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Why the need for life insurance in retirement is exploding

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Let’s face it, retirement has changed. It not only costs more to retire than ever before, but it’s a much riskier road to travel. What’s changed? The prevalence of traditional pensions has declined, people are living longer, and housing debt levels in retirement have soared. One thing that hasn’t changed, however, is the desire of most of your clients to remain in their homes as long as they can during their golden years. In a recent survey, approximately four out of five midlife and older adults indicated that they would like to stay in their current residence for as long as possible.1 That wish, for many, is becoming difficult to fulfill. And, for future retired widows or widowers, that wish is even less likely to come true.


The new retirement reality

Let’s first examine the shift from traditional pensions to 401(k)s in the private sector. Over the last 25 years, the financial security provided to widows and widowers by traditional pension plans has evaporated. By law, those plans offered a spouse the option of having lifetime survivor income should he/she outlive the retiring worker. With 401(k)s, if assets run out, the widow/widower’s financial security often does, too.

The shift to 401(k)s since the 1980s has been accompanied by substantial increases in retirement longevity. According to the latest pension mortality tables, the average male and female retiree will live to age 86 and 88, respectively, up from age 80 and 84, in the 1980s.2 This increased lifespan creates challenges in and of itself, as it extends the period for which retirement income is required. It also, however, creates challenges when retirees die early in retirement, leaving behind a surviving spouse who may live alone for decades and may wish to remain in his/her home.

While the shift to 401(k)s and extended longevity are increasingly impacting retirement security, it’s the surge in housing debt that is emerging as the newest threat. Not only are fewer households paying off their mortgage before entering retirement, but the amount of housing debt among retirement-age households is also exploding. For those ages 65 to 74, while the value of homes increased 76 percent from 1989 to 2013, housing debt increased 393 percent.3

While easier access to credit and lower down payment requirements prior to the financial crisis contributed to a rise in housing debt, low interest rates and increased refinancing activity played a role as well.4 Notably, close to half of all households who refinanced between 1985 and 2010 extracted cash from their home via cash-out refinancing.5

For those who do experience a long life as a widow/widower, the lack of guaranteed pension income and the added burden of higher housing debt can cause the dream of an enjoyable retirement to fade.


Life insurance can allow retirees to remain in their home

Ensuring that your clients have the appropriate amount of life insurance can help ensure that their surviving spouses can pay off outstanding mortgages and stay in their homes. Life insurance protection at older ages also provides peace of mind that may extend to the next generation. When life insurance is in place to retire housing debt, your clients’ adult children won’t have to worry about an aging parent who might otherwise have no choice but to move out of his or her home—widowed, aging, and alone.

Life insurance can help your clients’ retirement years remain golden, because, after all, there is no place like home.



1AARP, “Home and Community Preferences of the 45+ Population, 2014,” p. 3.

2Prudential calculations based on RP-2014 mortality table and MP-2016 projection scale.

32013 Survey of Consumer Finance. Values are in 2013 dollars and reflect median values of, and levels of debt on, primary residences.

4Freddie Mac, “First Quarter 2015 Refinance Report.”

5Freddie Mac.


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About the Author

James (Jim) Mahaney is a vice president with the Strategic Initiatives unit of Prudential.

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