Why Is Life Insurance Essential For Retirement Planning?

 Ekta Kariya
  Feb 18, 2018

In the view of increasing inflation and changes in lifestyle, it has become important for every individual to start doing financial planning from an early stage of one’s life. Financial planning should be done in a manner where it will take care of every stage of your life including retirement planning. Life insurance is one such tool that helps in achieving various needs like life cover, wealth creation and savings but not many people are of the view that life insurance is an essential and important part of retirement planning.

Life insurance is primarily seen as an instrument useful for financial security of families in situations where the bread earner of the family happens to suffer an early end. Contrary to this, if utilized properly in financial planning, life insurance in reality can be used to achieve complete retirement planning. Below are the reasons why life insurance is essential for retirement planning:

why is life insurance necesarry for retirement planning

  • Protection of Income: Death is inevitable so understand that life insurance is the foundation of a good retirement plan. After retirement the monthly income ceases. So you can plan well in advance for an insurance policy that will give you monthly monetary benefits. In this manner you will not have to struggle to meet your monthly expenses or depend on anyone. This is because your income flow continues and you do not have to compromise on your behavior or lifestyle.

  • Financial Protection: With increasing inflation, it is important to maintain a substantial post retirement corpus. This corpus can be used for your future expenses. But, what if you face certain uncertainties in life like untimely death or medical emergencies? Uncertainties can take a toll on your spouse and your family. In such cases life insurance can be the best tool for your surviving family to ensure that enough money is available. These funds will take care of the expenses that might erupt due to your untimely death or medical emergencies.

  • Keeping your savings safe: Every individual plans in a manner where he can create wealth so that it can be utilized for maintaining a financially secured life post retirement. But have you ever wondered that with the increasing inflation how long will your retirement savings last? So, it is beneficial to understand that a correct mix of life insurance policies can help you in keeping your savings safe and intact. For example: if you buy a term insurance policy for yourself and your spouse just before retirement then this will help in protecting the retirement savings. Also there are options wherein you can convert your term insurance plans to permanent policy. Thus one needs to diligently plan for the future.

  • Managing Taxes: Life insurance is an important tool in financial planning and is beneficial for tax management. Life insurance provides tax benefits. So understand the features of an insurance policy and you can supplement a good retirement plan with substantial tax benefits.

  • Return on Investment: Traditionally for retirement planning, fixed deposits or bonds were considered as an attractive investment instruments. This was primarily because they were believed to be safe investment financial tools and majority of the retirement funds were invested in these financial instruments. But with the changing financial scenario and mindset of the people life insurance has become the best substitute for fixed deposits and bonds. This is mainly because these instruments offer far more returns than the traditional options. So retirees should consider including life insurance in their retirement planning as they provide competitive interest rates

Thus make sure that while doing retirement planning you weigh various options which will help you achieve your financial goals. Avail life insurance that satisfies your retirement plan as everyone’s needs are different. You may opt for term plan, endowment plan, pension plan or money back plan as per your personal requirements and financial condition. Remember life insurance provides more than just protection; it helps in providing benefits throughout your retirement.

Why Is Life Insurance Essential For Retirement Planning?

Ekta Kariya

Ekta Kariya is a freelance writer based in India. She enjoys cooking, reading and meeting new people. You can connect with her on ektakariya20@gmail.com

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