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Message
Life insurance
Posted on 9/3/23 at 1:17 pm
Posted on 9/3/23 at 1:17 pm
Upon retirement, I will have a fixed annuity for the rest of my life.
I can choose to have a surviving spouse receive a reduced annuity upon my death which would currently be about $3500/month (plus all shared assets). Hopefully I’m worth more than that alive.
In order for this survivor’s benefit to be in place, my retirement annuity would be reduced by about $700 per month.
So I’m trying to determine if there’s a life insurance policy that could give my surviving spouse at least the same minimum fixed monthly payouts with annual COLAs, but at a lower monthly rate than $700 per month.
Any suggestions or leads from the MoneyBoard?
Edited: tried calling Mutual of Omaha but they may not be available until Tuesday.
I can choose to have a surviving spouse receive a reduced annuity upon my death which would currently be about $3500/month (plus all shared assets). Hopefully I’m worth more than that alive.
In order for this survivor’s benefit to be in place, my retirement annuity would be reduced by about $700 per month.
So I’m trying to determine if there’s a life insurance policy that could give my surviving spouse at least the same minimum fixed monthly payouts with annual COLAs, but at a lower monthly rate than $700 per month.
Any suggestions or leads from the MoneyBoard?
Edited: tried calling Mutual of Omaha but they may not be available until Tuesday.
This post was edited on 9/3/23 at 3:10 pm
5
Posted on 9/3/23 at 6:05 pm to Willie Stroker
How old are you?
Your only retirement is an annuity?
Your only retirement is an annuity?
Posted on 9/3/23 at 7:01 pm to Willie Stroker
How old are you both, how many years of life are you planning for, do you expect your spouse to outlive you, and if so by how many years?
Every year you live "buys" you about 3 months of spousal insurance if you save the $700 yourself.
If you retire at 65 and live to 85, you buy your wife at least 48 months of $3500 a month just by putting the $700 ($168,000 over 20 years) in a jar. Invested for 20 years you probably buy her 8-10 at least.
If you retire at 65 and die at 67, then that's pretty bad.
So what's the premium on something like $250,000 10 year term life at 65?
Every year you live "buys" you about 3 months of spousal insurance if you save the $700 yourself.
If you retire at 65 and live to 85, you buy your wife at least 48 months of $3500 a month just by putting the $700 ($168,000 over 20 years) in a jar. Invested for 20 years you probably buy her 8-10 at least.
If you retire at 65 and die at 67, then that's pretty bad.
So what's the premium on something like $250,000 10 year term life at 65?
This post was edited on 9/3/23 at 7:03 pm
Posted on 9/3/23 at 10:52 pm to Huey Lewis
quote:
How old are you both, how many years of life are you planning for, do you expect your spouse to outlive you, and if so by how many years?
57 and 58, I expect to live to 120, depending on how much more screwed up society gets (may wish to go sooner), and she may outlive me by at least 5 years, though she could kill me sooner for various reasons other than my life insurance decisions.
Posted on 9/4/23 at 7:49 pm to Willie Stroker
I'm in a similar situation at age 64 and just applied for my pension benefit. The Life Annuity payment was about $4,300/mo. A 100% Joint benefit is $3,500/mo. An $800/mo reduction. I priced a $500M 20yr term policy and was quoted $443/mo. ($250M was quoted at $226/mo).
I projected out the total payments at various ages 75, 80,85, 90 and compared the total payout. I am in relatively good health and my parents both lived into their 90s. My concern was if I live past age 85 I have outlived the insurance benefit and threw away $443/mo. In my case I elected to just take the 100% joint benefit.
I projected out the total payments at various ages 75, 80,85, 90 and compared the total payout. I am in relatively good health and my parents both lived into their 90s. My concern was if I live past age 85 I have outlived the insurance benefit and threw away $443/mo. In my case I elected to just take the 100% joint benefit.
This post was edited on 9/4/23 at 7:54 pm
Posted on 9/4/23 at 10:21 pm to Willie Stroker
I'm sorry. This isn't pertinent to you.
But I bought a $250k permanent life insurance policy almost 8 years ago for this reason (currently 45 yo).
If I die before my wife, she loses a social security benefit.
AND I have a pension.
It just made sense to get permanent coverage for income replacement. And the plan is to max out my pension for sole benefit and cola adjustment option.
People who are in their 30s who are already maxing 401ks, etc.. could look to this as a quality benefit/plan.
But I bought a $250k permanent life insurance policy almost 8 years ago for this reason (currently 45 yo).
If I die before my wife, she loses a social security benefit.
AND I have a pension.
It just made sense to get permanent coverage for income replacement. And the plan is to max out my pension for sole benefit and cola adjustment option.
People who are in their 30s who are already maxing 401ks, etc.. could look to this as a quality benefit/plan.
Posted on 9/5/23 at 8:17 am to Willie Stroker
quote:
57 and 58, I expect to live to 120
An optimist will love longer
Posted on 9/5/23 at 10:52 am to CEB
I think this only works if you can get a universal life significantly below the $800. If you guarantee it past age 100, it becomes more expensive.
The big problem with term is that if you die soon after the expiration of the level period, the $$ that you save, plus reasonable earnings will not replace pension for your spouse.
