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Old 06-18-2014, 06:56 AM
 
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
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Life insurance in retirement income planning | LifeHealthPro

Okay do not gloss over your eyes again. This is important information and many people can benefit from it. Life insurance is as we are all taught "Income Replacement", and what more important income replacement is there then for the very young and the very old. Yes it is important at all stages of life but the income protection is the key word here. If you are single and have no one depending on your income then it is a choice rather then a necessity.

But to the article it addresses Life Insurance in terms of replacing retirement income. You can read the article yourself but here it is in a nutshell.

A couple will generally have one person out live the other and in most cases the wife is left. If they are living on SS and some investment income and/or pension income as well circumstances might be that the pension income could stop all together or be cut in half or less. That could be a big loss and something that is difficult to manage.

One way to do this and it is an option many FERS employees i know opt to is a life insurance policy. It also goes well with anyone that receives a pension. Instead of an annuity this gives you a few more options to continue or not depending on need.

There are two ideas here. One that it be a level term, meaning that the bottom line stays the same as does the premium but for a specified length of time. This can provide a nice nest egg for heirs as well. The other is a decreasing benefit which can be a lower premium then the level term but as time goes on the benefit is reduced. This is a cost saving measure and should be considered as well. Both options are not free or cheap either but the consequences of not having a suitible plan can be just as costly and even more.

Yes the link is from an insurance publication so take only what they are explaining and try to apply it to your life. Do not think of it as selling anything as I didnt read in the piece that they are selling X or Y but just explaining the need and how insurance can fill that need.
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Old 06-18-2014, 03:21 PM
 
71,515 posts, read 71,694,121 times
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there are lots of uses for life insurance.

my wife and i are leaving everything to each other but being it is a 2nd marriage we do not want the kids to have to wait until we both are gone to get something. we each left our own kids a small policy.

life insurance swaps can take forever taxable ira money and turn it in to leveraged never taxed money.

it can be used to protect a spouse if only one spouse has a pension and it ends with them.
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Old 06-23-2014, 02:11 PM
 
Location: Florida -
8,763 posts, read 10,837,755 times
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Most pensions have options to include the spouse (for a significant decrease in the overall amount).

In our case, maxing-out my wife's pension (including subsequent COLAs) and backing it up with a Term Life policy, currently amounts to about a $15-$20K annual difference (versus a $4K+ annual insurance premium).... sort of a no-brainer.

A potential downside is that hers is only a 20-year plan, which ends at age 85, leaving me at 81. But, we also have additional back-up resources; including the fact that we are able to live quite comfortably without having to 'tap-into' my (not insignificant) deferred retirement account/s.
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Old 06-23-2014, 04:17 PM
 
Location: Northern panhandle WV
3,007 posts, read 2,169,984 times
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My husband has always worked for companies that had a LOT of life insurance. However I still bought a policy on him about 20 years ago, for 300k Just to be sure I always had insurance on him. He was healthy then. Now he has Parkinson's disease, and while he is valiantly still working and traveling a four hour round trip commute each day, trying to make it to FRA of 66 he is 64 now. He is deteriorating. When he does stop working we move to our cheap home in WV and we live on Social security alone. Now while he will receive the max benefit and I will recieve a portion of his, total comes to about 40K a year But if he dies that drops to about 29,500

So I need the live insurance.

It is going to be interesting going from a salary of about 145k to 40K and then to 29,500. That is if I outlive him, I have a lot of medical issues as well.

