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life ins after FIRE
Old 06-21-2013, 10:39 PM   #1
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life ins after FIRE

I'm pondering the need for life insurance after securely reaching FIRE. I can't think of any reason to have it. Did I overlook something?
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Old 06-22-2013, 12:01 AM   #2
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We dropped our life and disability insurance a year ago. We probably should have done it years ago but a year ago is when we started really examining and trimming our expenses to semi-ER (just work at home jobs now).
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Old 06-22-2013, 12:15 AM   #3
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When I Early-Early ER'd, I had an existing term life policy through a professional org. The premiums were low, so I kept it up. But after age 50 they started to move up. By age 55 they were starting to increase rapidly, and the positive tilt increases with increasing age. At that point, did a re-evaluation of what life insurance was supposed to do for us. And as our last child had graduated college, decided it was time to let it lapse.

If you don't have any kids at home or off at college, and your spouse/lover/significant other or whatever won't be destitute if you ring the bell, one would question why it would be needed.
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Old 06-22-2013, 06:21 AM   #4
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Dropped our Term Life insurance plans a few years back.

I do have a Universal Life insurance plan that is 30 years old.
It's cash balance is growing and the return is slightly more than 4% per year.
The returns more than pay for the insurance.

As long as the cash balance is growing and the returns are better than a CD rate,
then I will keep it. Maybe someone with better knowledge can let me know what
I should do with this thing.
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Old 06-22-2013, 06:31 AM   #5
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We're "glide sloping" off the Terms. Drop the amount of coverage as the brackets go up. After the next big bracket (55+), we'll drop it all. Our savings will be sufficient.
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Old 06-22-2013, 06:48 AM   #6
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I have a couple of very small whole life policies that my father took out on me when I was a child. There is no cost to me anymore since they are on "autopilot" and dividends now pay me. In the end there will be enough to plant me and have a great party.

I don't see any reason to take out another policy even if I didn't have the present one. There will be plenty of savings to take care of my wife with a nice amount left over for the kids (geez I just realized the oldest turns 50 this month ).

Cheers!
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Old 06-22-2013, 07:20 AM   #7
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We dropped all life insurance (except a small policy that is paid up and earmarked as a burial policy for myself) many years ago (1980 or so). When young LI (Term) is needed since asset base is usually smaller and may be needed for "survivors" but as we age asset base should grow and negate the need for LI (Term) to be used for that purpose (IMO).
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Old 06-22-2013, 07:22 AM   #8
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I dropped my term life when we had enough savings that my wife could be FI without me. That was some years before I retired.
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Old 06-22-2013, 07:51 AM   #9
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Quote:
Originally Posted by Independent View Post
I dropped my term life when we had enough savings that my wife could be FI without me. That was some years before I retired.
+1 same with disability insurance. I currently have a whole life policy that I purchased when I was 21. Still paying premiums since they are only ~$20/month and on autopay and the CSV earned 4.75% interest last year so from my perspective I have a highly credit worthy bond that pays me ~4.75% with no interest rate risk and I get free life insurance as a kicker. I consider it part of my fixed income allocation.

BTW, since I bought it the IRR has been 5.19%, ignoring the value of the life insurance. Not my best investment decision, but not my worst either.
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Old 06-22-2013, 07:55 AM   #10
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Dropped mine about 10 years prior to ER. Even a Financial Advisor/Life Insurance salesperson said it did not make sense. She did say keep the LTD until I stop working.
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Old 06-22-2013, 08:01 AM   #11
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Dropped mine about 10 years prior to ER. Even a Financial Advisor/Life Insurance salesperson said it did not make sense. She did say keep the LTD until I stop working.
Once you are FIRE and can retire anytime you want I don't see much sense to disability insurance unless one thinks one is at a much greater risk of becoming disabled than the general population and the DI is inexpensive.

I don't see what working has to do with it other than providing a basis from which to conclude one is disabled.
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Old 06-22-2013, 08:02 AM   #12
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> Did I overlook something?

I don't think so.

In our case, we had term life to provide a cushion if one (or both) of us died. We carried enough insurance to get the various kids through college.

Once we reached financial independence there was no reason to pay someone else for financial security - our assets can provide for our future.

To me, that's the definition of financial independence.
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Old 06-22-2013, 08:50 AM   #13
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What is your reason for wanting life insurance? We bought term life insurance when we were young and first bought our house. We only bought enough to cover the cost of the house. As our careers progressed and our salaries increased we dropped life insurance once we knew that each of us alone could cover basic expenses.
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Old 06-22-2013, 01:51 PM   #14
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When DH retired 3 years ago and I semi-retired we kept some life insurance on him to basically replace his SS until I would be FRA for SS. At the time I was mid-50s so not close to being eligible for even early SS. Over the 3 years we have reduced the coverage periodically as I get closer to SS age. Right now I am still a few years away from retirement SS but only a year away from being to take as a widow. We could have managed without the life insurance but I felt it made a smoother ride.

We are probably going to drop the remaining life insurance within the next couple of months since the current plan if I was a widow would be take survivors benefits (reduced) at age 60 and keep those until I was 70 then take my own (larger) age 70 benefit. So - given that - I don't see much need to keep the life insurance.
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Old 06-22-2013, 02:38 PM   #15
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The megacorp that I retired from has a free death benefit of a year's final salary life insurance. If I had died shortly after I retired, my beneficiaries would have received a full year of my final megacorp salary. This is a delining balance benefit that will bottom out at 1/2 of my final salary at megacorp. You have to read the fine print in the benefit manual to know that this is available. I have put a marked copy of this in my "if I should drop dead file".

It's nice to know it's there.
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Old 06-22-2013, 09:30 PM   #16
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We are using our term policies as bridge to SS FRA. Since pensions are our primary source of retirement funds the insurance will give surviving spouse financial flexibility. We didn't choose survivor benefits for either of our pensions, term insurance was a more cost effective way to provide what might be needed.
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Old 06-22-2013, 11:18 PM   #17
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Basically agree with others. Prob worth keeping some older universal/whole life policies for their (relatively) safe tax-advantaged increases in cash value. Term LI becomes rather useless once comfortably FI. Only real exception I have heard of is for ultra-high net worth folks using term LI in complex estate planning strategies. IIRC the logic is to help pay estate taxes.
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Old 06-23-2013, 11:29 AM   #18
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We only ever had term insurance. The amount peaked when our children were young, until they finished their education and left home.

We no longer have any life insurance except the small amount connected to my company pension.

We had no financial or tax planning reasons to continue the term policy when I retired early. So we cancelled it.
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Old 06-23-2013, 11:45 AM   #19
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Since there are no real Social Security survivorship options for Dual Income couples, there may be a place for life insurance in this case, especially if there will also be pensions involved that will be decreased upon the death of a spouse.

As my single friends often point out to me, in regards to tax brackets, the costs to maintain a house for one person,instead of two, does not decrease by 50%.

I guess it comes down to that it may depend if your are FI solely with liquid assets or if (so-called) secure income streams are part of your FI status.

-gauss

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Old 06-23-2013, 05:44 PM   #20
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Check to see what happens if one of you dies - this will affect SS benefits & maybe your pension. The cost of 2 people is less than 2x for one person.

ES Planner has a report of survivorship that shows what happens to your income if one spouse passes away - you can model it at different ages.
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