We have a lot of permanent insurance that we bought early for income protection against an early death. Now we are getting too old for an early death, so we use the death benefit to allow us to take slight risks with our pension and annuity payments, i.e., taking larger amounts with reduced spousal benefit.
The big problem with term is that if you die soon after the expiration of the level period, the $$ that you save, plus reasonable earnings will not replace pension for your spouse.
We have a lot of permanent insurance that we bought early for income protection against an early death. Now we are getting too old for an early death, so we use the death benefit to allow us to take slight risks with our pension and annuity payments, i.e., taking larger amounts with reduced spousal benefit.
Posted on 9/5/23 at 11:31 am to Willie Stroker
quote:
57 and 58,
I don't know your health, but the problem with life insurance is that its very expensive once you get over 40. You really have to plan for it sooner.
Something to consider, is that if you pass you will be one less person additionally. For instance, if you have 2 vehicles you only need one.
I would highly recommend considering some sort of self insurance. Start saving. Insurance really should be for something you can not afford. You can afford to start saving now and plan for your death.
$700/ month is A LOT though. Contact some local insurance brokers and try and get a quote. I'd consider something in the $250k range and try to save/ invest some extra.
Posted on 9/5/23 at 11:40 am to CEB
quote:
I priced a $500M 20yr term policy and was quoted $443/mo. ($250M was quoted at $226/mo).
Holy shite, where can I get these bargains!
Posted on 9/5/23 at 11:55 am to meansonny
quote:
But I bought a $250k permanent life insurance policy almost 8 years ago for this reason (currently 45 yo).
Around that age I converted both of our term policies to a return of premium policy. Should we both live to the end of the policy they rerun everything you paid into the policy tax free. I think it’s 67 but we both collect our premiums and I think it’s a one time pay out of $87k for me and $74k for her.
Posted on 9/5/23 at 12:06 pm to Motownsix
quote:
Around that age I converted both of our term policies to a return of premium policy. Should we both live to the end of the policy they rerun everything you paid into the policy tax free. I think it’s 67 but we both collect our premiums and I think it’s a one time pay out of $87k for me and $74k for her.
How much coverage?
The premiums seem kind of high (maybe not if you have a lot of coverage).
87,000 ÷ 360 = $241/month.
My $250,000 permanent life policy costs me $275/month and is paid in full after 120 payments.
Posted on 9/5/23 at 12:34 pm to Willie Stroker
quote:
57 and 58, I expect to live to 120, depending on how much more screwed up society gets (may wish to go sooner), and she may outlive me by at least 5 years, though she could kill me sooner for various reasons other than my life insurance decisions.
Present Value of $3500/mth for 30 years @ 5% is $660k, and $703k for 35 years. Perhaps get quotes for $250k 10, 20, and 30 year term policies and purchase all three. The amount of insurance needed for income replacement typically goes down over time for obvious reasons, so no need for a $750k 30 year term policy.
Posted on 9/6/23 at 12:48 pm to meansonny
quote:
How much coverage? The premiums seem kind of high (maybe not if you have a lot of coverage). 87,000 ÷ 360 = $241/month. My $250,000 permanent life policy costs me $275/month and is paid in full after 120 payments.
It is very expensive for the amount of coverage. I want to say the price for the same protection without the return of premium benefit was like $87 a month.
The upside I guess is that you get it all back.
Posted on 9/6/23 at 1:12 pm to Motownsix
quote:
It is very expensive for the amount of coverage. I want to say the price for the same protection without the return of premium benefit was like $87 a month.
The upside I guess is that you get it all back.
How much coverage is it?
How long of a term is it?
(The shorter the length of the term, the better value you get for the high premium).
Posted on 9/6/23 at 2:53 pm to Willie Stroker
Google "pension maximization using permanent insurance".
As some have stated, there are a lot of factors to consider
As some have stated, there are a lot of factors to consider
Posted on 9/6/23 at 2:56 pm to meansonny
quote:
The shorter the length of the term, the better value you get for the high premium
Wrong! Insurance is more expensive relative to likelihood of use. The actuarial numbers are clear.
Posted on 9/6/23 at 5:07 pm to baldona
quote:
$700/ month is A LOT though. Contact some local insurance brokers and try and get a quote. I'd consider something in the $250k range and try to save/ invest some extra.
It is a lot, but if my spouse is living off $3500 per month, that comes out to $42k per year. She’ll get by with less. A $250k lump sum runs out at the rate of $3500 per month right around 6 years.
Her lifetime security may be worth $700 per month if she never has to worry about making a lump sum payout last an unknown lifetime.
Posted on 9/6/23 at 5:18 pm to Willie Stroker
quote:
It is a lot, but if my spouse is living off $3500 per month, that comes out to $42k per year. She’ll get by with less. A $250k lump sum runs out at the rate of $3500 per month right around 6 years. Her lifetime security may be worth $700 per month if she never has to worry about making a lump sum payout last an unknown lifetime.
They don’t just pull these numbers out of thin air. It’s not like one or the other is a steal for the average Joe - you really have to consider each of your health situations, family history, etc. Try to make an educated logical decision and not an emotional one as you weigh the options.
Will your wife have SS or some other income? Is the pension all either of you will have for retirement.
All of those things come into play.
This post was edited on 9/6/23 at 5:20 pm
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