Life insurance

[Raymond01]

I am recently retired, DW is retired as well.

If you have a large enough nest egg that would provide enough income for your spouse assuming a 4% withdrawal rate, is there any reason to have life insurance? I have run my numbers through several online life insurance calculators and they say that I do not need it.

 

[pb4uski]

No, unless you have an estate tax situation that you are using life insurance to cover. Keep in mind though that if something happens to you (or her) that there will be a reduction in your SS income for the lower of your two checks.

We have dropped all of our life insurance long ago other than a small whole life policy that I bought in my early 20s that pays a good rate of interest on the cash value.

 

[2B]

What is the purpose of life insurance in your situation? If you can provide for yourself or DW if the other one died, why pay for life insurance? It provides no benefit other than an opportunity to gamble with the insurance company on an early death for you.

If you have no income, I suspect most insurance companies will be hesitant to write a term policy on either of you. They would suspect a secret knowledge about your health you aren't disclosing. You could buy whole life but why?

 

[Big_Hitter]

^ Agreed. I bought a $1M whole life policy 15 years ago but that was when I was 15 years younger and wanted to make sure DW (who was retired then) could carry on adequately


it has a really nice csv now though and is almost paid up

 

[RetireAge50]

When I retire I will be getting a pension for the 11 years between age 51 and 62. If I choose single life it is $1,504/mo. If I chooses 100% joint with spouse it is $1,350/mo.

I might choose single life and buy a 10 year $125,000 term policy (about $25/mo).

If it were not for that I would have no need for insurance.

 

[braumeister]

I bought a $1M whole life policy 15 years ago

That's the case for a friend of mine. He spends nearly all his pension and SS every year (although he could live on less), but he wants to leave a decent legacy to his kids (who get along fine but would definitely appreciate it).

For DW and me, there's no need for insurance since either one of us would be fine financially without the other. Anything left over goes to our favorite charities.

 

[Big_Hitter]

We don't have any kids (so yes, next question is why am I not yet FIRED?) but if she predeceases me I'll leave it to my sisters.

 

[2B]

^ Agreed. I bought a $1M whole life policy 15 years ago but that was when I was 15 years younger and wanted to make sure DW (who was retired then) could carry on adequately


it has a really nice csv now though and is almost paid up

We have had numerous threads on whether it was worth holding on to an old whole life policy. In general, the consensus has been negative except in the rare case where there is a substantial above market minimum interest rate or you are "near" death anyway. Being "paid up" is really not significant. If your health is bad or you're really old, keep it. If the minimum interest rate is high, keep it. Otherwise, the math would generally support cashing it in.

 

[Raymond01]

Thanks for the input so far.

I have chosen a pension with a single life annuity. If I pass, she will receive nothing. Originally I was going to purchase a term policy that would give her enough money to replace half of my monthly payment. But that's when I started thinking why do I need it with the size of my nest egg? Any more thoughts?

 

[pb4uski]

How about you assume that you die today and run firecalc without your pension and see what the result is for your DW?

 

[mickeyd]

I have run my numbers through several online life insurance calculators
and they say that I do not need it.

Would an online computer lie to you? Your numbers and your gut are probably correct.

 

[Raymond01]

How about you assume that you die today and run firecalc without your pension and see what the result is for your DW?

Good call. I ran thru FireCalc with the update budget and no pension, and it told me this:
For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 13 cycles failed, for a success rate of 87.5%.

 

[braumeister]

Good!
Now use the "Investigate" tab to find the highest spending rate you could support in that scenario. Then decide whether you're OK, or need to modify something to get under that spending rate.

 

[samclem]

Thanks for the input so far.

I have chosen a pension with a single life annuity. If I pass, she will receive nothing. Originally I was going to purchase a term policy that would give her enough money to replace half of my monthly payment. But that's when I started thinking why do I need it with the size of my nest egg? Any more thoughts?

Every relationship is different, but I'd suggest you have a thorough discussion with her about all of this, since she's got a lot more at stake than anyone here. She's already not going to benefit from your pension. Is >she< comfortable with the way the numbers work out if you predecease her (including changes in SS benefits, etc)? Is she comfortable investing to get that 4%? Are her estimates of monthly expenses (incl health care) the same as the assumptions you've made?

 

[Badger]

I have a couple of small whole life policies from Mass Mutual my father took out on me when I was just a young whipersnapper. The dividends keep the policy in force, add a little extra insurance and give me a few dollars cash each year so there is no cost to me.

After I retired I no longer had life insurance through work and didn't see the need to buy any. There will be enough money left to take care of my wife and later the kids (grown with kids of their own) after I "buy the farm".

For me additional life insurance would be a waste of money. We are comfortable enough, have simple needs, and have simple wants so I stopped worrying about money. There is no point for us to have life insurance.

Cheers!

 

[Raymond01]

Every relationship is different, but I'd suggest you have a thorough discussion with her about all of this, since she's got a lot more at stake than anyone here. She's already not going to benefit from your pension. Is >she< comfortable with the way the numbers work out if you predecease her (including changes in SS benefits, etc)? Is she comfortable investing to get that 4%? Are her estimates of monthly expenses (incl health care) the same as the assumptions you've made?

These are very good questions and points. And yes, I am having the discussion with her as we go thru this.

 

[Raymond01]

Good!
Now use the "Investigate" tab to find the highest spending rate you could support in that scenario. Then decide whether you're OK, or need to modify something to get under that spending rate.

Thanks for pointing this out, I had not even used the "Investigate" tab before. Very helpful.

 

[Raymond01]

Is there a straightforward calculator somewhere that would tell me her Soc Security benefits if I were to die tomorrow?

 

[Loving Life]

Well, when I decided to retire early (55) with a very large sum (mid 7 figures), I ran the numbers for my lovely bride and she said - sounds good, but I want a 7 figure life insurance policy - (end up with 750K) - Although I have since returned to work overseas after 2 years, I will keep the insurance in force to make her happy - I know it makes no economic sense, but you know, happy wife. I am now on my second job(2nd 2 year contract), and just turned 60 - living/working in So. East Asia really enjoying life - just sitting in my office drinking my morning coffee. Some times you just need to do it.

 

[meierlde]

Another possiblity with an old whole life policy is convert it to a paid up policy. The policy should tell you what it would be worth. Being 64 I have one policy that will be paid up at 65, so will pay that year, but will convert my paid up at 85 policy to a paid up policy. (Difference in face amount is like 2k)

 

[traineeinvestor]

I cancelled mine before I FIRE'd.

If there is enough money to support the family while I am alive then by definition, there is enough to support them after I am gone*. Keeping it was just an unnecessary expense.

* There is no estate duty either where I live or in my country of citizenship.

 

[pb4uski]

Is there a straightforward calculator somewhere that would tell me her Soc Security benefits if I were to die tomorrow?

I believe that she would get the higher of her benefits based on her work record, or your benefit.

 

[pb4uski]

Just saw this today. Haven't read it yet but is seems on point to the discussion.

Tax Planning for Widowhood (or Widowerhood)

 

[walkinwood]

The program ESPlanner has a feature that helps determine survivorship finances. Try it - and it may help. I've found ESPlanner to be better for comparing two scenarios than for getting absolute numbers.