There are many retirement planning articles out there, including several right here on the Stonepath Wealth Management blog. And we’ll be honest: You’re going to see a lot of overlap between these articles. Things like saving early, understanding cumulative interest, taking tax advantages where you can get them, regularly meeting with your financial advisor—all of these are important considerations, and none of them are really contested among retirement planning professionals. If you want to retire well, you just need to do these things.
However, these are not the only important parts of retirement planning. There is one major piece of the puzzle that is discussed far too little, and in fact we see many otherwise savvy retirement planners who totally neglect this—sometimes to their detriment.
We’re talking about life insurance.
What Life Insurance Is—and What it Isn’t
This is something that you may not think of as a retirement planning product per se, and let us be clear in saying that it’s just one part of the equation—not a replacement for other retirement products. If your goal is to build a nest egg with which you can safely, securely retire, then you don’t want to make the mistake of using life insurance instead of a Roth IRA, a Traditional IRA, or a 401(k). These are much better vehicles for growing wealth.
That’s not really what life insurance is for, though. Life insurance is intended as a means of protecting your family, as simple as that. To put it another way: You may be planning and investing your money so that one day you and your spouse will be able to enjoy a great retirement together. Your plans may all be on course to prosper, but what if the unthinkable happens—what if, for whatever reason, you pass away before your retirement nest egg reaches its full potential, or even gets to the level you need it to for a viable retirement?
You’re potentially leaving your survivors in a tough place—not least because of the funeral expenses that they could be stuck with. If your spouse has to dip into the retirement fund prematurely, then it could effectively spoil your retirement plans. As such, life insurance protects your family—but it also protects your retirement plan.
Everyone Needs Life Insurance
Again, we have seen many successful and wealthy clients who know all the right things to do with their retirement plan, but who neglect life insurance—and, sadly, we have seen some adverse consequences to this, some families whose best-laid plans have really been wrecked. That’s why we urge clients to consider life insurance not as a full retirement plan, but certainly as an important part of one.