Should I keep my 400K term Life Ins now that I an retired

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trueson1
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Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

Advice from my Bogelhead friends please:

I retired at the end of 2021.

I have a 400K term life ins plan until I am 68 (currently 66) that costs me $1260/yr.

We have ~1.8M in IRA (~80/20 - Regular/Roth assests) and 200K taxable

Income: 27K annual pension, DW's SS at 21 K, holding off on my SS until 70 when I will receive ~50K.

About 120K/year expenses. Only debt is ~350K ( 2.75% 30 years fixed taken in 2020) on mortgage on home worth 950K.

Thinking about dropping the insurance as my view on life insurance is to replace lost income, which no longer applies. I think we are covered should I die in the next 2 years. On the other hand, if I die in the next 2 years, the DW could pay off the house witht he 400K or add to portfolio. It wouldn't be worth the cost of carring the insurance after the term is over due to the dramatic increase in cost.

Many Thanks.
Chardo
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Chardo »

Are you in good health right now? Will your pension continue after your death? How are you covering that 120k in expenses?
HIinvestor
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by HIinvestor »

It looks like for a nominal amount of $2520 over 2 years, your wife could have the potential payout of $400,000. You could not buy a policy paying that amount at that premium and as you say, that amount of money would be useful if the worse happened and you were to pass away over the next two years. As you say, it doesn't make sense to buy with a much higher premium in two years but I'd probably be willing to pay that amount for "just in case." Sure, you don't NEED it as there is enough buffer for your survivors, but it isn't a lot to pay for extra cushion.
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trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

I am in good health now with no major issues as far as I know. Yes, the pension is 100% survivorship for life.
Rex66
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Rex66 »

I’d drop it
Parkinglotracer
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Parkinglotracer »

[Medical advice removed by admin LadyGeek]
Topic Author
trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

We are funding the 120K from our assets plus pension and SS. When I hit 70, 98K (21K+27K + 50K) of that 120K in expense will be covered from both our SS and pension. For the next few years we will pull more from our pre-tax IRAs.
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trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

Farthingham score for 10 years is 12%.
dred pirate
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by dred pirate »

Parkinglotracer wrote: Tue Jun 28, 2022 4:40 pm What’s your farthingham score - ie chances of a heart attack in 10 years. Doc can tell you . If you are in good health I’d cancel it.
not to be thw "well actually guy" but it is framingham just in case somebody is trying to look it up
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Stinky
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Stinky »

trueson1 wrote: Tue Jun 28, 2022 4:33 pm I am in good health now with no major issues as far as I know. Yes, the pension is 100% survivorship for life.
I had the same situation when I retired. I had a few years to go on a 20 year term policy.

I dropped the policy. I figured that salary income had stopped, so the need for term life insurance had gone away.

Enjoy spending the $2500 you'll save on something fun.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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yatesd
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by yatesd »

You don’t need it, so I would personally drop it.
Broken Man 1999
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Broken Man 1999 »

What does your wife think about dropping the policy?

Honestly, if she would feel more comfortable keeping the policy, I would keep it. The cost is relatively small, whether you drop it or continue it isn't going to change anything for you and your wife, unless you die.

MIL found out her last husband had cancelled a life insurance policy that would have paid off their dwelling. Whoops!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Chardo
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Chardo »

dred pirate wrote: Tue Jun 28, 2022 5:26 pm
Parkinglotracer wrote: Tue Jun 28, 2022 4:40 pm What’s your farthingham score - ie chances of a heart attack in 10 years. Doc can tell you . If you are in good health I’d cancel it.
not to be thw "well actually guy" but it is framingham just in case somebody is trying to look it up
Defend the Grammar Police
hudson
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by hudson »

Stinky wrote: Tue Jun 28, 2022 5:35 pm
trueson1 wrote: Tue Jun 28, 2022 4:33 pm I am in good health now with no major issues as far as I know. Yes, the pension is 100% survivorship for life.
I had the same situation when I retired. I had a few years to go on a 20 year term policy.

I dropped the policy. I figured that salary income had stopped, so the need for term life insurance had gone away.

Enjoy spending the $2500 you'll save on something fun.
I agree with Stinky.
You have no reason to have life insurance.
Your risk of death is low.
I wouldn't pay another dime on the policy.
When I cancelled my term policy early, I did consult with my wife. She initially thought that we should keep the policy. Later she understood that if I passed away that she would be OK.
TOM1964
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by TOM1964 »

I have a 20 year term policy that runs to age 69. I’m 58, and retired unexpectedly when I was offered an early out due to COVID.

