How to Use Life Insurance in Your Retirement Planning?

  • Post author:
  • Post last modified:August 4, 2021

We all want to spend a happy life post-retirement. But if you take retirement without any planning, it can turn into a big mistake.

Since you will not have any steady monthly income to support yourself and your family, you may have to take loans or find another job to pay for regular expenses.

Of course, who will pay for your everyday expenses when you stop working?

This is why you need to plan for your retirement to prevent any problems in the future.

Additionally, you need to plan wisely and strategically so that the money you save will be enough to spend the rest of your life without doing any job. For this reason, you also need to think about life insurance for retirement.

Read the article further to understand the benefits of a retirement plan and how you can plan for it.

What Is Retirement Plan?

do retirement planning

It’s a no-brainer, you need to design a plan to meet your retirement needs. An appropriate retirement plan aims to provide you a financially stable and secure future.

Hence, with a retirement plan, you can live peacefully and happily.

Let’s discuss how the retirement plan works. It comprises two phases: the annuity phase and the accumulation phase.

Accumulation Phase

In this phase, you need to pay premiums until the designated time. Your chosen insurance company will collect the premiums which accumulate in your account with interest on it.

This way, over a period, your money grows in the account.

Annuity Phase

At this point, you get the results of your investment, which means you get returns on your invested funds. Once you retire or on the maturity of the policy, you get a standard amount of regular income.

Depending on your life insurance organization, the vesting age of the policyholder is between 50 and 70 years.

Plus, during this time, the policyholder can withdraw 33% of the accumulated money in the account. Besides that, you can use the remaining funds to purchase an annuity policy.

It is important to note that an annuity plan offers you the feature to withdraw and pension according to the annuity mode and option you have chosen.

Plus, the annuity mode can be yearly, half-yearly, quarterly, and monthly. It is the best way to receive money monthly or according to your chosen plan after you retire.

Steps Of Retirement Planning

steps of retirement planning

There are several steps of retirement planning with an end goal of getting enough money so that you can quit work and spend your remaining life while relaxing.

Think About What Is The Best Time To Start Planning

You might be thinking that a retirement plan is only for older elders. But do you know that the best time to start planning your retirement is when you are in your 20s?

Wondering why? You can grow more money if you start your retirement planning at an early age.

But of course, it’s never too late to begin your planning for retirement. Even if you don’t have much to invest to gain profits on it, don’t worry.

Every few dollars that you can save will be enough to support you for retirement. All you need to do is to invest in the right place strategically.

Calculate How Much Money You Need for Retirement

Your current expenses and income will help you determine the amount of money you will need for retirement. Also, think about how your expenses can change after retirement.

Experts suggest placing around 70% to 90% of your annual pre-retirement income via social security and savings.

For instance, if you earn around $63,000 every year before getting retired, you will need $44,000 to $57,000 every year after retirement.

Consider Your Financial Goals

You need to understand that besides retirement, there are also several other saving goals. Many people have more vital goals, such as paying student loan debt or credit card debt.

Some people also want to build up emergency funds. But it is best to save for retirement at the same time when you are working for emergency funds.

Figure Out An Ideal Retirement Investment Plan

You also need to think about the best retirement investment plan so that you can retire without worrying.

The investment you plan to make should offer you profit to resolve any possible problem in the future, such as medical expenses and funeral expenditure.

Professionals suggest investing aggressively at the starting of your career, then opt for a conservative mix of investments when you reach your retirement age.

This is because, at an early age, you have a lot of time to let your funds fluctuate in the market. You also have more endurance to the loss and risk at this point in life.

Additionally, few experimenting years don’t impact you, and you can take advantage of your long-term investment.

Besides that, you don’t need to monitor your investment. If you are thinking of managing your retirement savings, you can do it by yourself by investing in a handful of low-cost mutual funds. However, it could be risky, read this.

Once you get to middle age (i.e, 40 years), you also need to invest in a life insurance plan. Having the right insurance plan helps you get a lump sum amount after your retirement that you can use to pay your debts or regular expenses.

How To Get Most Out Of Your Investment Plan


Here are the things that you need to do to get the most out of your investment plan.

Plan Ahead

The best time to purchase an insurance plan or invest in anything is when you are young because life insurance for seniors is going to cost a lot more. Consider it as a long-term secure investment plan.

The extended accumulation phase allows you to invest your money for a longer time. As a result, you get good results in terms of profits.

Consider Requirements

Figure out what criteria you need to fulfill to invest in your required field. Also, consider what requirements you have to fulfill in the future and whether you can do it after few years.

Know the Right Plan

There are many insurance and investment plans designed for retirement planning. Research about them, and select the best option for you.

Term Insurance: Do You Need It For Your Retirement Planning?

We have already discussed, when you are planning for retirement, one of the most important things is to consider a life insurance policy for yourself.

Anyone who has children or other family members that depend on them needs to purchase an insurance policy. It is also important for your at-home parents, nonworking spouse, and homemakers.

Additionally, you need to have enough insurance that can cover your credit loans or debts.

If you have children, you also need to make sure that you can afford their expenses after you get retired. For this reason, you need to opt for life insurance that offers premiums you can pay.

One of the affordable life insurance is term insurance, which offers you cheap premiums and excellent coverage. It gives you guaranteed payment of the death benefits in your chosen term, such as 10, 20, and 30 years.

However, it doesn’t offer you a cash value feature, which you can get from whole life insurance. In this case, when the policy expires, you need to either convert it to permanent coverage, renew it to get another term, or allow the policy to terminate.

Note that, term life insurance is not available after a certain age. You hardly can find an insurer who offers a term policy for over 85 years olds. If you are that much old, you should seek other types of policies.

Why Don’t Purchase Whole Life Insurance Policy?

The cost of the insurance pension depends on your age, health, and several other factors.

For insurance, if a non-smoker healthy man of 35 years opts for a 20-year term plan, he has to pay around $1,030. But if he purchases a whole life policy, he needs to pay about $13,500.

This is the primary reason why people don’t purchase whole life insurance. It is important to note that if you have enough money to pay for regular premiums, then the whole life policy is the best option to enjoy a peaceful retirement.

But if not, try to avoid any insurance plan that you can’t afford in the future.

Because of these costs, term life insurance is an ideal saving technique for you in two ways.

  • It offers you the basic financial support your family will require if one of the earners in the family dies without saving enough money to protect your family after death.
  • Its low monthly premiums allow you to use your income for other purposes. You can even invest your income in other things to gain more profits.

Moreover, you also need to think about the ideal time period for the policy. You can estimate it by considering how many years your family will remain dependent on you.

So, when your children grow and start to earn, you will not have to support them.

Another thing you need to consider is the amount of insurance you need to purchase. It merely depends on how much money you will need to protect your family.

Make sure to think about the major debts, college fees, and other future expenses of your family before opting for any insurance.

Bottom Line

Retirement planning is easy if you start it at an early age. Try to invest as much as you can to multiply your savings.

Also, look for opportunities, such as life insurance plans, that give you security and protection after retirement.

Linda Chavez

I'm a burial & senior life insurance expert, independent agent, Founder & CEO of Seniors Life Insurance Finder. I have been working in this sector since 2004 and established my own company in 2014. I have a team of seven members, and we are trying hard to share the knowledge we've gathered. We know how difficult often it is to find an affordable policy. Hence, we are doing our best to help you.