Life insurance after kids graduate

[Anonymous]

I pay for extra life insurance but it’s getting more expensive as I age. Now that the kids are out of college and working, I’m thinking about cutting back. There is enough in my TSP to cover our mortgage and spouse has a pension plus TSP. I’d keep some life insurance but only the basic amount. Is there anything else I should consider?

[Anonymous]

I don’t understand. Didn’t you get term?

[Anonymous]

We got life insurance as a replacement of our salary if one of us died. Once the kids are out on their own, there is no reason for us to continue it.

[Anonymous]

If you can pay off the house, college costs are covered, and surviving spouse doesn't need to change their lifestyle without you there (without your income), no need to keep paying for insurance

[Anonymous]

It sounds like you’re a fed so assuming you’ve been employed for 10 years your spouse will be entitled to lifetime survivor’s benefits. It seems like that + TSP and basic life insurance plus spouse’s own income should be fine with kids already launched.

[Anonymous]

Random posters can't answer this question with no information about you. Whether or not kids are launched is only one factor to consider. In a nutshell you need to figure out whether your surviving spouse would be OK financially if you passed away. If you are the primary breadwinner and you have a big mortgage, probably not a good idea to drop it. If you are 60 and have millions saved for retirement, then that's a different story. Also, the fact that you are paying more each year suggests it is a workplace policy, which probably does not pay very much (like 1x salary).

[Anonymous]

We timed our latest term policy to end when youngest kid is 22. We don’t plan to renew after that as we have amassed enough savings that either of us would be fine if the other passed away.

[Anonymous]

Anonymous wrote:We got life insurance as a replacement of our salary if one of us died. Once the kids are out on their own, there is no reason for us to continue it.

Did you get scammed into a whole life policy? our thought process was similar , but we did term so there’s no real decision point.

[Anonymous]

How much is it a year and how long have you been paying it?

[Anonymous]

Get rid of the life insurance. You no longer need it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We got life insurance as a replacement of our salary if one of us died. Once the kids are out on their own, there is no reason for us to continue it.

Did you get scammed into a whole life policy? our thought process was similar , but we did term so there’s no real decision point.

No, we got term. I shouldn’t have said “continue”. More like we will not look to get new policy when term runs out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We got life insurance as a replacement of our salary if one of us died. Once the kids are out on their own, there is no reason for us to continue it.

Did you get scammed into a whole life policy? our thought process was similar , but we did term so there’s no real decision point.

Whole life isn't a scam...it's a decision to accept a guaranteed return vs. pay for term and just invest in the market.

I have calculated that I paid about $130k in premiums for a policy that now has a cash value of $370k. Starting two years ago, the dividends more than cover premiums so every year that I decide not to tap it, the cash value increases annually by about $20k for free.

I can borrow against the policy and never pay capital gains tax, and I never actually repay it.

Knowing how the market performed over the last 25 years, yes...I would be better off had I invested the annual premiums in an S&P fund. However, it looked like a pretty good decision from 2000 - 2010 when the market went down over that 10 year period.

[Anonymous]

But $370k is not probably not income replacement. That's another problem with whole life. The payouts are too small and the premiums too expensive. We each carry $2 million in term the premiums for which if we keep.them for 30 years would be less than half the whole life premiums on a 370 policy.

[Anonymous]

Anonymous wrote:But $370k is not probably not income replacement. That's another problem with whole life. The payouts are too small and the premiums too expensive. We each carry $2 million in term the premiums for which if we keep.them for 30 years would be less than half the whole life premiums on a 370 policy.

That’s the cash value…the life insurance is now at like $800k for this policy.

The point is that it’s both life insurance and a savings vehicle that has almost zero correlation to the stock market. And it’s completely tax free savings if withdrawn correctly. The return has been better than any alternative to stocks…much better than bonds. Just a way to diversify your portfolio and no different than a balanced investment portfolio.

We have term above that as well.

Variable Universal Life perhaps could be called a scam because if the market tanks then your premiums can jump a lot just to keep your policy. Those policies are tied to overall market performance.

[Anonymous]

We looked at our term as income replacement. We bought 20 year policies in our 40s. Our policies expire when I'm 62 and DH is 68, when we expect to be retired (or close enough to it), at which point we should have enough in 401k, pension, etc, to replace lost income through work. Our kids will be young adults, college taken care of with some cushion for life after college.