Life insurance questions

[cloud9nd]

I'm looking at life insurance now that we've been out of work about a year .

What makes sense for a couple with ages 44/55?

I'm wondering if SS won't payout until either is 62, would it make sense to get a larger plan?

I'm 44. Even if spouse makes it to 62 and if SS is available if anything happens I don't get to carry on benefits is my understanding.

And if it carries over by chance when I'm 62 I will only get 37.5% or something because of imitating at 62.

Technically i earned a higher wage in my career but it I don't have as many year earned. I don't have the 30 years. 5 years self-employed and now 1 year early retirement.

Any input is appreciated.

 

[Lewis Clark]

The main purposes of life insurance are to replace lost income when the policyholder dies, or to cover increased expenses (such as child care after the loss of a parent). If you have no income to replace, and foresee no increase in expenses, you may not need life insurance at all.

 

[cloud9nd]

The main purposes of life insurance are to replace lost income when the policyholder dies, or to cover increased expenses (such as child care after the loss of a parent). If you have no income to replace, and foresee no increase in expenses, you may not need life insurance at all.

Thank you.

Our financial plan is to live on an allotted amount for the next 6 years then SS kicks in if available. We do have a plan for other money to work for us out of annuities etc at that time as well, but we are planning on SS just not solely relying on it or counting on it.

I'm trying to ensure I can continue life on my path no matter what happens. So basically supplement the insurance payout in place or SS if anything happened.

 

[athena53]

The main purposes of life insurance are to replace lost income when the policyholder dies, or to cover increased expenses (such as child care after the loss of a parent). If you have no income to replace, and foresee no increase in expenses, you may not need life insurance at all.

I agree. I retired at 61, so was much older than the OP, and DH was 77 so had been retired for awhile. Our kids were launched and what we had in investments would have been enough to allow DH to live his remaining years as a dissolute playboy if I died first- so no need for it.

 

[OldShooter]

What problem are you trying to solve?

 

[euro]

Agree with the general tenor of the answers: likely you don't need an life insurance since you are not replacing any income. I maintained a company sponsored policy becasue it didn;t cost me anything, but when they stopped paying premiums after 6 years, I immediately cashed it in.

 

[cloud9nd]

What problem are you trying to solve?

Chances are spouse could die and I don't get the SS amount anymore that was coming in if it was there.

The insurance payout would cover that if it happened.

The problem would be possibly not enough funds at that point. I don't plan on working in the future I'm considering this as a way of planning not to.

 

[OldShooter]

I don't think very many people would consider life insurance to be a good substitute for retirement savings. One reason is that even straight term premiums get bigger and bigger as you age. Level premium term doesn't really help because all that means is that you are pre-paying those high premiums. Where will the funds to pay premiums come from? I would think that in order to retire at 44 you must have big retirement savings and hence not need to look at insurance at all. Right? Wrong?

 

[gauss]

The main purposes of life insurance are to replace lost income when the policyholder dies, or to cover increased expenses (such as child care after the loss of a parent). If you have no income to replace, and foresee no increase in expenses, you may not need life insurance at all.

Our current Social Security system is not really designed for dual income working couples. When one party of a marriage passes away, the survivor will only receive one SS check -- not both.

I have used group term LI from DW's former employer to purchase the maximum amount available on both of us to try to mitigate this situation.

We are not really trying to mitigate a risk (per se), but rather trying to smooth income over time.


-gauss

 

[Bamaman]

Our current Social Security system is not really designed for dual income working couples. When one party of a marriage passes away, they survivor will only receive one SS check -- not both.

Many people need to save more for retirement than they think they'll need in retirement--as a pad in case one of the spouses doesn't have a long life.

I'm in that position as my wife has a number of health and mobility issues.

Some may need to work longer and save more than they originally planned, especially if there's a wide variance in age of the spouses.

 

[athena53]

Chances are spouse could die and I don't get the SS amount anymore that was coming in if it was there.

The insurance payout would cover that if it happened.

The problem would be possibly not enough funds at that point. I don't plan on working in the future I'm considering this as a way of planning not to.

You'd mentioned that you didn't think you'd be getting that much SS because of your short work record even though it was high-income. First step is to quantify what you'd be getting at age 62. Would losing 1/3 of that (going from 150% of your SS to a 100% Survivor benefit) hurt either of you? If you think it will be bad enough that you want to buy life insurance for it, I think you need to build in COLA adjustments to get the full effect after SS age.

