The synergy between life insurance and retirement planning
22 December, 2024 / Articles
As people approach the end of their career, they usually start thinking about retiring. When regular income
stops or decreases, retiree’s lifestyle may change while healthcare costs could go up due to medical
conditions and inflation. Consequently, planning for one’s retirement becomes very critical and people are
advised to start saving as early as possible.
While life insurance policies are commonly associated with providing financial protection to loved ones in the
event of an untimely demise, their utility extends beyond mere risk coverage. These policies can serve as
robust financial tools, particularly in retirement planning. Offering low-risk investment avenues, tax benefits,
and facilitating goal-based savings, life insurance policies stand out as versatile instruments for securing one's
financial future, especially during retirement.
When planning for retirement investments, life insurance is seen as a wise alternative since it involves
minimal risks, offers a possibility of financial guarantee during old age and can adapt to various needs among
retirees as well as those planning for retirement. Life insurance policies come with numerous advantages
which include flexibility features in addition to being customizable thereby providing supportive mechanisms
towards achieving secure and satisfying retirement.
The low-risk nature of life insurance policies makes them particularly attractive during retirement. With a
diminished risk appetite post-retirement and a finite pool of savings, retirees seek avenues that ensure the
preservation of their capital. Retirement plans, provide the twin benefits of protection and wealth
accumulation, with guaranteed payouts offering peace of mind amid market volatility.
A disciplined approach to retirement planning is essential, emphasizing regular and systematic premium
payments to capitalize on the power of compounding. By commencing investments early and adhering to a
disciplined payment schedule, retirees can build a substantial corpus to sustain their desired lifestyle post-
retirement, while also fortifying themselves against unforeseen financial exigencies.
Financial independence is a cherished goal during retirement, underlining the importance of self-reliance
irrespective of familial support. Life insurance plans serve as companions in this journey, empowering
individuals to navigate their retirement years with financial confidence and autonomy.
As health concerns become more prevalent with age, life insurance payouts can offer vital assistance in
covering medical expenses. Beyond addressing emergencies, life insurance can facilitate access to
preventative care, ensuring retirees lead healthy and fulfilling lives in their golden years.
Tax efficiency is another compelling feature of life insurance plans, offering attractive benefits under the
Finance Act, 2021. As per the act, a resident individual shall be entitled to insurance relief at a rate of 15% of
the insurance premiums paid, subject to a maximum relief of KES 5,000 per month (or KES 60,000 per
annum). With such provisions, life insurance policies enable retirees to optimize their retirement savings
while minimizing their tax liabilities significantly.
When planning for retirement investments, life insurance is seen as a wise alternative since it involves
minimal risks, offers a possibility of financial guarantee during old age and can adapt to various needs among
retirees as well as those planning for retirement. Life insurance policies come with numerous advantages
which include flexibility features in addition to being customizable thereby providing supportive mechanisms
towards achieving secure and satisfying retirement.
