the long-term ramifications of helping out.
Myth: You Don’t Need Life Insurance, So You Can Drop It
One of the main reasons people have life insurance is to replace their lost wages if they die early. That means when they retire, they are less inclined to keep the policies. Often, they simply drop and surrender the policies for any cash value in them. They view the insurance suddenly as an expense, not an asset.
That could be a mistake.
True, they may no longer need to replace lost wages after they retire, but many widows find their lifestyles are hampered when their retired spouses die. The total Social Security payable to the household decreases when either spouse goes and there may be a reduction in a pension payout. Plus, survivors’ tax brackets compress when they start filing as single taxpayers, and that stresses their portfolios.
Though many retirees will not “need” life insurance, they still shouldn’t rush to drop their policies. There is an adage that no beneficiary ever thought the insured had too much life insurance—and dying is a matter of “when” not “if.” None of us knows whether the proverbial bus is around the next corner, and at the least we should get thorough physical exams before making rash decisions about dropping our insurance policies. Heaven forbid a policyholder has cancer or another condition that could cut life short.
You can do things with existing policies to make the expense less burdensome or otherwise make better use of the asset that an in-force, uncontestable policy represents.
Myth: I Must Convert To Roths