(Someone please verify or correct me- does the SS site build anticipated COLAs in when they tell you what you'll collect 18 years from now?)

So... you want life insurance to replace $X,000/year starting at age 62. I'd buy a joint policy on both of you that pays off when the first one dies. The face amount would be $X,000/.04, more or less.

That's a rough estimate. Only you can decide if it's worth the money.

 

[cloud9nd]

I don't think very many people would consider life insurance to be a good substitute for retirement savings. One reason is that even straight term premiums get bigger and bigger as you age. Level premium term doesn't really help because all that means is that you are pre-paying those high premiums. Where will the funds to pay premiums come from? I would think that in order to retire at 44 you must have big retirement savings and hence not need to look at insurance at all. Right? Wrong?

That's a good way of putting it.

If things go right. Yes. Our advisor has a nice plan for us. My career ended 12 years early so that changed a lot , but life is short and for now I'll take what's left of the American dream life. The system collapse will mess it up. For now we're certainly not high on the hog, but have a dream house and all other things like race cars etc are out of my life. It's just about making the best of what we have.

I also have a pension, IRA, small Roth that I could draw on at 55/ 59.5 if I have to.

Spouse has IRA we may touch in , 4 years based on planning, hopefully not necessity, because that will ease the drawing on the retirement account, and then mix in SS if available when it comes time.

 

[cloud9nd]

You'd mentioned that you didn't think you'd be getting that much SS because of your short work record even though it was high-income. First step is to quantify what you'd be getting at age 62. Would losing 1/3 of that (going from 150% of your SS to a 100% Survivor benefit) hurt either of you? If you think it will be bad enough that you want to buy life insurance for it, I think you need to build in COLA adjustments to get the full effect after SS age.

(Someone please verify or correct me- does the SS site build anticipated COLAs in when they tell you what you'll collect 18 years from now?)

So... you want life insurance to replace $X,000/year starting at age 62. I'd buy a joint policy on both of you that pays off when the first one dies. The face amount would be $X,000/.04, more or less.

That's a rough estimate. Only you can decide if it's worth the money.

This is interesting, Thank you.

 

[OldShooter]

... Our advisor has a nice plan for us. ...

Is that where this insurance idea is coming from? IF you do decided to buy insurance, it should be term insurance bought on line. Anyone trying to sell you something else is almost certainly not your friend.

... The system collapse will mess it up. ...

Really? How and when?

 

[cloud9nd]

Is that where this insurance idea is coming from? IF you do decided to buy insurance, it should be term insurance bought on line. Anyone trying to sell you something else is almost certainly not your friend.

Really? How and when?

No, it was my idea. Just an idea.

Idk, I just meant as time goes it gets worse and harder for middle class. Imo the future isn't bright, it was a throw away comment. Just my view.

 

[ivinsfan]

Just reading between the lines it sounds as if things are too tight for you to stop working. If you need more money it's much easier to earn it now then 10 years from now if something happens to your spouse.


Are you saying you only have 5 years of SS credits?



At any rate the younger spouse might well need to go look for a job now. Do you have some estimate of health costs and Medicare costs going forward?

 

[braumeister]

cloud9nd, I may have missed it but I don't recall you mentioning using FIRECalc. Have you done that, and if so, what was your result.

If you haven't done it, please use the link at the bottom of the page and read the instructions fully before trying it.

 

[OldShooter]

Just reading between the lines it sounds as if things are too tight for you to stop working. ...

That's been my thought too. @cloud9nd, you are probably looking ahead at 40 years or more of retirement. Longer than your working life to date. IMO if you are not sitting on at least seven figures of wisely invested portfolio value, you are in a dicey position. And, as you say, if things are significantly worse looking ahead, it might be very tough for you even with a large-looking portfolio.

Warranty: All opinions guaranteed worth price paid.

 

[Sunset]

OP - While you were self employed for 5 years... you contributed to SS or did you cheat on taxes and now realize it lowers your SS amount ?

If you "forgot" to pay SS, you can fix your tax returns and SS contributions.

SS is the best Annuity in Town, so perhaps you should plan on delaying collecting it until age 70 to maximize the amount.