Life insurance after retirement?

[pb4uski]

I got taken in by that when I was in my 20's. Not knowing any better I just went to the same agent my father used and got the shaft. Unknown to me at the time I had all the life insurance I needed free from my employer (one year's salary). I was single, no dependents, no debt, why do I need life insurance exceeding what the funeral would cost? ...

The primary reason for buying insurance at that age is to lock it in so if something happens and you can't get life insurance later in life when you need it you will have it. The whole life policy that I bought in my 20's had options for me to add additional insurance at standard prices without underwriting. Luckily, I never needed them.

Back to the OP's question, you probably don't need life insurance unless your wife would need the money to live in the lifestyle to which you are accustomed if you were to die.

Like OldShooter, I let all my term insurance lapse over 20 years ago once we had accumulated enough assets that if I were to die that DW and kids would be provided for.

I did keep that whole life policy that I was sold in my 20s. While I believe that buy term and invest the difference is preferable, the whole life policy hasn't done too bad. These days, I think of it as an interest bearing investment with no interest rate risk and negligible credit risk. It paid me 3.8% in the last policy year, and average of 4.9% since 1977, and if I were to die the tax free death benefit would result in a 7.3% after-tax return since 1977.

 

[38Chevy454]

If your spouse and/or other dependents would be OK financially after your death, life insurance is completely unnecessary IMHO.

This is how I look at it also. Life insurance is to cover expenses if you are gone. If expenses can be covered without life ins, no need to keep it in retirement.

 

[Sunset]

I have a $5K policy my mom & dad took out on me in the 1950s. It has paid me a minuscule annual dividend since I became an adult ... I'd cash it out, but it's only 5 grand. I figure it'll cover my "final expenses."

I think of it as my cradle-to-the-grave policy.

I had one of those as well, the interesting thing about mine was the life insurance policy turned into shares of the insurance company + the policy when they converted from (some special form of institution like Vanguard where the customers were in fact owners) into an regular insurance company.

The shares themselves which I ignored for a couple of years (long ago) blossomed into quite a nice tidy sum worth more than the face value of the life ins policy. I cashed them in and then cashed in the tiny life insurance policy for all the built up dividends it had.

 

[davebarnes]

I have never paid for life insurance.
Spouse made good money when we were both working for big corps.
Now, I am 69, and what is the point?
She will get my SS, my pension, and the $1+M IRAs.
Now, She is 60, and what is the point?
I will keep my SS, my pension, and the $1+M IRAs.

 

[redduck]

... Although I can afford it, I'm leaning towards canceling my policy since it's sole purpose will be to increase my children's inheritance.
Thoughts?

You say it like that's a bad thing.

You can't truly know what the world is going to be like in 20-40 years from now, or how your children might be doing financially when you die. That policy money might make a huge difference in their lives--or in the lives of your grandchildren.

I have kept my life insurance policy--the sole purpose now being to increase my children's inheritance.

 

[DEC-1982]

No. I can visualize some scenarios where this is useful for somebody, but that is not so for us.

 

[Luck_Club]

One of my guiding life principles has been to always make sure I am worth more alive than dead. No need to give out any unneeded motivations ..

+1
During my 40'S everyone around us was talking about how much life insurance they had. I was always under insured in their eyes. I would respond by saying, I didn't want to give DW too much incentive to knock me off!

 

[joeea]

When I had people depending on my income, I carried life insurance. That transferred the financial risk of my demise to the insurance company.

Now that we are financially independent with nobody depending on our incomes, we no longer need life insurance, so dropped it. Any money that would have gone to pay for insurance (and commissions) is invested.

 

[brucethebroker]

We are retired and do not have any life insurance. Typically you only want to purchase life insurance if you have an identifiable need.

Another way to look at it, if you have enough assets and income streams, you can self insure.

You are correct.

As a retired CLU (life insurance designation), my opinion is that life insurance for retirees (with significant assets) usually is only necessary if you are off-setting a pension reduction for the surviving spouse OR for payment of estate taxes to prevent survivors from selling assets to pay the taxes (family farm/business as examples) at your death. (Neither applies to me, so I no longer carry my policy, btw). (Death benefits are tax free (most of the time) so that can be a big plus for keeping a policy, but usually not worth continuing paying premiums).