I’m keeping my $1870/year $1M policy for two reasons:

1. I manage my family’s finances, and I don’t normally keep a larger-than-necessary emergency fund. If I die suddenly and unexpectedly, my instructions to my wife are to put the insurance money in our MMF and write checks for a couple of years until she’s ready to get financial help from Vanguard Trust Services. This would be a major easing of her burdens at a time of crisis.

2. I’m a victim of the “sunk cost fallacy.” When I bought this policy I was 49. The level premium covered a range of mortalities, from age 49 to 69. The chances that I was going to die at 50 are much lower than the chances I might die at 68. I gave them the “easy” money, now I want to enjoy a benefit that would be much more expensive if I were buying it at age 58.

Each person’s situation is different. If I wipe out on my motorcycle tomorrow, my wife will have a substantially easier entry to widowhood without worrying about asset management right away. That is worth $150/month to me.

Cheers, Tom
mega317
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by mega317 »

Chardo wrote: Tue Jun 28, 2022 6:05 pm Defend the Grammar Police
Defend the typo police :happy
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Parkinglotracer
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Parkinglotracer »

dred pirate wrote: Tue Jun 28, 2022 5:26 pm
Parkinglotracer wrote: Tue Jun 28, 2022 4:40 pm What’s your farthingham score - ie chances of a heart attack in 10 years. Doc can tell you . If you are in good health I’d cancel it.
not to be thw "well actually guy" but it is framingham just in case somebody is trying to look it up
Thanks for the correction! I’m not a doc but I stayed at a holiday inn express last night .. lol.
Topic Author
trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

Thanks everyone!

My wife is the one who suggested droping it. I think we will take the 2.5K and take a nice long weekend vacay!

PS - I saw that it was Framingham but was so grateful for the advice, I left it up to the grammar police - good catch! :D
Topic Author
trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

trueson1 wrote: Wed Jun 29, 2022 5:48 am Thanks everyone!

My wife is the one who suggested dropping it. I think we will take the 2.5K and take a nice long weekend vacay!

PS - I saw that it was Framingham but was so grateful for the advice, I left it up to the grammar police - good catch! :D
Topic Author
trueson1
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by trueson1 »

trueson1 wrote: Wed Jun 29, 2022 5:49 am
trueson1 wrote: Wed Jun 29, 2022 5:48 am Thanks everyone!

My wife is the one who suggested dropping it. I think we will take the 2.5K and take a nice long weekend vacay (probably not the Holiday Inn in though!

PS - I saw that it was Framingham but was so grateful for the advice, I left it up to the grammar police - good catch! :D
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JoeRetire
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by JoeRetire »

trueson1 wrote: Tue Jun 28, 2022 4:19 pm Thinking about dropping the insurance as my view on life insurance is to replace lost income, which no longer applies. I think we are covered should I die in the next 2 years.
If you are truly "covered", and your spouse wouldn't suffer financially, then you should cancel the insurance, since you no longer need it.
On the other hand, if I die in the next 2 years, the DW could pay off the house witht he 400K or add to portfolio.
If you want your spouse to get a bonus upon your demise, and it's worth the cost of the premiums, then keep the "will he or won't he die" lottery. Watch your back for the next 2 years.
This is gonna be my time. Time to taste the fruits and let the juices drip down my chin. I proclaim this: The Summer of George!
dred pirate
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by dred pirate »

Parkinglotracer wrote: Wed Jun 29, 2022 5:19 am
dred pirate wrote: Tue Jun 28, 2022 5:26 pm
Parkinglotracer wrote: Tue Jun 28, 2022 4:40 pm What’s your farthingham score - ie chances of a heart attack in 10 years. Doc can tell you . If you are in good health I’d cancel it.
not to be thw "well actually guy" but it is framingham just in case somebody is trying to look it up
Thanks for the correction! I’m not a doc but I stayed at a holiday inn express last night .. lol.
lol- I had a friend actually use that line during pharmacy school when he saw someone looking through the medication aisle at the local grocery store
JPM
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by JPM »

Looked at as a bet, your odds of death, avg male 66yo, is 1.7% for the coming year according to the Social Security mortality estimate. A 58:1 shot each of the next two years. Taken together, odds of death over the two year period are a little better, about 2.8%, a 38:1 shot.
Your $1260 premium for a $400,000 payout is a 318:1 payout. Over the two years, still 159:1.

From your wife's point of view, it's a good bet if you want to make it.
balbrec2
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by balbrec2 »

Rex66 wrote: Tue Jun 28, 2022 4:37 pm I’d drop it
+1 absolutely drop it
Parkinglotracer
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Parkinglotracer »

JPM wrote: Wed Jun 29, 2022 8:34 am Looked at as a bet, your odds of death, avg male 66yo, is 1.7% for the coming year according to the Social Security mortality estimate. A 58:1 shot each of the next two years. Taken together, odds of death over the two year period are a little better, about 2.8%, a 38:1 shot.
Your $1260 premium for a $400,000 payout is a 318:1 payout. Over the two years, still 159:1.

