Q: Can you explain the maze of life insurance options once one retires? Especially the 50 percent, 75 percent or no-reduction options?
A: When you retire, you must choose how much life insurance you want to carry into retirement. You can elect to retain the full face value of your policy on the day you retire or allow it to reduce by 75 percent or 50 percent. If you elect the 75 percent reduction, beginning at age 65 the coverage will decline by 2 percent per month until it reaches 25 percent of its original face value. If you elect 50 percent, it will decline by 1 percent per month until it reaches half of its face value. If you elect the 75 percent reduction, you will pay no premiums after you reach age 65. If you instead elect either to retain the full value of your policy or choose the 50 percent reduction, you will continue to pay premiums based on the dollar value of that insurance after you reach age 65. And those premiums will increase over time.