Right now for myself, according the the SS website, my survivor benefits would be $49k per year. So assuming a 4% withdrawal rate, isn't this the equivalent of already having $1.2 million? This makes me wonder if $1 million for me might be enough instead of the $1.5. which would save me about $860 per year. On the other hand, $1 million today won't be as valuable in 20 to 30 years from now. But I wonder if given the SS benefits and $1 million, if my family would be fine. They'd at least be able to pay off the mortgage and afford to continue to live fairly well. I suppose the big difference might be paying for college or not if we end up having 3 kids. Right now we are only on our first (who is 2 months old).
My wife on the other hand is a public school teacher in Mass. She doesn't pay SS. Her survivor benefits grow each year. Right now, her benefits would only be worth $4k per year. So all the more to get her insured. However, her plan rapidly become more valuable between ages 50 and 58 (when she would reach max benefits). For her, I'm considering keeping the amount at $1 million, since the benefits are so little for her until she gets older (for example, 17 years from now at age 46 her benefit would pay out only $20k per year). However, I'm considering reducing her term from 30 to 20 to save $400 per year. 20 years from now when she is 49 we will likely have a 20 year old child, a 17-18 year old and then maybe one more teenager if we decide to go for three. At this point her benefit would grow like this:
- Age 50 - $24.5k - 4% withdrawal equivalent - $611k
Age 51 - $25.6k annually - 4% withdrawal equivalent - $640k
Age 52 - $26.8k annually - 4% withdrawal equivalent - $670k
Age 53 - $35.5k annually - 4% withdrawal equivalent - $886k
Age 54 - $38k annually - 4% withdrawal equivalent - $950k
Age 55 - $40.6k annually - 4% withdrawal equivalent - $1 million
Age 56 - $45.4k annually - 4% withdrawal equivalent - $1.13 million
Age 57 - $50.3k annually - 4% withdrawal equivalent - $1.26 million
Age 58 - $52.3k annually - 4% withdrawal equivalent - $1.31 million
So I guess my questions are, based on the survivor info I've found, would it make sense to reduce my own benefit amount or my wife's term? Of course the wild card in my view is the cost of college and if I can convince my wife to only have two kids vs. the three she wants.
Thanks for taking the time to read and offer help! My wife is ready for me to move on from this morbid topic!