When most people think about life insurance, they associate it with raising a family, protecting income, and covering large financial responsibilities during their working years. By the time retirement comes around, many assume life insurance is no longer necessary.

But that assumption doesn’t always hold true.

In our planning work with retirees, we’ve found that life insurance—when used correctly—can still play a valuable role as part of a comprehensive financial plan.

Term vs. Permanent Life Insurance

There are two broad categories of life insurance: term insurance and permanent insurance.

Term insurance is typically used to cover large risks during your working years. It provides a high death benefit at a relatively low cost, but only for a set period of time. If the policy expires before death, no benefit is paid.

Permanent life insurance, on the other hand, is designed to last your entire life. It includes a cash value component that grows over time and can be accessed while you are still living.

Both types serve a purpose—but they are used very differently.

Why Life Insurance Can Still Be Useful After Age 65

One of the biggest misconceptions we hear is: “I don’t need life insurance anymore because my kids are grown.”

While that may be true in some cases, there are several reasons why life insurance can still make sense in retirement:

1. Replacing Lost Income for a Surviving Spouse

When one spouse passes away, one Social Security check typically goes away. That can create a noticeable drop in household income.

Life insurance can help fill that gap and provide financial stability for the surviving spouse.

2. Creating Tax-Free Wealth Transfer

Life insurance death benefits are generally income tax-free to beneficiaries. This makes it a powerful tool for passing assets to the next generation efficiently.

For families concerned about estate taxes—especially at the state level—life insurance can provide liquidity without forcing the sale of assets.

3. Providing Flexibility Through Cash Value

Permanent life insurance builds cash value over time. This creates an additional “bucket” of money that can be accessed if needed.

Unlike retirement accounts, policy loans can often be taken without triggering taxes, and in many cases, the funds can be paid back over time.

This flexibility can be helpful for:

• Covering unexpected expenses
• Bridging income gaps
• Handling timing issues (such as buying a home before selling another)

4. Supporting a Larger Tax Strategy

In some cases, we use life insurance alongside Roth conversions or IRA withdrawals.

The idea is to reposition taxable dollars into a structure that can ultimately provide:

• Tax-deferred growth
• Tax-free access
• Tax-free transfer at death

It’s not a one-size-fits-all strategy, but for the right client, it can add another layer of efficiency to a retirement plan.

What About the Criticism of Whole Life Insurance?

There’s no shortage of criticism when it comes to cash value life insurance. You’ve probably heard statements like:

• “It’s a bad investment”
• “No one should buy whole life”

The truth is more nuanced.

Life insurance is not meant to replace your investments. It’s a different type of asset—one that offers:

• Stability
• Predictability
• Tax advantages
• Guaranteed death benefit

When used appropriately and as part of a broader plan, it can complement—not compete with—your other assets.

What Do Wealthy Families and Institutions Do?

It’s worth noting that many wealthy families have used permanent life insurance as part of their long-term planning strategies.

For example, families like the Rockefellers have used life insurance and trusts together to help preserve wealth across generations.

Even banks utilize life insurance through what’s known as Bank-Owned Life Insurance (BOLI), holding billions of dollars in cash value policies on their balance sheets. They value the stability, tax advantages, and diversification it provides.

This doesn’t mean it’s right for everyone—but it does challenge the idea that it has no place in financial planning.

Is Life Insurance Right for You?

The answer depends on your goals, health, and overall financial situation.

Life insurance is not something we recommend for everyone. In fact, there are many cases where it doesn’t make sense.

But for others—especially those interested in:

Leaving a legacy
Creating tax-free income or benefits
Adding flexibility to their plan
—it can be a valuable tool.

Final Thoughts

The goal of this discussion isn’t to convince you to buy life insurance.

It’s simply to encourage you to take a second look.

If you’ve written it off based on something you’ve heard, it may be worth revisiting—especially as part of a comprehensive retirement plan.

If you’d like help determining whether life insurance fits into your situation, we’d be happy to walk through it with you.