Do i still need Term Life Insurance ?

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indexlover
Posts: 66
Joined: Mon May 11, 2015 10:39 am

Do i still need Term Life Insurance ?

Post by indexlover » Sun May 14, 2017 11:13 am

Background:
- I am 52 , my wife is 51 - 2 kids one in college and one soon in college.
- More than enough in 529 plan (probably a over funded situation).
- Portfolio ~3 MM ( evenly split between retirement and non-retirement), NW is 4+MM.
- 33% tax bracket, no state tax.
- No debt.
- Health: one of the kids and i have a health condition which will need sustained health care all our life ( nothing serious though).
- Contemplating early retirement in 2022 or maybe sooner in 2020 - still working the numbers to be comfortable.

Last year i paid $921 for a coverage of $638000. When i took this policy in 2011, i still had a mortgage.

Do I still need Term Life Insurance ?

TIA

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warowits
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Re: Do i still need Term Life Insurance ?

Post by warowits » Sun May 14, 2017 11:18 am

It is a personal decision, but I would say no.
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

retiredjg
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Re: Do i still need Term Life Insurance ?

Post by retiredjg » Sun May 14, 2017 11:22 am

If you still feel like you need your income, I think insurance to cover your income is reasonable. On the other hand, if you continue to work just because you want to and if you believe your family would be fine if the bus comes for you too soon, I don't see that you have to keep it.

Rebecca_S
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Re: Do i still need Term Life Insurance ?

Post by Rebecca_S » Sun May 14, 2017 12:49 pm

It is your spouse's opinion that matters most, since she will be the one most affected if you die between now and retirement.

If you were my spouse, I would say that you don't need coverage any more, but it isn't my opinion that matters.

LarryAllen
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Re: Do i still need Term Life Insurance ?

Post by LarryAllen » Sun May 14, 2017 12:54 pm

As others said it really depends on your spouse and their desires and income potential. To me it seems like cheap insurance for a few more years. Nobody ever complains that there is too much cash if someone dies unexpectedly!

bsteiner
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Re: Do i still need Term Life Insurance ?

Post by bsteiner » Sun May 14, 2017 1:05 pm

If it's an x-year level term, if you keep it, you get the benefit of the insurance in the later years at the same price as for the early years.

indexlover
Posts: 66
Joined: Mon May 11, 2015 10:39 am

Re: Do i still need Term Life Insurance ?

Post by indexlover » Sun May 14, 2017 1:24 pm

LarryAllen wrote:As others said it really depends on your spouse and their desires and income potential. To me it seems like cheap insurance for a few more years. Nobody ever complains that there is too much cash if someone dies unexpectedly!
Had a good laugh at your last sentence. So true !!!

Rebecca and you make a good point about asking the spouse. On a similar thread, someone had said that they would still keep the insurance so that it gives enough time for the wife to get a handle on the rest of the portfolio while using the insurance money for next few years ( but i do think spending some portion of 638k while she gets her bearings on the rest of the finance is a lot, most definitely not BH style).

WallStreetPhysician
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Re: Do i still need Term Life Insurance ?

Post by WallStreetPhysician » Sun May 14, 2017 2:46 pm

indexlover wrote:Background:
- I am 52 , my wife is 51 - 2 kids one in college and one soon in college.
- More than enough in 529 plan (probably a over funded situation).
- Portfolio ~3 MM ( evenly split between retirement and non-retirement), NW is 4+MM.
- 33% tax bracket, no state tax.
- No debt.
- Health: one of the kids and i have a health condition which will need sustained health care all our life ( nothing serious though).
- Contemplating early retirement in 2022 or maybe sooner in 2020 - still working the numbers to be comfortable.

Last year i paid $921 for a coverage of $638000. When i took this policy in 2011, i still had a mortgage.

Do I still need Term Life Insurance ?

TIA
I don't think you need term life insurance, because the difference in leaving your family with 4 million versus 4.68 million probably won't mean much.

