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Retirement planning typically centers on a familiar set of priorities: building a 401(k) or IRA balance, estimating future expenses and figuring out when to claim Social Security. But as retirement gets closer, protecting the financial plan that’s already been built can become just as important as adding to it. And that’s an area where many Americans appear to have some uncertainty.
For example, just 52% of Americans are now confident their retirement savings will last throughout their lifetime, according to New York Life’s 2026 Wealth Watch Midyear Outlook, down sharply from 73% in 2025. And many are already responding to that uncertainty: 56% of those surveyed said they had updated their retirement strategy, while 34% had delayed or planned to delay retirement.
Those adjustments can take many forms, and life insurance may be one tool worth considering as part of the process. While its primary purpose is generally to provide a death benefit to beneficiaries, this type of coverage can serve other functions. But how exactly does life insurance fit into a retirement planning strategy? That’s what we’ll examine below.
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How life insurance can fit into a retirement planning strategy
Life insurance generally shouldn’t replace traditional retirement accounts, which are specifically designed to hold savings and investments for retirement. But depending on the policy and the household’s needs, a life insurance policy can complement those accounts in several ways, including the following:
It can protect a spouse’s retirement plan
A retirement strategy built for two people can change significantly if one spouse dies earlier than expected. The surviving spouse may lose income, face outstanding debts or need to cover expenses that were previously shared.
That’s where the death benefit from a life insurance policy can help. Life insurance proceeds paid to beneficiaries after the insured dies are generally excluded from their taxable income, according to the IRS, though there are exceptions.
That money could give the surviving spouse more flexibility to cover living expenses, pay off a mortgage and other debts or avoid drawing down retirement accounts faster than planned. In that sense, life insurance can act as a layer of protection around the retirement assets a household has spent decades accumulating.
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Permanent coverage can provide another source of funds
Unlike term life insurance, which typically provides coverage for a specified period and doesn’t accumulate cash value, permanent policies such as whole and universal life insurance can build cash value over time. And, policyholders may be able to access that cash value while they’re alive through withdrawals or loans.
That can potentially create another source of funds in retirement. For example, a retiree with sufficient cash value might use it to supplement other assets rather than selling investments during an unfavorable market period.
That said, having access to the cash value doesn’t mean it’s free money. Policy loans can accrue interest and reduce the death benefit and remaining cash value, and taking too much money from a policy can create problems with keeping the coverage in force. Surrendering a policy can also trigger taxes when the proceeds exceed the owner’s cost in the policy.
It can help preserve an inheritance
Retirement planning often requires balancing two competing goals: having enough money to live comfortably and leaving something behind for children or other beneficiaries. Life insurance can help separate those goals.
For example, rather than preserving a certain portion of an investment portfolio specifically for heirs, retirees may be able to rely on a life insurance death benefit to provide an inheritance. That could give them more flexibility in how they spend their other retirement assets.
Still, while this strategy may be useful when estate planning is a major priority, coverage costs also matter. Permanent life insurance generally costs more than term coverage, and premiums can represent a significant long-term expense, so it’s important to weigh all the factors beforehand.
It can address risks that retirement savings alone may not
One notable finding from New York Life’s study illustrates why protection may become part of the broader retirement conversation. Among respondents who both worked with a financial professional and owned protection products such as life or long-term care insurance, 86% said they were confident their assets would last through retirement. That compared with 43% among those without a financial professional or protection products.
The broader point is that retirement planning isn’t only about reaching a target account balance. It’s also about determining what could disrupt that plan and whether there are tools available to manage those risks. For some households, life insurance may be one of them.
The bottom line
Life insurance and retirement savings serve different primary purposes, so one generally shouldn’t be viewed as a replacement for the other. A 401(k), IRA and other investments are designed to build assets for retirement, while life insurance is primarily designed to provide financial protection if the insured dies. Still, the two can work together in tandem as part of a comprehensive retirement planning strategy.
Life insurance may help protect a surviving spouse, provide an inheritance or, with certain permanent policies, offer access to cash value during retirement. Those benefits also come with costs and tradeoffs, though, so the right approach depends on the type of policy, the coverage needs and how it fits alongside the rest of the retirement plan.