 

[Danmar]

As part of my final divorce settlement, I agreed to buy a 10 year term life policy payable to the Xwife. Cost me about $7,500 per year. It expires next month and the premium went up to about $56,000 per year. Needless to say, I will not be continuing with this policy.

Seriously though, once you reach FI, life insurance usually not required, although as others have said, there may be valid estate planning or pension reasons to have it.

 

[45th Birthday]

This is what I did.

I do have a whole life policy that is paid for by the premium. I stopped paying on it as soon as I felt that my DW would not need the extra funds. From time to time I think about taking the cash value but I think it will help the inheritors with taxes, so I have let it go.

Pretty much in the same position here. I had large whole life policies put in place to fund a buy/sell agreement with a business partner. Once those businesses were sold, I converted the policies to fully paid status. The cash values and death benefits increase a bit each year. I have also looked at taking the cash value, but made the same decision to just leave them. I always like to keep a diversified portfolio of tax positions, and this is part of that. Even though the new tax law might lessen the pain of the death tax, it will still be there and these policies will cover some of it.

 

[meierlde]

This is what I did.

I do have a whole life policy that is paid for by the premium. I stopped paying on it as soon as I felt that my DW would not need the extra funds. From time to time I think about taking the cash value but I think it will help the inheritors with taxes, so I have let it go.

Note that there is one tax related reason for not cashing in a paid up policy which paid dividends. You would pay taxes on the difference between what you paid and what you got which in my case is several times the face value of the policy (On a policy that was from a mutual ins co). If you leave the paid up policy in place your beneficiary gets the money tax free.

 

[CRLLS]

Note that there is one tax related reason for not cashing in a paid up policy which paid dividends. You would pay taxes on the difference between what you paid and what you got which in my case is several times the face value of the policy (On a policy that was from a mutual ins co). If you leave the paid up policy in place your beneficiary gets the money tax free.

In the case where the spouse is the beneficiary, that's a 50/50 proposition. What if the beneficiary dies 1st? I'd make sure there is a secondary beneficiary.

To make things equitable for the survivor, whomever it might be, there should be a similar policy on the spouse too. Often this is not the case.

 

[Mr._Graybeard]

I had one of those as well, the interesting thing about mine was the life insurance policy turned into shares of the insurance company + the policy when they converted from (some special form of institution like Vanguard where the customers were in fact owners) into an regular insurance company.

The shares themselves which I ignored for a couple of years (long ago) blossomed into quite a nice tidy sum worth more than the face value of the life ins policy. I cashed them in and then cashed in the tiny life insurance policy for all the built up dividends it had.

Wow, that's great. My policy is through Guardian, which is a mutual company; perhaps my parents collected some shares out of it. I don't think my policy is worth more than a few thousand cash value, but I think I'll call the company and see if there is anything else I can wring out of it.

 

[Stormy Kromer]

My dad had a Universal Life Policy that he took out in 1984. I found the sales proposal, the projected interest at that time was around 12%. We know what happened to interest rates. He paid the premium for 31 years and it still almost collapsed. He was worried that he'd outlive the policy, he was only 4 months away when he passed.

It is my observation that most people reach a point where the biggest financial risk they have isn't dying, it's living a long time and requiring LTC.

I took the comprehensive & collision coverages off my car insurance when my car got older, I'm doing the same with myself....

 

[Scuba]

This post has made me think about life insurance. We don't have kids and neither of us has life insurance now. I have a pension I haven't started taking yet. I have options of single life, or 50%, 75% or 100% survivor benefits. I've never thought about taking the single life option and replacing the pension differential with a life insurance policy. Interesting idea. What is the easiest way to figure out the best option, recognizing that insurance premiums will increase over time?

 

[brucethebroker]

This post has made me think about life insurance. We don't have kids and neither of us has life insurance now. I have a pension I haven't started taking yet. I have options of single life, or 50%, 75% or 100% survivor benefits. I've never thought about taking the single life option and replacing the pension differential with a life insurance policy. Interesting idea. What is the easiest way to figure out the best option, recognizing that insurance premiums will increase over time?

If you contact a reputable life insurance agent they can help you with this. It is a common situation, and their sales or estate planning department can give you options. I would avoid universal life and term-go with a whole life policy. Met Life, NY life and Northwestern Mutual would be good, highly rated companies to consult.

