How much do YOU think YOU need to retire? ...and at what age will you (and spouse) retire? (Part 1)

Parents Forum Parent Cafe
16041

Term is basically insuring you for one year at a time, so every year as you get older and less healthy it costs more to insure you.

If you get a long term level premium policy you pay a little more every year than you would have in year one, but after the period runs out, you are essentially getting a new one year policy at your current renewal rate, which will be very high since it is generally guaranteed renewable regardless of your health. You can get a brand new policy for cheaper if you are still insurable.

The coverage change is a gimmick to lower the cost when you get old.

16042

Because you get older.

16043

Did you keep it beyond the term or something? My rates never change. I thought that was the point of term. Lock in a rate for a period of time.

16044

DH has a level term policy that will end in 3 years. Weā€™ll cancel it then. The premium is not high, so weā€™ve kept it.

16045

I had a level term policy, bought at age 45 for 20 years, and figured the offspring should be covered well through grad school. But I dropped it early, as they were done with grad school and the self insure thing should work well for me, being single. While I work there is a still a modicum of life insurance.

Question, is whole life still thought to be a good idea for those with assets to shelter from taxes? I cashed one in early post divorce as the premiums were a serious burden and I needed a reliable vehicle. But in talking with those at a more prosperous place in life, have wondered if that is still a good piece of advice.

My mom has some sort of whole life policy bought for her by her dad in the 1940s. It was lost for a time and then refound. $10,000. Back in the '40s that was sufficient to buy a house! Makes me sad, as these days, a drop in the proverbial bucket.

16046

Ok. So weā€™re talking about after the 20 or 30 or whatever year term is up. I knew I could keep mine if I wanted but the rate goes from something like $300/year to $5000 or something nuts like that. I figured the only people that kept those policies knew their heirs would be collecting soon.

16047

To be blunt, I donā€™t think while life was ever a good idea for anyone other than the salesperson (Usually they get the first yearā€™s premium as commission).

Arguably, we are ā€œat a more prosperous place in life,ā€ with considerable assets to ā€œshelter from taxes.ā€ Donā€™t let the tax tail wag the dog. We have a large umbrella insurance policy to cover legal liabilities. We are gifting assets to kids, a legal way to shelter by gifting the annual gift exclusion (it adds up). We are setting up trusts. But, mostly we have made our peace that taxes will be paid, and that thereā€™s nothing wrong with paying our fair share.

16048

Whole life can make sense in very rare circumstances, such as the extremely wealthy (top half percent?) or regular folks with say, a special needs child who you want to protect when you are gone. But for most peeps, whole life is almost always a bad purchase, benefitting only the sales agent.

16049

If you believe in having insurance in force when you die, term is by far the most expensive insurance. Ironically itā€™s sold and purchased as the least expensive. Great if you need it for a set period (to pay off a note or somehting like that). But if you want it to actually pay your heirs a benefit, you need it in force forever. That means renewing it at much older ages which becomes much more expensive than permanent coverage if you live a long time. Ultimately it becomes annual renewable term with incresing (steep) premiums each yr because youā€™re a yr older.

Somehting like 97% of terms polciies never pay a benefit becuase people lapse or donā€™t renew prior to death. Doesnā€™t mean they were a waste of money because they provided protection for a set period of time, but if you want it to actually provide a benefit, only way to ensure that is with permanent. About 20 yrs ago a new product came out called GUL which is a permanent guaranteed death benefit but way less expensive than whole life (it doesnā€™t build cash. Think of it like term that never expires or increases premium). The nice thing about it is everything is guaranteed; the premium, the death benefit, etc. Not market sensitive. Very efficient way to make sure my spouse has plenty of money when Iā€™m gone while allowing us to use our money while Iā€™m here.

Advisors who recommend dropping coverage need to rethink that. Forget about what youā€™ve already paid. On a go forward basis, the premium will likely purchase far more after tax dollars than an investment would create. Itā€™s not about needing coverage. I get that. Itā€™s about using dollars efficiently. Seen many a complaint by would be beneficiaries when they learned that advisor told mom to stop the life insurance payments (because they got a lot less than they would have). Easily becomes an E&O claim if beneficiary knows what buttons to push.

16050

Huh, I donā€™t get it. If life insurance is no longer needed, why should a disinterested advisor rethink his/her position?

Exactly. When the income goes to zero (in retirement), there is no longer a need for term, so folks drop it.

