When to discontinue long term disability insurance

[beanctr88]

I have seen this discussed in quite some time and was interested in how others handled this. Currently, I am 6 years away from my planned worst case retirement date. If I lost my job today or something happened to the family Corp. I work for it is unlikely I would bother looking for a new job.

We could live on what we have saved now and have everything we really need and “some” fun money. We’d like to top it off over these next few years to have plenty of extra and a good bit to leave to our children. Our current agreement is I will stop working at the earlier of hitting our dollar target or me hitting 60. My wife has only had part time jobs when bored since the kids were born over 20 years ago.

Next year I hit another 5 year age band on our long term disability policy that will push the premiums to almost $5,000 per year. That seems to be reaching an unreasonable level, especially considering if I lost this job involuntarily that I would not be inclined to find another job to just work a few more years.

How long would you keep the LTD insurance in place? What have you personally done?

 

[SecondCor521]

Sounds like you already have answered your own question in your penultimate paragraph.

I never had LTD, neither through work nor through a private plan. Lots of reasons - it was expensive, I couldn't foresee a situation where I might need the benefit, I expected they would deny a claim, the benefits period and amount was limited, and probably most of all I had other resources to rely on that I thought would cover any potential issue.

From watching a bunch of residents at the CCRC where my Dad lives, it's my semi-informed observation that for nearly everyone the situation is self-limiting. If you're sick enough to require expensive care, you don't live long enough to spend much money on that care. It is almost always a matter of a few weeks to a few months; rarely is it ever over even a year.

The one exception to this rule of thumb is Alzheimer's patients, who can have bodies that live on in expensive memory care facilities for a long time after the brain is essentially gone. At some point I'll need to tell my kids to put me in the cheapest place they can find if that happens to me. I figure if my mind is gone I won't really care, and I'd rather them have the money. My Dad thinks similarly.

 

[beanctr88]

This is long term disability that replaces your salary if you were to have a heart attack or cancer or an accident and couldn’t work for a few months all the way up to retirement age. Not long term care that you seem to be discussing.

 

[Dtail]

I gave up my LTD when I retired, but at 5k yearly with your situation, would probably give it up now.

 

[SecondCor521]

This is long term disability that replaces your salary if you were to have a heart attack or cancer or an accident and couldn’t work for a few months all the way up to retirement age. Not long term care that you seem to be discussing.

Ah, you're right. Feel free to ignore the last two paragraphs of my reply as non-applicable as I was talking about LTC there.

The first two paragraphs do apply to LTD, though.

 

[daylatedollarshort]

We dropped long term disability when we became financially independent. And dropping the annual expense of the disability insurance helped us reach FI. Same with life insurance.

 

[Aerides]

I gave up my LTD when I retired, but at 5k yearly with your situation, would probably give it up now.

Yeah, this. I had LTD for 60% salary for a premium thru my MC. I think at the end I was paying $25 per paycheck? Our FA recommended we drop it when we were still 5+ years away from retiring, but I kept it for peace of mind.

I knew it was solid and reliable, and that HR would help me with any claims and issues, and the cost was not much. But $5k a year, and an independent policy...yeah I'd drop it.

 

[pacergal]

We dropped both our life insurance and short/long term disability when we were eligible to retire with our pensions, even though we kept working a few years after that.
We knew we'd be financially fine if something happened.

 

[COcheesehead]

I dropped all my disability at retirement. The insurance is intended to be a hedge for loss of your salary. I had other means once I retired. There was no salary to replace at that point. I also was only paying $1250/year. At $5000, I likely would have dropped it sooner.

 

[PaunchyPirate]

I also dropped mine upon my retirement 3 years ago. I was only paying $1350/year for myself.

 

[Al in Ohio]

I have seen this discussed in quite some time and was interested in how others handled this. Currently, I am 6 years away from my planned worst case retirement date. If I lost my job today or something happened to the family Corp. I work for it is unlikely I would bother looking for a new job.

We could live on what we have saved now and have everything we really need and “some” fun money. We’d like to top it off over these next few years to have plenty of extra and a good bit to leave to our children. Our current agreement is I will stop working at the earlier of hitting our dollar target or me hitting 60. My wife has only had part time jobs when bored since the kids were born over 20 years ago.

Next year I hit another 5 year age band on our long term disability policy that will push the premiums to almost $5,000 per year. That seems to be reaching an unreasonable level, especially considering if I lost this job involuntarily that I would not be inclined to find another job to just work a few more years.

How long would you keep the LTD insurance in place? What have you personally done?

The time is when you retire. Earlier if your employer has LTD insurance as a benefit. Subtract the number of employer provided LTD months from your retirement date.

 

[reneeh63]

Sounds like you already have answered your own question in your penultimate paragraph.

I never had LTD, neither through work nor through a private plan. Lots of reasons - it was expensive, I couldn't foresee a situation where I might need the benefit, I expected they would deny a claim, the benefits period and amount was limited, and probably most of all I had other resources to rely on that I thought would cover any potential issue.

From watching a bunch of residents at the CCRC where my Dad lives, it's my semi-informed observation that for nearly everyone the situation is self-limiting. If you're sick enough to require expensive care, you don't live long enough to spend much money on that care. It is almost always a matter of a few weeks to a few months; rarely is it ever over even a year.

The one exception to this rule of thumb is Alzheimer's patients, who can have bodies that live on in expensive memory care facilities for a long time after the brain is essentially gone. At some point I'll need to tell my kids to put me in the cheapest place they can find if that happens to me. I figure if my mind is gone I won't really care, and I'd rather them have the money. My Dad thinks similarly.

I understand your sentiment to not have money "wasted" on you if you have Alzheimers but if you go to the cheapest place you just might die of bone-deep bedsores or some other sepsis-type infection etc. that won't be pleasant at all so keep that in mind.

 

[Montecfo]

I had a supplemental group LTD policy most of my career.

It was not expensive. I discontinued when I retired.

I would have cut it earlier at that cost. You may have access to a group policy at work which would likely be much cheaper if you want to straddle the issue.

 

[beanctr88]

That is the group policy through work price. It just gets crazy high once you hit the 49 then 54, 5-year age bands. Before those levels it was much more reasonable. I get it, that’s when we all start getting cancers and heart issues that cause long-term periods of missed work.

I feel I would be better served just taking that weekly premium not paid and dollar cost averaging additional broad market index funds and self-insuring any risk of long-term disability. With my attitude of not ever wanting to work for another employer if my current job ended in any fashion, the more I think about it the less this policy makes sense to me.

After all, I’m FI right now by any reasonable calculation. I’d be fine with no job now. Just trying to be better than ok these next few years for extra fun in retirement, no market worries, and to leave a legacy for our kids and future grandkids.