Baby Boomers Ramp Up Their Post-COVID Travel
But how are they financing it?
The increasing desire to travel post-COVID vaccine calls for practical solutions on paying for those trips. Abacus Life Settlements suggests an option for baby boomers financing post-COVID travel.
The long, isolating months of COVID quarantine are – for the most part – long gone, and with easing restrictions comes a surge in post-COVID travel, especially for baby boomers (those age 56-74).
Even back in February, boomers showed emerging optimism for hitting the road or air as soon as possible. A survey conducted early this year by AARP found that just over half of boomers (54%) planned to travel this year, and they are actively selecting destinations, booking accommodations, and scrutinizing COVID-19 safety protocols, the survey found. Among those looking to travel, most said they are “hopeful” and “excited” at the prospect.
The survey also revealed that many are motivated to travel now by a desire to reconnect with loved ones: More than half (57%) said that they are planning a trip this year to spend time with friends or family. With fully refundable or creditable airline tickets, hotels and resort reservations still being offered, the allure of leaving home is heightened.
But wanting to travel and having the ability to afford it are two different things. Baby boomers – many of whom are on a fixed income – must find a way to pay for jet setting, if that’s what they so choose. But that’s not so simple. According to the Stanford Center for Longevity, baby boomers hold less wealth, carry more debt, and will face greater expenses than retirees a decade older than them. And considering that there are more than 71.5 million baby boomers living in the U.S., the number of individuals who could run out of money in old age is staggering. So, what options do boomers have?
An option for boomers financing post-COVID travel
Individuals who own life insurance can sell their policy to reclaim equity and provide funding for their golden years. A life settlement, as it’s known, can help cover medical expenses, long-term care, travel, business aspirations, or any financial expenses faced by the policyowner. In fact, life settlements are becoming a mainstream financial option for many. This is due in part to:
- The pandemic’s impact on jobs and retirement accounts: The recent COVID-19 pandemic has hit retirement accounts hard and caused millions – including seniors – to lose their jobs. Life settlements can be a source of urgently needed funds.
- The new, higher estate tax exemption: In 2017, the estate tax exemption increased to $5.5 million. In 2018, it skyrocketed to $11.18 million for singles and $22.4 million for married couples. This means policyowners who bought life insurance to pay estate taxes might no longer need the policies because they no longer have an estate tax issue.
- COI increases by carriers: Because interest rates remain at historic lows, carriers are unable to make the same profits from investments as they had. To make up for the disparity, many carriers have increased their cost of insurance (COI) charges to customers. To avoid increased COI charges in their premiums, policyowners can sell their policies.
- Comfortable regulatory environment: 43 states and Puerto Rico have life settlement laws that provide substantial consumer protections in the sale of a life insurance policy. Nine states require carriers to disclose that there are alternatives to the lapse or surrender of a life insurance policy when a policy is in jeopardy of lapsing, which includes the life settlement option. Additionally, in 2019, the National Conference of Insurance Legislators reaffirmed its commitment to making sure policyholders were informed of life settlement as an option. Even the National Association of Insurance Commissioners, the watchdog of the life insurance industry, has endorsed life settlements as a way for seniors to finance their long-term care costs and other expenses – both necessary and optional ones.
- Baby boomers holding large amounts of life insurance: About 60% of Americans were covered by some type of life insurance in 2018. The value of total life insurance coverage in the U.S. was roughly $19.6 trillion at the end of 2018.
As baby boomers continue to age, many still yearn to check off boxes on their bucket list. For some, life settlements can help them do just that.
Abacus Life Settlements has been a leading buyer of life insurance policies in the U.S for the last 16+ years. With over $10 billion in policy face value purchased, the company has helped thousands of clients maximize the value of their life insurance. Abacus Life Settlements provides white-glove services to financial advisors and policy owners. To learn about the true value of your policy, check out the Market Value Calculator for a free estimate.