From your wife's point of view, it's a good bet if you want to make it.
On the other hand never make your death too good of a deal for your spouse …
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Valuethinker »

trueson1 wrote: Tue Jun 28, 2022 4:33 pm I am in good health now with no major issues as far as I know. Yes, the pension is 100% survivorship for life.
The cost of 2 years insurance is very small.

Your spouse would be in a much better position if you died in that time than otherwise.

For that cost, I would keep it.

We've just been through the grim reaper wrt people over 65 (about half or more of those who died, I believe). People are still dying from it. The existence of a novel and deadly virus, that killed primarily those over 60, was not priced into your premiums when that insurance policy was sold to you.

That alone would make me keep the policy. I can blow $2500 on a weekend in Vegas (not that I would, I don't gamble). On a new laptop. It's just not a significant sum of money relative to your financial position. On the other hand if you have more than a 2500/400k chance of dying in the next 2 years, it is cheap insurance (Net Present Value is greater than 0, roughly).

My father managed to collect on his life insurance - he died in an accident.

Remember life insurance is a product where "winning" is losing from the point of view of the insured. Conversely if you never collect on the insurance, you won.
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K72
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by K72 »

balbrec2 wrote: Wed Jun 29, 2022 6:18 pm
Rex66 wrote: Tue Jun 28, 2022 4:37 pm I’d drop it
+1 absolutely drop it
+1

Retired 3 years. I let my $500k policy expire last year (I'm still getting offers to reinstate it, which tells me something). In the end my logic was that the only thing I was protecting was future SS benefits. Just didn't seem worth it.
All we want are the facts...
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Luke Duke »

trueson1 wrote: Tue Jun 28, 2022 4:45 pm Farthingham score for 10 years is 12%.
($1260x2)/$400,000 = 0.63%
wander
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by wander »

I would drop it.
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by marcopolo »

trueson1 wrote: Tue Jun 28, 2022 4:19 pm Advice from my Bogelhead friends please:

I retired at the end of 2021.

I have a 400K term life ins plan until I am 68 (currently 66) that costs me $1260/yr.

We have ~1.8M in IRA (~80/20 - Regular/Roth assests) and 200K taxable

Income: 27K annual pension, DW's SS at 21 K, holding off on my SS until 70 when I will receive ~50K.

About 120K/year expenses. Only debt is ~350K ( 2.75% 30 years fixed taken in 2020) on mortgage on home worth 950K.

Thinking about dropping the insurance as my view on life insurance is to replace lost income, which no longer applies. I think we are covered should I die in the next 2 years. On the other hand, if I die in the next 2 years, the DW could pay off the house witht he 400K or add to portfolio. It wouldn't be worth the cost of carring the insurance after the term is over due to the dramatic increase in cost.

Many Thanks.
How is your wife at managing investments, spending, etc in an efficient manner (taxes, Roth Conversions, etc.) relative to you?

We are retired and I have several years left on a term life policy ($500k, $400/yr). I am keeping it for now because I know my wife will not be nearly as efficient in managing investments/withdrawals/Roth Conversions, etc in nearly an efficient manner as I do currently. So, I figure the life insurance will serve as a buffer to absorb those inefficiencies. She has been willing to learn, and I have been working with her over the last few years, after we retired. I am hopeful that by the time the term expires on the policy, she will be better up to speed on these things.

You are in good financial shape, and have most of your expense covered by guaranteed streams of income (we are mostly living off investment). So, there may be less of a concern in your situation.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Carl53
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Carl53 »

I've got a few years left on a 15 year $300k policy ($860) purchased in my late 50s. It was intended to tide my spouse over once post tax assets were depleted, cover a pension reduction that would or might occur in several steps, and allow a delayed SS benefit if so desired. Given our current ages, most of those will no longer have a significant impact. However, having had a rather scary episode with Covid, and the relatively cheap cost of insurance late in the policy term, the volatility in the market, and our currently depleted post-tax resources, I've decided to maintain the policy for the time being figuring it would provide a cushion should something happen and have the market crash too.
UNCHEEL
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by UNCHEEL »

Drop it. You'll have no regrets (even if you get hit by a bus tomorrow). :D
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Re: Should I keep my 400K term Life Ins now that I an retired

Post by Herekittykitty »

Keep the insurance. You can afford it. At least it looks like you can.

If you kick the bucket within the next 2 years the insurance money would help, either by letting her pay the house off and eliminate the mortgage, or let her invest it for growth and/or income, or even just save it in case she needed it in the future.

Oh - go on the trip anyway. It looks like you can afford it.
I don't know anything.
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