Anyway I am trying my best to hang onto that insurance.
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Old 06-23-2014, 07:29 PM
 
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I think tis even more important for younger workers with children that I have seen. I have see disasters when one died .But it can also be used to insure for single survivors.
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Old 06-25-2014, 02:13 AM
 
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if you are young and have many years to retirement and already funded a roth,ira or 401k with growth investments then a permanent lfe insurance policy can become a tax free source of safe money for income later on..

what you do is buy the insurance and over fund the premiums you pay. that money will compound over the years from the interest , have little fees taken out and can be borrowed out tax free decades later and never paid back .

you need to ask what the MEC level is and fund it with one dollar less or you lose the tax free status to heirs of the insurance policy. if you over fund a premium to much the irs says it becomes a modified endowment contract and not life insurance.

there is another benefit to this. a broker only gets commissions on the base amount not any over funding so most of the money stays intact. especially because you only pay mortality charges for the policy on the difference between your cash value and the death benefit.

when you over fund it like this the policy reaches the death benefit pretty quick and little fees are taken out.


folks this demonstrates just how little everyone knows ,go to any life insurance thread in any forum and you will see folks who comment on whole life who are clueless about its uses but will tell you it is silly to buy.

there are so many uses for it but folks being as ill-informed as they are run on only what they know and factor nothing about what they don't know.

the problem is the insurance industry tried to market these policies as some kind of investment .

they are not an investment , they are insurance geared for holding until death no matter what age and that is mostly where their value is. you are being charged for that purpose and a pay out is a given.

they are excellent at acting as tax sheltering vehicles on the money you make elsewhere INVESTING.

if you want a product for living buy an annuity .

like i said it is only when folks try to use a product designed for dying as a product for living that these are not usually a good choice. it isn't just your premiums that pay for these policies but it is decades of compounding interest going back in to supplement that premium.

by the time the death benefit reaches the cash value you paid in every penny through premiums,dividends and your interest reinvested and you are really self insuring at that point.

the endowment usually has the insurer mailing you back a check dead or a live of your money. usually you see that around age 100.

while not for everyone i certainly would never tell folks buy term and invest elsewhere without knowing their plan for the insurance or whether they have a use for the product.

Last edited by mathjak107; 06-25-2014 at 03:26 AM..
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Old 06-25-2014, 06:47 AM
 
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
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MJ great information.

I know people's eyes glaze over when someone mentions life insurance. We all love to hate the insurance agent. Before anyone assumes something I do not work for an insurance company, but I did take a broker's license exam and pass it. I never worked for them but I did learn some of what insurance is and what it is for.

Now the information MJ so graciously provided is news to me. I knew that there were other uses and reasons for life insurance. I like the over fund an investment insurance policy trick. Tax free investments are good as well as the safety of insurance in the unfortunate event of a death.

Going back to the original point here on my thread is that if you need to protect an income one way would be to take the stack of money in one pot or your only pot to use as an annuity or as a hedge to continue a payment of money in the even of a death. Yes sometimes it is not a good idea but everyone has a risk tolerance and insurance can be a vehicle that can settle the nerves so to speak.

So thanks MJ. I am glad for your input and your insite. Let's hope other people who need that advice at least look at all options.
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Old 06-26-2014, 02:06 AM
 
71,515 posts, read 71,694,121 times
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thanks..

one other thing i want to mention.

a new twist to whole life is a linked benefit policy. these are pretty good deals.

they combine whole life with a benefit that will pay the death benefit in advance for long term care .

these work in a very unique way.

to pick a number ,you can have 100k sitting in your safe money bucket in cd's or the bank at near 1%..

but instead you can buy a linked benefit policy that pays about 3% and instantly becomes a 200k death benefit for long term care payments.

the longer the time frame the more the payments can become above that 2x.

now the best part is at anytime after 2 years you can get your 100k back and kill the plan.

it is an amazing way to have longterm care and yet if you do not need it your heirs get the money.

it really is as close to taking the money out of your left pocket , the bank and putting it in your right pocket ,the plan.

the draw back is no inflation protection. but some coverage is far better than no coverage.

since odds are 75% of women need long term care and only 25% of men a good stratagy may be for the wife to take a full blown long term care policy while the husband runs with a linked benefit whole life policy.

in fact this would be my choice if for some reason long term care insurance will not take me because i am pre-diabetic.
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