How to age gracefully, or how do the elderly transition into retirement?

February 7, 2013 12:19 PM

As I assist my recently retired parents, I'm finding I know very little about the practical parts of traversing this phase of life. How do I help them manage their financial future, particularly with life insurance? I've read previous posts but special *elder* snowflake..

Both parents have recently retired and I've helped them with retirement accounts, COBRA, etc. The most baffling part of the process has been trying to maintain their life insurance coverage. We met with the insurance company to discuss converting the coverage they had through work to an individual policy but their "suggested" course was whole life insurance with extremely high monthly premiums for low pay-out ($600/mo. for $100k). Is this typical?

My parents are in great health, do not smoke, but as "old" people, seem uninsurable at affordable rates. How do people retire from jobs and maintain coverage? Because shopping around at 60+ for life insurance seems financially ruinous for those on a fixed income. I'd appreciate hearing how other older people have managed their life insurance or even if others have dealt with similar situations. As a younger person, my life insurance needs are quite different so it's been difficult to know how to proceed, who to trust and where to go for answers. Here I am, asking for your help. Thank you!

posted by loquat to work & money (5 answers total)

Your parents do not NEED life insurance at this stage of their lives.

Whole life is a boondoggle.

Life insurance is to cover the needs of the remaining spouse and any children should one die before the other.

When one reaches the age of retirement, it's assumed that some things are already taken care of.

1. The house is paid for, or at such a low montly rate that it's inconsequential

2. Health care should be through Social Security (if in the US). Or managed through a private insurer until the folks are eligible. COBRA may NOT be the best option, shop it around.

3. With any pensions you want to have a right of survivorship. That means that the payment is lower every month/quarter/year, but should one spouse die first, the payments continue through the surviving spouse's lifetime.

4. Long-Term Care insurance should be secured.

WHY do you and your parents think that they need life insurance?
posted by Ruthless Bunny at 12:27 PM on February 7 [5 favorites]

I'm not a financial advisor or your financial advisor, but I think generally you allow term life insurance to lapse. Term life can get exceedingly expensive, since it is solely an insurance product (versus an insurance product combined with a savings vehicle)--because the risk of a mortality event is high, the insurance against it is expensive.

This is why some people fund whole life policies (especially at younger ages)--it's a savings vehicle that continually builds value.

Term life is, more or less, a young person's game. The goal is to buy enough insurance to make up the lost income--pay off the mortgage, put the kids through college, etc. When you're retired, you're not earning anything--you don't really need to buy insurance. Term life is not intended as something to fund a bequest.

Again, I'm not your or a financial advisor, estate planner, and this is not advice to you.
posted by Admiral Haddock at 12:28 PM on February 7

Most people at retirement age don't purchase life insurance. They have investments, pensions, and social security that provide income in retirement and (in many cases) a death benefit for the surviving spouse. Think of insurance as a way to replace a spouse's lost income during their prime earning years.

What you might want to be thinking about is when your parents are going to be taking social security, and if it is possible for the parent with the higher benefit to defer this until age 70 (for example). Also, yes, why are they going on COBRA? Are they not yet eligible for Medicare? If COBRA is what bridges the gap between now (you say they're 60+) and Medicare eligibility at 65, mabye it's the cheapest option, but maybe it's not.
posted by MoonOrb at 12:48 PM on February 7 [2 favorites]

Health care should be through Social Security

I think this meant to say Medicare.
posted by treehorn+bunny at 12:52 PM on February 7 [2 favorites]

Yes, Medicare.

Although, you might want to make an appointment at your local Social Security office so tht someone can explain all of the benefits to your folks.
posted by Ruthless Bunny at 1:04 PM on February 7 [1 favorite]