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possibly. Here are 10 reasons to own life insurance after your kids have
left home: |
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1. |
To meet goals |
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If your
children are in college and/or not completely financially independent,
life insurance can help “finish the job.” Although you may have saved
enough for tuition, the kids’ living expenses (e.g., room and board,
laundry, entertainment/activity costs, etc.) continue, but not Social
Security benefit payments for the surviving spouse and children—they
stop when the kids leave high school. |
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2. |
To support other dependents |
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If you
have parents, disabled adult children, or others who
depend on you for financial support, life insurance
would continue this support if you die before they do. |
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3 |
To cover the Social Security “blackout period”
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A recent
study showed that 5 percent of married women ages 51-64 were poor, but
20 percent of widows that age were poor. This happens because many
people don’t plan for life insurance to pay income to the surviving
spouse after their kids are grown. As noted above, Social Security pays
nothing from when the youngest child leaves high school until the
surviving spouse applies for benefits based on the deceased spouse’s
record (minimum age for eligibility is 60). This interval is called the
“blackout period.” |
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4. |
To offset reduced Social Security survivor’s benefits |
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If a
survivor begins receiving Social Security survivor benefits earlier than
the full-benefit age (66-67, depending on when the survivor was born),
the Social Security benefit amount is permanently reduced. Moreover,
because of the deceased’s early death, he or she didn’t get salary
increases that might have boosted Social Security benefits further. A
life insurance policy can help offset the effect of these “lost” raises. |
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5. |
To offset other “lost” retirement savings |
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Also,
because of the deceased’s early death, he or she didn’t get salary
increases that might have boosted employer pension benefits and/or IRA
contributions. A life insurance policy can help offset the effect of
these reduced retirement savings. |
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6. |
To meet commitments based on two incomes |
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Most
two-earner couples make financial commitments (e.g., home mortgage,
loans, leases, etc.) based on their combined income. Life insurance on
each earner enables the survivor to continue to meet those commitments. |
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7. |
To pay unplanned expenses caused by an early death |
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Young
people don’t generally plan to have 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 can cover these costs, which can easily reach tens of
thousands of dollars. |
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8. |
To create a financial “safety net” |
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Conventional wisdom says each household should have an “emergency fund”
equal to about half a year’s income, to meet surprise unavoidable
outlays. If the household does not already have an emergency fund, the
post-death family will be even more financially vulnerable without one.
Furthermore, it might also be somewhat more difficult for the survivors
to obtain credit. Life insurance can solve this problem. |
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9. |
To offset lost income if a spouse dies after beginning Social Security
retirement benefits |
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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—in effect, a
33 percent income reduction. Life insurance can offset this income drop.
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10. |
To provide bequests to heirs and charities |
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If you
want to be sure that your heirs and/or favorite charities get money
after your death, you can designate some or all of your life insurance
benefits to go to them. This is particularly useful if, without the life
insurance, your executor would have to liquidate other assets to meet
this objective. |
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