This too, makes no sense. Sure, anyone can sue for anything in this country, but is there is in insurance there is no insurance. Who is suing what for what?

Uhh, no, not efficient at all (except for the sales person.)

16051

The way we figured our pension in retirement plans was as a stream of income.

We added all our income pre-retirement and compared it with all our combined expenses.

We added all our projected income post retirement (including pension, SS, rentals, interest, dividends, etc) and compared it with post retirement projected expenses.

For us we had enough post retirement that so far we have been able to be very comfortable and travel as desired and support our medically disabled loved one.

Also, we have opted to keep Hā€™s two life insurance policies in effect. They are quite modest but the cash they will provide will be handy in adjusting to financial changes after he passes.

One of them has a fully paid up premium and pays out about $xxxx or more every year as a return on premium of the cash value or something. The other has an annual premium of slightly over $xxxx, so itā€™s as if the premium on policy 2 is paid by the payout of the fully paid policy 1. So far, the premium on policy 2 hasnā€™t increased much and our CPA agrees itā€™s a pretty good value to get the 6 figure face value of the policy for the price of the premium. We wouldnā€™t be able to get a comparable policy to policy 2 for that premium on the market at Hā€™s age and itā€™s guaranteed renewable. I have no life insuranceā€”never have had any and at this point with my chronic health condition it would have very high premiums.

16052

@rickle1 , is your survivor insurance the same as 2nd to die?

16053

You could try to figure out a current cash value if your pension and all your assets and then calculate say 3% of that per year and see if that would be adequate for your annual expenses but honestly that approach has never appealed and seems silly to me.

A pension is like an immediate annuity. Folks that donā€™t get one from their employer could purchase one if desired.

16054

^ yes a 2nd to die is a surivor policy. No benefits paid until both deaths so very inexpensive coverage.

Lots of ways to skin the cat. WIth all due respect to those who feel life insurance in retirement is only for the benefit of the salesman, you just donā€™t get it and thatā€™s ok. Not going to go in to all the uses here. Full dislcosure - I sell life insurance. Do I benefit? Of course, but nowhere near as much as my clients. Iā€™m also a consumer of life insurance. So I know my spouseā€™s reitrement will be taken care of whether Iā€™m here or not, regardless of market performance, taxes, etc. I also invest in the market, so having a nice blend works for me.

16055

I did add term insurance for H when I wasnā€™t working outside the home and raising young kids. Will pay the annual premiums until the term rate runs out. Although it is unlikely for him to pass, I would feel very foolish not paying the premium and forego the insurance payout if he does die.

Also bought term policies on DDs when they were eligible (age 21) - 30 year term and rates are the same low rate each year, like $250. Due to my cancer 10 years ago, was not able to get any more insurance on myself, but had a fair amount in place.

Life insurance payout is tax free.

DD/SIL bought some term insurance but bought 20 year instead of 30 year - although I advised them for the 30 year. Will see what they think in 20 yearsā€¦

Much of our life insurance is a mix/blended - that keeps premiums reasonable - the cash value and dividends now have almost all of the policies w/o us paying any premium as the dividends pay for the premiums.

Since we donā€™t have pensions, we have purchased some annuities to reduce our overall risk.

We are at a point where we havenā€™t needed to make any changes. Financial guy says keep doing what we are doing. Making enough money, continuing some contribution to 401k (getting company matches), keeping nest egg intact while non-retired.

Putting some $$ into GKids college funds (they are under 1 and under 2 years of age at present) - let the money grow in the investment account.

My dad bought two life insurance policies in the late 60ā€™s/early 70ā€™s - a friend of his in the industry said the rates for smokers was going to go up, and those two policies worked out well. Dad died of small cell lung cancer 20 years after he had quit smoking (but his lungs were very compromised due to heavy smoking before age 45) - he died two days before turning 65. He was very happy to have the insurance in place. The cancer really sucked (they now have chemo that is effective with some small cell lung cancer cases; radiation now is much better too) However in addition to the life insurance, he had sold the property from his business a few years earlier, and had some very good apartment buildings. He bankrolled a small corner bar/pizza/burger place and had the operating partner be able to buy him out - very good cash flow. Momā€™s care was well managed at home with live in help and my brother living very close - which preserved the estate.

I see and hear all kind of stories with people going into rehab and skilled care. Some families have to scramble when a parent hasnā€™t downsized and now canā€™t return home. The cases with one or two parents and the type of help/care needed.

