Stuck Planning Life Insurace+ Military Pension + Savings

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Topic Author
Sophia1884
Posts: 174
Joined: Mon Aug 05, 2013 10:23 pm

Stuck Planning Life Insurace+ Military Pension + Savings

Post by Sophia1884 » Wed Jul 17, 2019 4:57 pm

Hello all,

I'm really stuck and not sure how to proceed with setting up the life insurance. I'd really appreciate some thoughts.

My policy is easy- it's a term for $500,000, split between my mom and my husband. As he is the military member, his policy is the most pressing for our family. Currently, his policy is for $800,000, with 17 yrs left. We have a 4 yr old and a 3 mth old. Our goal is to replace his income (100-130 K), cover some college (we have 1 GI bill for me or a kiddo), and generally cover the kids to age 25 of the youngest.

I've been reading on laddering policies and have done some calculations but am getting really confused. Termlife2go calculator, capturing: annual income, 20 yr coverage, 2 kids at public college, 800K in taxable, 200K in retirement, says we need a coverage of 1.3 mill. But if I do the Income part of the DIME calculation (annual income x # of year to desired age of youngest (25)=127Kx25) it gives me 3 M :shock:

There are also a bunch of red herrings:
1. We have 8 yrs to finishing the 20 year military commitment=Pension/Spouse survival plan...how does this fit in with a laddered LI plan?
2. Do we need to maintain the annual income of 127k if I'm underemployed and retirement acct conctibution opportunities are limited? I assume 100K will cover our expenses, some investment and travel. We also will not longer have day care expenses if I'm at home and I hope to get back to school to transition to a job of interest.
3. We don't own a house and I don't plan to in the near future due to frequent moves but purchasing may be a good idea if we settle in an area with excellent schools/work opportunities? So, should I plan for a mortgage?
4. A 20 yr policy takes me to about 55 yrs....is that too early to start using retirement/taxable funds?

I'm thinking of either dropping the current policy and replacing it with 10 (immediate needs, day care, house,) 15 (??), 25 (income replacement, colleges) yr term policies, or maybe keeping this one and adding the 25 yr policy based on the "10 x annual income" formula.

How can I make this process more straight forward and organized? I feel like I'm getting cought up in the details and not seeing the whole picture.

...What's the picture?

Thank you for reading~

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BL
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Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by BL » Wed Jul 17, 2019 7:56 pm

Unless you can get it cheaper, I would hang unto existing policies and just add others as needed. Not simple to figure it out, but SBP after retirement is a good COLA-enhanced security of up to 55%

Children would be eligible for SS until age 18, and survivor parent if income from work is low until child is 16, IIRC.

Curious if you are currently paying your mother back or supporting her? Will she depend on you and will she need it more than the kids and spouse if you are gone? (child supervision, college, mortgage, time off from work to help deal with it if retired military).

Topic Author
Sophia1884
Posts: 174
Joined: Mon Aug 05, 2013 10:23 pm

Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by Sophia1884 » Thu Jul 18, 2019 10:11 am

BL wrote:
Wed Jul 17, 2019 7:56 pm
Unless you can get it cheaper, I would hang unto existing policies and just add others as needed. Not simple to figure it out, but SBP after retirement is a good COLA-enhanced security of up to 55%

Children would be eligible for SS until age 18, and survivor parent if income from work is low until child is 16, IIRC.

Curious if you are currently paying your mother back or supporting her? Will she depend on you and will she need it more than the kids and spouse if you are gone? (child supervision, college, mortgage, time off from work to help deal with it if retired military).
Thanks BL! For the SBP...how would you advise working it into the plan? For example, I'm assuming that I would only need a 10 yr policy for income replacment to cover the remainder of our commitment if the SBP kicks in afterwards, right?

For my policy, the half coverage is for my mom because she was a single mom, immigrant, that used all of her available resources to take care of and educate me and my brother. She didn't have the ability for many years to think about her own retirment. Once we left home, she started to and is on her way to financing time after she's done working. However, I see myself with a responsiblity to help/assist as needed. If I'm not around to help, I'd like to know she'll be ok.

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BL
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Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by BL » Thu Jul 18, 2019 1:10 pm

Sophia1884 wrote:
Thu Jul 18, 2019 10:11 am
BL wrote:
Wed Jul 17, 2019 7:56 pm
Unless you can get it cheaper, I would hang unto existing policies and just add others as needed. Not simple to figure it out, but SBP after retirement is a good COLA-enhanced security of up to 55%

Children would be eligible for SS until age 18, and survivor parent if income from work is low until child is 16, IIRC.

