Join Early Retirement Today
Thread Tools Search this Thread Display Modes
401K Beneficiaries vs. Term Life Insurance
Old 09-26-2016, 09:01 AM   #1
Full time employment: Posting here.
EvrClrx311's Avatar
Join Date: Feb 2012
Posts: 598
401K Beneficiaries vs. Term Life Insurance

I may be getting ahead of myself here, but I like to plan and am trying to make sure my thought process here is on track (appreciate any feedback on what I may be missing)

I've maintained a term life insurance policy since having children that would cover all their expenses and education through college, and I have also diligently set aside 25% of my pay towards my 401K since I started working in my early 20's... my life insurance policy is over in about 5 years, which will be about the point my children enter teenage years. So I'm considering extending it another 5-10 years, except I noticed that my 401K is now approaching half the value of the payout... and I expect in about 5-10 years for it to be comparable to the size of the life insurance policy.

Is it appropriate to consider the beneficiary designation (to a trust my family maintains with the understanding it's to provide for my children - which is the same designation of the life insurance as well) to be sufficient. Another variable worth mentioning here is that I'm divorced which is why the money isn't going directly to kids while they are still minors.

Basically, is it overkill to have both life insurance and a 401k going to my kids... when one or the other would be sufficient? Where I'm going with this is that it seems smart to reduce the amount of life insurance based on the current size of the 401k replacing some of it's value.

EvrClrx311 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-26-2016, 09:08 AM   #2
Thinks s/he gets paid by the post
CaliKid's Avatar
Join Date: Apr 2016
Location: Cali
Posts: 1,020
Definitely pay the life insurance and 401k to your trust. Once the kids are mature adults (not just 18) then change the 401k to direct beneficiary to them. The problem is paying a retirement account to a trust can eliminate the option of a stretch. So once the kids are old enough to make the stretch election, should you die, then you would name the kids as the direct bene. For life insurance no reason to name the kids directly ever as there are no income tax consequences either way so just pay it to your trust.

As for maintaining the life insurance I'd probably get a 10 year term now or when that policy runs out. In case you die prematurely you want your kids to have more than enough money to get through college and get a head start on life I assume. Consider changing policies now rather than waiting for the term to end. You'd be amazed that prices sometimes go down as you get older depending on how the insurance company prices mortality, your health, etc.... It's free to check into it!

To clarify the trust should be YOUR trust. The way you phrased it wasn't clear if it is your own trust or not.

Hoping to get out around September 1, 2022... I hope, I hope, I hope. Until then off to work I go....
CaliKid is online now   Reply With Quote
Old 09-26-2016, 09:08 AM   #3
Full time employment: Posting here.
kaudrey's Avatar
Join Date: Feb 2006
Location: Alexandria, Va
Posts: 997
Yes, it is overkill, assuming your goal is just to provide expenses until they are through college. If you want to leave them additional $$, then having both is fine.
Two roads diverged in a wood, and I - I took the one less travelled by...
kaudrey is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Estate planning question- 401k and IRA beneficiaries jIMOh Young Dreamers 8 05-18-2014 11:14 AM
Long-term Care Insurance and Life Insurance thatgirlmjl Young Dreamers 15 01-20-2012 12:24 PM
Will/trust disbursement wrt TODs/beneficiaries RunningBum FIRE and Money 3 01-12-2010 01:17 AM
Your accounts will pass to your account beneficiaries regardless of your will JustCurious FIRE and Money 21 03-22-2008 04:35 AM
Naming Beneficiaries JohnDoe FIRE and Money 6 07-02-2007 04:41 PM

» Quick Links

All times are GMT -6. The time now is 09:42 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.