Are Life Settlements Key to Solving America’s Retirement Crisis?

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By Lucas Siegel, CEO and Founder of Harbor Life Settlements

The national average age of retirement is 61 years old, but 54% of people plan to work past the age of 65 and some will come back to work after retirement. Many people are concerned about outliving their retirement savings which leads them to work longer, while others retire early and realize they need more money later on.

Financial experts often have different rules on how much you should save for retirement, ranging from replacing 70-75% of your pre-retirement income through investments and other means. However, if you’re recently retired or nearing retirement and haven’t saved enough — selling your life insurance through a life settlement may enable you to cover retirement living expenses.

Learn everything you need to know about life settlements including what they are, whether you qualify, and why they’re a great option to help cover a variety of retirement expenses.

What is a life settlement?

A life settlement is the process by which an individual can sell their life insurance policy to a third-party for a lump cash sum. In this transaction, the original policyholder will receive a cash payout that can be worth up to 60% of the death benefit value. In exchange for the cash sum, the original policyholder agrees to give ownership of the policy to a third party which will be responsible for paying premiums and collect the death benefit amount after the original policyholder passes away.

This is a mutually beneficial transaction, as the policyholder gets money that can be used during their lifetime to cover retirement expenses, and the third party buyer gets a guaranteed sum from the death benefit upon the policyholder’s passing.

How to determine if you qualify for a life settlement

To determine if you qualify for a life settlement, it’s best to work with a life settlement company who can review your policy details to see if you meet the proper requirements such as policy type, policy value, policyholder age, and more. In general, to qualify for a life settlement you must be at least 70 years old with a policy valued at $50,000 or more, and the policy type must be universal, variable, or convertible term. Beyond determining whether you qualify, a life settlement company can also provide you with an estimate of how much your policy is worth to help you decide whether you should sell it.

Why life settlements are a great solution to pay for retirement expenses

Life settlements can be a great way to get money for retirement without parting with assets such as a home or making significant lifestyle changes to live on a tighter budget. The money you get from a life settlement can be used however you’d like such as paying off debt, creating an emergency fund, going on vacations, or other retirement living expenses. 

In addition to getting a large cash sum, you also benefit by no longer having to pay insurance premiums. Some people decide to give up their insurance policy when they get older due to expensive premium payments or because they no longer need coverage. 

When a policyholder decides they no longer want life insurance, they can either cancel the policy, surrender it, or sell it. Cancelling the policy or letting it lapse by stopping payments means you’ll receive nothing, and when you surrender it you’ll only get a single offer from the insurance company. By comparison, selling your policy through a life settlement broker allows you to seek multiple offers from different buyers which drives up the price resulting in a higher value.

Selling your policy through a life settlement is a great way to get money for retirement. If you’re nearing retirement or recently retired, don’t cancel or surrender your policy — find out how much it’s worth through a life settlement. Even if you don’t plan to sell soon, knowing how much your policy is worth can help with financial planning before and during retirement.

Lucas Siegel is the founder and CEO of Harbor Life Settlements, a life settlement company that is dedicated to helping seniors and the terminally ill sell their life insurance policies, and Harbor Life Brokerage, a life settlement broker that helps policyholders receive the maximum cash value for their life insurance through its proprietary bidding platform that reaches the world’s largest buyers. 

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