Life insurance in retirement: keep, drop or replace?

At a glance

Reasons to keep coverage

Survivor income gap, remaining mortgage, final expenses, legacy or charity

Reasons to drop

No dependents, debts paid, savings cover final costs

Common move

Convert part of an expiring term policy to a small permanent policy

Watch for

Replacing an old policy with a new one without comparing the old one’s guarantees

Do you still need life insurance in retirement?

Sometimes. A surviving spouse who would lose a pension or the larger Social Security check may need income replacement. Final expenses, a mortgage still owed, or a plan to leave money to children or a charity are other reasons. If none apply, letting a term policy end can be the right answer. A policy review looks at what would actually happen to the survivor’s budget.

What Social Security pays when someone dies

Social Security pays a one-time lump-sum death payment of $255 to an eligible surviving spouse or child. Monthly survivor benefits can be significant for a spouse caring for young children or a spouse at retirement age, but they do not pay for a funeral, which is why families use life insurance for final costs.

How much coverage people usually look at

The National Funeral Directors Association reported a median cost of $8,300 for a funeral with viewing and burial in 2023, before cemetery costs, a monument, flowers or an obituary. Cremation with a viewing had a lower median. Families commonly add a cushion for last medical bills and a few months of household expenses, which is why $10,000 to $25,000 is a common range.

• Funeral and burial or cremation
• Final medical and hospice bills
• Small debts a spouse would otherwise carry
• Travel and time off work for family