 

[pb4uski]

This post has made me think about life insurance. We don't have kids and neither of us has life insurance now. I have a pension I haven't started taking yet. I have options of single life, or 50%, 75% or 100% survivor benefits. I've never thought about taking the single life option and replacing the pension differential with a life insurance policy. Interesting idea. What is the easiest way to figure out the best option, recognizing that insurance premiums will increase over time?

I looked into this a few years ago and ultimately decided to just accept the 100% survivorship option.

This was an interesting article: https://obliviousinvestor.com/laddering-life-insurance-policies/

Basically, the cost of a SPIA to replace your pension if you elect single life, or portion if you elect a survivorship pension less than 100%, declines as you age because there are less payments to be made. With this plan you would first try to get an idea of SPIA costs to replace at different periods in time and then buy a ladder of term policies with death benefits sufficient to fund those SPIA purchases.

One objection is that you can only buy term for a certain number of years. True but you coud buy a 30 year deferred annuity to replace the benefit for cheap if you wanted to cover that tail risk.

 

[pb4uski]

If you contact a reputable life insurance agent they can help you with this. It is a common situation, and their sales or estate planning department can give you options. I would avoid universal life and term-go with a whole life policy. Met Life, NY life and Northwestern Mutual would be good, highly rated companies to consult.

+1 on NML and NYL. I would also add Mass Mutual and Guradian to the list. I prefer the mutuals but if you are going to look at some stock companies MetLife is ok and I happen to like Minnesota Life as well.

 

[athena53]

I had one of those as well, the interesting thing about mine was the life insurance policy turned into shares of the insurance company + the policy when they converted from (some special form of institution like Vanguard where the customers were in fact owners) into an regular insurance company.

It's called "de-mutualization". I worked for a sub of Prudential and got some company stock when they went public.

Interesting twist on life insurance that I'd never heard of till a customer inquired about it (I was an actuary on the property-casualty side so not my area of expertise): second-to-die policies. They pay when the second spouse dies since that's when an estate would be subject to taxation.

 

[mistermike40]

You say it like that's a bad thing.

You can't truly know what the world is going to be like in 20-40 years from now, or how your children might be doing financially when you die. That policy money might make a huge difference in their lives--or in the lives of your grandchildren.

I have kept my life insurance policy--the sole purpose now being to increase my children's inheritance.

Leaving an inheritance isn't a bad thing, but how much is enough? My heirs will be fine... I suppose more money would be better, but they are both doing well on their own. And honestly... if I kept a $500K policy that wasn't cashed in for (hopefully) 35-40 years, split two ways... how much would that be worth in 2057 dollars? Will it make a significant difference for them?

If you really want to maximize improving your children's future, you should keep the policy *and* go back to work... continue to increase that nest egg for them

Again, how much is enough? It's not an easy question to answer.

 

[Trooper]

DW and I opted not to have life insurance during ER. Our rationale was: life insurance is mainly designed/intended to protect one's income while working. Since we were no longer working...

 

[Senator]

Other than what work provided for free, I have never had life insurance. No kids, no wife.

 

[rodi]

When I was single I never had any beyond what work provided for free. I remember after buying a house having lots of cold calls from insurance agents - pitching the idea that life insurance could pay off the house.

I would laugh and say I didn't need a paid off house when I was dead - my parents could sell my house and my cat would have to fend for herself. They didn't think it was funny.

When we had kids we both took out term big enough to cover the mortgage. We both had decent jobs and decent savings... so the survivor would be fine and be able to get the kids raised if the stress of the mortgage were removed from the picture.

We canceled the policy when the mortgage got under $50k. And I retired the next year after paying off the mortgage.

Kids college accounts are funded enough, we've got a paid off house... the survivor can lead a pretty comfy lifestyle. It would be different if either of us had significant pensions.

 

[CoolRich59]

As soon as I got to FI, one of the first things I did was cancel my life insurance policy.

Notwithstanding what insurance agents (and others) say, my view has always been that life insurance serves the simple purpose of replacing the lost income if I was to die prematurely.

Once we hit FI, that reason went away. So, I canceled the policy and redirected the amount of the monthly premium into my retirement account.