A solid retirement income plan starts with a few familiar components. You probably think of Social Security, personal savings, and investment income. These sources form the core of how you’ll fund your retirement lifestyle.

What’s often missing is protection.

That’s where retirement insurance comes in. It plays a critical but underappreciated role. Retirement insurance isn’t a single product. It’s a broad term for financial tools that protect against common risks retirees face, including longevity, healthcare expenses, and market volatility.

Let’s look at how various forms of retirement insurance support and strengthen a retirement income strategy.

Protect against outliving your money

Longevity risk is the silent threat in most retirement plans. If you retire at 65, there’s a good chance you’ll live another 25 years. Possibly longer.

That creates a significant risk that your assets won’t last.

Annuities are one way to mitigate this risk. Specifically, income annuities, like single premium immediate annuities (SPIAs) and deferred income annuities (DIAs), can provide guaranteed income for life. Some annuities are designed to start paying immediately, while others are structured to begin later, typically when market withdrawals might otherwise be more stressful.

Think of annuities as a form of personal pension. Once purchased, they distribute fixed monthly payments, regardless of market conditions. That level of predictability can reduce pressure on your investment portfolio. It also helps preserve capital for legacy or discretionary spending.

Critics of annuities often focus on fees or the lack of liquidity. Those are valid concerns. But when used in moderation and with a fiduciary advisor's guidance, annuities can offer protection against one of the most difficult-to-plan-for retirement risks: living longer than expected.

Manage the rising cost of healthcare

Healthcare costs often spike later in retirement. Fidelity estimates that a 65-year-old individual retiring in 2024 will need roughly $165,000 in after-tax savings to cover healthcare expenses throughout retirement.

Medicare helps, but it doesn’t cover everything. Retirement insurance, specifically, Medigap policies and long-term care insurance, becomes essential.

Medigap (or Medicare Supplement) plans fill coverage gaps in traditional Medicare. They help pay for out-of-pocket expenses like deductibles, copays, and coinsurance. While premiums can be substantial, the coverage offers financial predictability and shields retirees from surprise medical bills.

Long-term care insurance is another layer of protection. It covers assistance with daily activities such as bathing, dressing, or eating, which are not covered by Medicare or most health insurance policies. Without this coverage, retirees may be forced to draw down investment accounts rapidly or rely on family members for care.

Some premiums for qualified long-term care policies may be tax-deductible, depending on your age and income. Hybrid policies funded with after-tax dollars or through a 1035 exchange can also offer tax-efficient benefits.

Hybrid policies combining long-term care coverage with life insurance or annuities are becoming more popular. These products allow policyholders to retain some value if care is never needed, solving one of the historical criticisms of standalone long-term care policies. They typically provide a death benefit or return of premium if long-term care is not used, offering more flexibility and appeal to affluent households.

Provide income flexibility in volatile markets

Market downturns in early retirement can do lasting damage to a portfolio. Known as sequence of returns risk, this problem arises when retirees withdraw assets during a market decline. Even if the market eventually recovers, those early losses can permanently impair the portfolio's ability to generate income.

One option is cash value life insurance. While its primary purpose is protection, permanent life insurance policies (like whole life or indexed universal life) accumulate a cash value that can be tax-free through policy loans. In retirement, this feature provides an alternative source of liquidity during market downturns, allowing investment accounts more time to recover. However, the gains may become taxable if loan balances grow too large and the policy lapses. It’s essential to manage loans carefully to avoid unexpected tax consequences.

Cash value insurance is complex and not universally appropriate. Still, it can provide a vital release valve when traditional withdrawal strategies become strained for affluent households or those with longevity concerns.

Preserve wealth for heirs

Retirement planning doesn’t end with your lifetime. Many retirees want to leave a financial legacy. Life insurance plays a key role in that plan.

Term life insurance typically doesn’t extend into retirement, but permanent life insurance does. It provides a tax-free death benefit to heirs and can equalize inheritances, cover estate taxes, or replace wealth spent on care or lifestyle needs.

Some retirees use life insurance to replace the wealth they donate during their lifetime. For example, a couple who gifts appreciated stock to a donor-advised fund may use life insurance to restore that value to their children.

Irrevocable life insurance trusts (ILITs) are often used in more complex estate planning to keep the death benefit out of the taxable estate, especially for high-net-worth households. In 2026, the One Big Beautiful Bill Act (OBBBA) raises the federal estate tax exemption to $15 million per person, indexed for inflation, up from approximately $13.99 million in 2025. While fewer estates will face federal estate tax, ILITs may still serve strategic purposes, like asset protection, managing significant policies, or mitigating state-level estate taxes.

Coordinate insurance with your income plan

Retirement insurance doesn’t replace your retirement income strategy. It complements it. Insurance is about hedging risk. The rest of your plan focuses on opportunity.

The key is integration.

If you’re buying an annuity, it should fit with your other income sources so you don’t overcommit to fixed income and sacrifice growth. If you’re exploring long-term care coverage, it should reflect your family history, care preferences, and financial resources. And if you’re considering permanent life insurance, it should be evaluated considering your estate plan, tax situation, and philanthropic goals.

This is best done with a comprehensive financial plan and a trusted advisor.

Common misconceptions

Some investors mistakenly believe that retirement insurance is only for the wealthy. Others assume it’s unnecessary if they have a large enough portfolio. Both views miss the point.

Insurance isn’t about maximizing returns. It’s about protecting against ruin.

A well-constructed retirement insurance strategy protects the parts of your plan most vulnerable to failure. That might be your income stream, ability to manage rising healthcare costs, or desire to leave a legacy. The OBBBA may reduce exposure to federal estate taxes, but that doesn’t eliminate the need for strategic insurance planning. Protection remains essential across a wide range of wealth levels.

In each case, insurance can provide stability. It transforms uncertain outcomes into defined obligations. That’s valuable at any wealth level.

Final thought

Retirement is unpredictable. You don’t know how long you’ll live, what markets will do, or what health challenges you’ll face. What you do know is that your income plan needs to last, adapt, and preserve your dignity and goals.

Retirement insurance makes that plan stronger.

Changes to tax law and healthcare policy can shift the role of insurance in your plan. Regular reviews can help ensure that your coverage still meets your needs.

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Disclaimer: Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through TOP Private Wealth, a registered investment advisor and separate entity from LPL Financial.

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