Find the Income to Insure Against Retirement Risks
When money gets tight, it can be tempting to ditch some insurance coverage to balance your budget. However, that could leave you high and dry. Instead, figure your premiums into your income plan itself.
You have probably seen TV commercials recently where:
- A retired couple decides to drop their life insurance policy in order to create some extra cash.
- An ex-quarterback talks about health insurance to supplement basic Medicare.
- A recognizable mustachioed actor touts the advantages of tax-free cash through a reverse mortgage.
Evaluating the products and the companies offering them is absolutely critical before you make any decision. However, the real challenge for you may be whether or not you can find income elsewhere to:
- Pay the life insurance premiums instead of deciding to drop the policy.
- Pay the higher health care premiums for the more generous Medicare Supplement plan.
- Purchase longevity insurance to complement the reverse mortgage drawdowns. (Longevity insurance is the opposite of life insurance; it pays you income if you live, which means in this case it could continue the cash flow from reverse mortgage drawdowns beyond a certain age.)
Income first
As I always advocate, it is better to create a plan for retirement income first, and then figure out whether you can afford the premiums on the insurance protection you believe you need. That allows you to afford all the pleasures and necessities — including insurance — that best fit the needs of you and your family, with less worry and much more flexibility.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
By unbundling the income and insurance elements of your plan, you can adjust them to reflect market conditions, the change in the personal circumstances of you or a spouse, or a change in situation of a child or grandchild. And your initial planning has all the flexibility of the individual components.
The value of staying the course
The older you are, the more likely you are to need the benefits of insurance (especially during pandemics). That means the value of each policy increases as you age. You may be able to lock in annual premiums that will remain unchanged; however, for many policies, prices will continue to grow annually. Whatever the circumstances, some people stop paying the premiums, which makes the insurance worthless when you need it. So, continued insurance premiums — whether increasing or not — have to be figured into your income plan.
Fortunately, you can build an income plan that allows you the flexibility to choose the best insurance policies for you and that fit your budget.
It just takes a little homework …
What type of insurance?
You may want life insurance, for example, that will fund a financial legacy for your heirs. On the other hand, perhaps you may only want enough to cover your funeral expenses, because you have taken care of the kids in other ways. You may consider long-term care insurance a necessity to prevent you or your spouse from having to sell the family home if either or both of you require a stay in a long-term care facility or need to hire an aide for home care.
Perhaps a Medicare Supplement policy will pay expenses that Medicare doesn’t. Or you hope to stay in your home and a reverse mortgage will help you do that. There are lots of options here, so you want to know what you can afford.
Different companies will offer terms that you can analyze to make sure they offer what you need. If you don’t understand the terms, find an agent or agency to help you interpret them. If you still aren’t clear, look for another insurance adviser.
Your retirement income plan
A mix of stability and reasonable market risk is the best way to create income during retirement. I favor allocating a portion of your income to annuity payments as a way to provide guaranteed income, combined with dividends, interest and IRA withdrawals, along with Social Security payments and a pension, if you are lucky enough to have one. Allocating your income among major income sources provides a reliable stream of cash and gives you the opportunity to continue to adjust to market conditions.
Happily, you can take advantage of certain tax benefits offered by income annuities and insurance products if you design the income plan and insurance purchase separately. You may not get the best tax treatment if you purchase a hybrid insurance product that combines multiple protections.
Plan to create the income to pay for your insurance needs. Consideration of flexibility of the products and transparency about how they work is equally important.
Have you created the retirement income to provide cash flow to pay insurance premiums and optimize tax benefits? Start your analysis by downloading a free evaluation of how much income your savings can produce. Visit Go2Income for the answers you need.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.
-
Dow Beats 334-Point Retreat on Tech Bite: Stock Market TodayInvestors, traders and speculators wonder whether this remains a Magnificent 7 market and how long this AI-driven bull run will last.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
-
Ten Ways Family Offices Can Build Resilience in a Volatile WorldFamily offices are shifting their global investment priorities and goals in the face of uncertainty, volatile markets and the influence of younger generations.
-
Should Your Brokerage Firm Be Your Bookie? A Financial Professional Weighs InSome brokerage firms are promoting 'event contracts,' which are essentially yes-or-no wagers, blurring the lines between investing and gambling.
-
Supermarkets Have Become a Pickpockets' Paradise: How to Avoid Falling VictimSome stores regularly rearrange inventory with the aim of increasing purchases, and they're creating opportunities for thieves to steal from customers.
-
I'm a Wealth Adviser: These Are the Pros and Cons of Alternative Investments in Workplace Retirement AccountsWhile alternatives offer diversification and higher potential returns, including them in your workplace retirement plan would require careful consideration.
-
I'm a Financial Planner: If You're Within 10 Years of Retiring, Do This TodayDon't want to run out of money in retirement? You need a retirement plan that accounts for income, market risk, taxes and more. Don't regret putting it off.
-
Five Keys to Retirement Happiness That Have Nothing to Do With MoneyConsider how your housing needs will change, what you'll do with your time, maintaining social connections and keeping mentally and physically fit.
-
Budget Hacks Won't Cut It: These Five Strategies From a Financial Planner Can Help Build Significant WealthCutting out your daily latte might make you feel virtuous, but tracking pennies won't pay off. Here are some strategies that can actually build wealth.
-
To Unwrap a Budget-Friendly Holiday, Consider These Smart Moves From a Financial ProfessionalYou can avoid a 'holiday hangover' of debt by setting a realistic budget, making a detailed list, considering alternative gifts, starting to save now and more.