16056

Regarding taking adult kids on vacations: We took our kids traveling every year and had great times and now even as young adults, they say they would be delighted to travel with us. We took them to UK, several European countries, China, Bali, Australia, Costa Rica, Nicaragua, Mexico and Canada (both many times). They both now travel on their own ā€“ ShawD hiked in Patagonia this summer and ShawSon was in Paris and Mexico City (his GF is not outdoorsy even though he is an avid backpacker).

My FIL/MIL funded trips with their young adult kids to places where it was impossible to turn down going with them (beach house in Maui, bicycle trip in China in 1984, etc.). So we saw them much more than we saw my parents. I always planned to emulate my in-laws and this year, for the first time, we did such a trip. Took the kids and their SOs to the Canadian Rockies. Iā€™d like to take them to Machu Picchu. The real problem is their schedules.

Regarding expense levels: In our social milieu, we are probably lesser spenders but our milieu is expensive. We live in a very nice suburb in Massachusetts, have a vacation home on a lake in Canada (that we share with a sibling and which we knocked down and are rebuilding from scratch), and try to spend several months a year in Northern California which I love (as distinct from ShawWife) and where I co-founded a startup and now where both of our kids live. Plus I hate cold (unlike ShawWife). We could easily cut expenses by eliminating one or more locations. But, which one(s)? No grandkids now, but certainly within 10 years and possibly 5.

I travel a ton for work and have for 25+ years ā€“ was in Brazil for two days this week but unlike someone here, I really enjoy traveling. Leave shortly for Stockholm and London. Then Memphis, San Francisco (twice before year-end), probably some other places. We vacation well ā€“ again more frugally than many of our peers, but we spent 2 weeks in Northern Italy in May and 2 weeks hiking in the Canadian Rockies in July. We will continue doing these things until we are physically unable (ShawWife replaced 2 knees last year and I replaced one this summer, so our ability is currently on a short upward swing). I donā€™t think our expense level will go up. Neither ShawWife nor I expect to fully retire but will undoubtedly have to slow down.

Regarding asset level: I donā€™t have a number per se, but would like to have $10 MM post-tax. That includes money to be given to the kids but really reflects our social milieu and spending choices. We could spend a lot less and live happily.

16057

We still have large term policies, mainly because of medical expenses. Most of our savings are in retirement vehicles (pension, 401k, R/O IRA) and arenā€™t liquid. The term policies are to protect me before pension and SS kick in, esp since I am not able to work but in SSā€™s mind, not disabled enough to get SSDI (go figure that one).

I got my policy when the guys were born, long before I got ill, with an eye to it providing for day care/household help/college if something happened to me. Premiums are still reasonable and I am otherwise insurable, so I have kept it. They would each get a chunk.

A financial adviser would probably think weā€™re nuts, but weā€™re risk averse and my most expensive med is $100k+/year. If coverage changes or Medicare decides not to cover it down the road, we need some backup.

Neither of us are terribly close to SS retirement age, so we have a good ten years before more guaranteed safety nets kick in.

16058

An aside- some of the newer life policies (mainly permananet but some term) include riders that pay for LTC benefits. Although many will need senior related healthcare in the form of nursing home, assited living, etc., very few actually buy protection and the cost is crazy (100k+ per yr in a nursing home in many parts of the country). For some reason they must thing it doesnā€™t apply to them and then you see people plow thorugh their nest egg because they donā€™t have protection. Silly, they protect against market loss with diversification but donā€™t consider other risks that may actually cost their account a lot more than the market.

The good news is these new life contracts are much easier to get than LTC coverage (easier underwriitng) and are not ā€œuse it or lose itā€. If you donā€™t use the LTC benefits, you get the life insurance proceeds so itā€™s not a insurance black hole. These products are quickly becoming the new normal for LTC and an important planning instrument when considering retirement.

16059

@rickle1 , DH and I were discussing the relatively inexpensive 2nd to die. The only problem is the mental aging of the survivor and forgetting to pay the premiums. Seems there needs to be something set up so itā€™s done automatically.

Thank you for telling us about the new policies above. Iā€™m going to look into that.

16060

If anyone is considering whole life or universal life, those might be the ONLY insurance that Bogleheads are unanimous on. People debate Long Term Care Insurance (LTCi), how much term insurance to get, how much umbrella, etc., but not Whole Life (other than salesmen themselves).