VALUE IN SELLING — For some retirees, maximizing their income may include selling an extra or unneeded life insurance policy. (Family Features/Getty Images)
Maximize your assets in retirement
No matter how diligent you may have been about saving for retirement, unexpected life changes and economic realities can negatively impact your retirement budget. Sustained low interest rates have suppressed yields on income from bonds and rising health care expenses have affected retirees of all ages.
Many retirees are surprised to learn that one of the most valuable assets in their portfolios may be a life insurance policy that they no longer need. It’s not uncommon for people to outlive their need for life insurance, and if you no longer need the policy or can no longer afford the premiums, you could consider selling the policy through a life settlement.
This is a financial transaction in which a policy owner works with a company to determine if they qualify to sell their life insurance policy. The policy seller receives an immediate cash payment while the buyer assumes all future premium payments. Most life insurance policy types qualify, even convertible term life policies.
Consider this story about a financial advisor who recently retired from a long, successful career. He decided the money he was spending on the rising premiums for his $799,975 life insurance policy could be used to help fund his retirement. After some research, he called a company and was happy to learn he had an option other than just letting the policy lapse.
He sold his policy through a life settlement for $25,000, which was more than four times the value he would have received if he surrendered the policy back to the insurance company.
If you don’t own a life insurance policy or still need your coverage, you may want to evaluate the real estate you own. Think about downsizing to a smaller home or selling other property you no longer need. Many retirees discover that they have significant equity tied up in real estate - equity that could be used to help fund expenses.
Another useful exercise is reviewing your investments. If your retirement income is failing to produce the amount needed to maintain your lifestyle, you may need to rebalance your portfolio in order to meet your changing needs. If you find your retirement income is insufficient, there are options available to maximize your assets.
For many retirees, an existing life insurance policy may be a hidden asset that can be utilized to generate cash.
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