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Tuesday, October 27

Buying Life Insurance in Your 60s

Retired couple on a porch swing reviewing an insurance proposal

A retired couple, 65 and 66, wrote to Kiplinger’s Wealth Wise column in October with a question many people in their 60s will recognize. Their financial adviser suggested a $250,000 life insurance policy for each of them that could also cover nursing home care. Total cost: about $15,000 a year, or about $7,500 each, paid from their pre-tax retirement account. They also want to keep taxes low for their two adult children.

Is it a good rate? Is it a smart idea at their age? The experts Kiplinger asked didn’t say no. But their questions are the ones every couple should ask before signing, and they start with a better question than price.

Start with the real risk

Nicholle Overkamp, a ChFC and founder of Wilcox Financial Group, put it this way: “My first question wouldn’t be whether $7,500 per person is a good insurance rate. It would be, ‘What problem are we actually trying to solve?'”

In your 30s and 40s, life insurance protects people who depend on your paycheck. By your mid-60s, the kids are often grown, the mortgage may be gone, and there may be no paycheck left to replace. The bigger money risk is usually care.

The U.S. Administration for Community Living says someone turning 65 today has almost a 70% chance of needing some type of long-term care. Women need it longer on average (3.7 years) than men (2.2 years), and 20% will need it for more than five years. One-third may never need it.

The costs are steep. CareScout’s 2025 national medians put assisted living at $74,400 a year, a semi-private nursing home room at $114,975, and a private room at $129,575. And Medicare.gov is blunt: “Medicare doesn’t pay for long-term care.”

What a hybrid policy actually is

The National Association of Insurance Commissioners (NAIC) explains that a life insurance policy with a long-term care rider may be called a “hybrid,” “linked benefits,” or “combo” policy. The rider lets you use some or all of the death benefit while you’re alive if you need care.

That money comes out of what your heirs get. The NAIC’s example: on a $100,000 policy, if you use $60,000 for care, your beneficiary gets $40,000. And the NAIC adds that “the premium for a traditional stand-alone long-term care policy could be much less than the premium for a hybrid/combo policy, all else being equal.”

Sonja Breeding, a CFP at Rebalance, estimated that a typical $250,000 hybrid might pay about 2% a month for care, roughly $5,000 a month for about four years, with some policies adding an extension rider. Those are her assumptions. The couple needs to see the actual numbers.

Watch how you pay for it

Pulling premiums from a traditional IRA or 401(k) raises the true cost. “To net $15,000 for premiums in a 22% bracket, they’d need to withdraw more than $19,000,” Breeding said. Overkamp added that the extra taxable income could also raise Medicare premiums, and that over 20 years the couple would pay “$300,000 in premiums alone.” If cash or a taxable account is available, Breeding said, that’s usually a better source.

Breeding also pointed out a possible upside. Most adult children who inherit an IRA must empty it within 10 years under IRS rules, often during their peak earning years. A tax-free death benefit can soften that. But she noted that Roth conversions “accomplish something similar and are worth comparing.” For most families, federal estate tax isn’t the issue: the IRS exclusion is $15 million per person in 2026.

Questions to ask before you sign

Breeding suggested four:

  1. What’s the monthly care benefit, and does it include inflation protection?
  2. Are the premiums guaranteed, and for how many years do you pay them?
  3. Is there a joint policy option with shared benefits that might cost less?
  4. Is there any return of premium if we change our minds?

DFN would add a few more:

  • Can we self-fund care? Overkamp noted that couples with enough savings may be better off keeping control of their money.
  • What would a standalone long-term care policy cost for the same care benefit?
  • How is the adviser paid? Breeding notes these policies typically pay a commission, and she says, “A second opinion from a fee-only fiduciary is worth getting.”
  • Can we both pass medical underwriting? At 65 and 66, health problems can mean a denial or higher price.

The Bottom Line

At 65, life insurance isn’t automatically wrong, but it’s rarely the first thing to fix. Figure out whether anyone still depends on your income and how you’d pay for care. Then compare a standalone long-term care policy, self-funding, and the hybrid side by side, using after-tax dollars. If someone is pushing you to decide quickly, get that second opinion first.

Sources and Further Reading

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