From an expected value standpoint, it looks like the insurance company is slightly losing money on your life insurance. According to https://upload.wikimedia.org/wikipedia/ ... able_1.pdf, the probably you will die in the next year is about 1/200, while you're paying less than 1/600 of the coverage. Of course, some of those 50-somethings who will die in the next year have terminal cancer or other terminal illnesses, which probably means the probably you will die in the next year is less than 1/200.

Hopefully these numbers help lay out some of the math to help you make your decision.

-WSP

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BL
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Re: Do i still need Term Life Insurance ?

Post by BL » Sun May 14, 2017 3:01 pm

I would wait till you have been retired a few years, and reconsider then. Is this a single policy? Perhaps it can be reduced.

LarryAllen
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Re: Do i still need Term Life Insurance ?

Post by LarryAllen » Mon May 15, 2017 8:50 am

indexlover wrote: On a similar thread, someone had said that they would still keep the insurance so that it gives enough time for the wife to get a handle on the rest of the portfolio while using the insurance money for next few years ( but i do think spending some portion of 638k while she gets her bearings on the rest of the finance is a lot, most definitely not BH style).
If someone loses their spouse, especially when not expected, their ability to function normally can take years. I have seen people that reacted by spending money uncharacteristically; i.e. new car, travel abroad, etc.... I have seen people spend a ton on mental health help. I have seen people unable to work. Plus not everybody is going to live the BH style. So for $900 a year you can supply enough cash that the surviving spouse has few financial concerns for a few years. To me that's a no brainer. Once a person gets into their mid/late 60's the cost of term is pretty expensive but before that it's so cheap that it is money well spent in my opinion.

Jack FFR1846
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Re: Do i still need Term Life Insurance ?

Post by Jack FFR1846 » Mon May 15, 2017 9:15 am

You absolutely do not need this. If your wife doesn't know where assets are or which order they should be used, write that all down. I did before open heart surgery, explained it to wife and showed her where the paper was in the safe
Bogle: Smart Beta is stupid

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Watty
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Re: Do i still need Term Life Insurance ?

Post by Watty » Mon May 15, 2017 9:26 am

WallStreetPhysician wrote:I don't think you need term life insurance, because the difference in leaving your family with 4 million versus 4.68 million probably won't mean much.
+1

Having an extra $921 dollars a year probably won't make much difference either.

Do you have any work provided life insurance?

Some considerations though;

1) If you die then your surviving spouse will be filing tax returns in the higher single tax brackets so her tax expenses could be higher than you were planning on paying.

2) Once she is older and getting Social Security then she will only get one social security check. If you were both surviving then you would be getting two Social Security even though the second one would probably be smaller.

3) If you are sick for a year before you die then there could be a lot of unexpected expenses that are not covered by insurance so the nestegg could be smaller than expected.

If you can't think of a clear way that saving the $921 a year will make a positive impact in your life then I would keep the insurance since as other posters have said it sounds like it is a really good price for the coverage.

btenny
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Re: Do i still need Term Life Insurance ?

Post by btenny » Mon May 15, 2017 1:34 pm

I suggest you figure out how to keep $150K or so term insurance going forward. The key is lots of things can change between now and say age 70. So I would try to keep some insurance that goes to say age 70 or so. This gives your wife some protection if you pass early and she needs extra funds for any reason beyond your existing portfolio.

I revised my insurance plan at 52ish when my kids went off to college way back when. I got a term policy for my wife and converted part of my term to whole life to protect each of us from income loss if one of us passed early. It was relatively cheap for the income protection it provided.

Good Luck.

aristotelian
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Re: Do i still need Term Life Insurance ?

Post by aristotelian » Mon May 15, 2017 3:19 pm

My 20 year term will expire at about your age. I don't plan to get more.

If there is any question about spouse's ability to access the $4M during a crisis, put a big chunk in cash in her name. Otherwise, assuming she agrees, she will be well provided for.

Texanbybirth
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Re: Do i still need Term Life Insurance ?

Post by Texanbybirth » Mon May 15, 2017 3:24 pm

How many more years is the term? Is it level/same premium each year? I'd keep it, as at your income level the cost is not making a dent in your expenses. (I'm assuming a bit here, of course.)

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