Curious if you are currently paying your mother back or supporting her? Will she depend on you and will she need it more than the kids and spouse if you are gone? (child supervision, college, mortgage, time off from work to help deal with it if retired military).
Thanks BL! For the SBP...how would you advise working it into the plan? For example, I'm assuming that I would only need a 10 yr policy for income replacment to cover the remainder of our commitment if the SBP kicks in afterwards, right?

For my policy, the half coverage is for my mom because she was a single mom, immigrant, that used all of her available resources to take care of and educate me and my brother. She didn't have the ability for many years to think about her own retirment. Once we left home, she started to and is on her way to financing time after she's done working. However, I see myself with a responsiblity to help/assist as needed. If I'm not around to help, I'd like to know she'll be ok.
Good for you for looking out for your mom!

Not really good at figuring this out. We sort of bumbled along and things turned out good eventually.

Seems like you could break down planning as before/after military retirement.

Don't know what coverage exists now, but there should be some. Perhaps need more coverage now. Some could be dropped when/if pension arrives. term4life.com has estimates. An independent insurance agent can shop for you at several companies.

For after retirement, there should be estimates available for pension and SBP could probably be bought for up to 55% of that by deducting some from pension for 30 years. Don't let anyone talk you into life insurance instead! No COLA there. There will be convincing arguments. Save in TSP and Roth IRAs meantime. You may have similar (401k) savings opportunities in a second career, or perhaps another pension.

Watch out for vultures (friends, fellow military retirees, or civilians) that sell things to military: insurance, investing, Multi Level Marketing, anything.

TriCare should be available as back-up health insurance and TriCare for Life (Medicare Supplement) at age 65 is great unless you are a remarried widow of military person, for example (Congress gives and can take away!).

Things change in military so be flexible and keep on top of things that affect your well-being.
Attitudes toward military have been mostly positive since 9/11/01, but whether that will continue is hard to know.

Olemiss540
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Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by Olemiss540 » Thu Jul 18, 2019 1:33 pm

What is your rate of retirement savings? I would think you main concern is the coming years to get to the pension. Personally, I would get a total of 1.5 Million or so to cover the grief and income shortfall temporarily until you get back to work if absolutely necessary in order to cover retirement. Kids can go to cheaper schools and/or take loans out if the worst case happens.

There is no need to look at life insurance as a way to set heirs up for the rest of their life, but as a pillow to support some changes if God forbid the worst happens. Also, strange to look at life insurance as a gift to your mother. It is meant as a last ditch resort to aid in dependent's short term stability and not as a lotto ticket to bequeath loved ones a final thank you. Personally, I would chang that entirely to your husband with the understanding and discussion you would hope he would help ensure your mother's livelihood out of respect for the woman he loves.

Just my opinion since you are looking for some thoughts and different viewpoints. I wouldn't stress about it once you get it set and hope you and the family remain happy and healthy regardless of your choice!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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elcadarj
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Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by elcadarj » Thu Jul 18, 2019 2:02 pm

You may want to talk to USAA. They have a fairly detailed insurance calculator. (Last time I ran it, it recommended zero life insurance for me, which is correct considering I've reached my military reserve pension age and I've hit my number for my retirement funds) Also, USAA life does NOT have a war exclusion.

ETA: Link to USAA Life Insurance Calculator>https://www.usaa.com/inet/life_insuranc ... nceAdvice/

Topic Author
Sophia1884
Posts: 174
Joined: Mon Aug 05, 2013 10:23 pm

Re: Stuck Planning Life Insurace+ Military Pension + Savings

Post by Sophia1884 » Fri Jul 19, 2019 10:30 am

elcadarj wrote:
Thu Jul 18, 2019 2:02 pm
You may want to talk to USAA. They have a fairly detailed insurance calculator. (Last time I ran it, it recommended zero life insurance for me, which is correct considering I've reached my military reserve pension age and I've hit my number for my retirement funds) Also, USAA life does NOT have a war exclusion.

ETA: Link to USAA Life Insurance Calculator>https://www.usaa.com/inet/life_insuranc ... nceAdvice/
Thank you for the recommendation! I'll look at their caclulator.
Olemiss540 wrote:
Thu Jul 18, 2019 2:02 pm
What is your rate of retirement savings?-
We're between 30-50%
elcadarj wrote:
Thu Jul 18, 2019 2:02 pm
There is no need to look at life insurance as a way to set heirs up for the rest of their life, but as a pillow to support some changes if God forbid the worst happens.
- Agreed, not looking to create heirs as much as offering support in times of transition.
elcadarj wrote:
Thu Jul 18, 2019 2:02 pm
Just my opinion since you are looking for some thoughts and different viewpoints. I wouldn't stress about it once you get it set and hope you and the family remain happy and healthy regardless of your choice!
-Thank you!

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