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  • Jason Veirs
    replied




    Thank you LizOB and ajm184.

    We have two small kids. We are putting money in 529’s. However that is a good reason to have some cushion.

    I will also look in the employer based option and the tax ramifications.

    Lastly, how long should this separate policy be – 10 years, 15 or 20? I definitely don’t need it beyond 60, I assume.

    When do folks start ditching their life insurance policies if they are financially independent?
    Click to expand...


    You will definitely want to look into the tax ramifications, as the death benefit can sometimes become taxable if your Employer is paying the premiums - Usually the first $50k of coverage is not taxable (SEE ATTACHED NOTICE FROM PRINCIPAL). Much like a disability policy, if the Employer pays the premiums, then the benefits are typically taxable, whereas, if you're paying the premiums, then the benefits are typically tax-free. Please note that I'm obviously not a CPA, but this is a general rule.

    Also, if it's a group policy, then you will want to look at the "Cost Per Thousand" Rate Tables in order to determine the pricing increases for each age bracket, which usually take place every 5yrs (ie: ages 40-44, 45-49, etc.) - You should be able to obtain this from HR.

    In addition, if you're still healthy, then I would bet that a standalone Term policy would probably be less in cost than the potential increases on your group policy, but you would just have to run the numbers in order to make sure.

    Lastly, when it comes to determining your life insurance needs, you will want to consider what immediate and future obligations you have such as an outstanding mortgage, potential childcare costs, college tuition, and general living expenses, in addition to your existing assets, in order to determine the appropriate amount/length of coverage. Since every person's situation is unique, both the coverage lengths and face amounts will be different for each individual.

    Hope this helps!

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  • StarTrekDoc
    replied
    45 yo with two kids in HS

    Fully funded 529s

    We did 20year Term life and that's coming due in 3 years.  If they don't extend with minimal changes, will probably let expire since we've crossed the beach bum FI line.

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  • Neuro
    replied
    Thanks

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  • Neuro-doc
    replied




    When do folks start ditching their life insurance policies if they are financially independent?
    Click to expand...


    We are in our early fifties, have reached FI, and our kids are halfway through college.

    we will be dropping our term life this month. In retrospect, we should probably have dropped it 3 years ago.

    Leave a comment:


  • Neuro
    replied
    Thank you LizOB and ajm184.

    We have two small kids. We are putting money in 529's. However that is a good reason to have some cushion.

    I will also look in the employer based option and the tax ramifications.

    Lastly, how long should this separate policy be - 10 years, 15 or 20? I definitely don't need it beyond 60, I assume.

    When do folks start ditching their life insurance policies if they are financially independent?

    Leave a comment:


  • ajm184
    replied
    It seems to me that you should be concentrating you employer provided life insurance into the term part only versus a term/WL combo.  I would look at your options toward your existing CVLI (cash value life insurance).  Paying the premium with after tax money is actually a good feature imo, so if there is a claim, the payout is also after tax.

    As to needing additional life insurance, a 'rule of thumb' is 8 - 10 times a earners salary, so assuming you each make $225k/year, the range a term life insurance is 1.6 - 2 million for each person.  A 'rule of thumb' is not an absolute, rather a only a mental shortcut to use or ignore at your discretion.

    I would look into a separate level term life insurance policy to address any gap between your family's need and the term amount provided by your employer.

    Leave a comment:


  • LizOB
    replied
    Do you have kids? If so, you need to have enough insurance that if you both die the kids will be totally taken care of. Including college. Add up how much you think that may be and compare to current amounts.

    If you don't have kids it's less of an issue since you both work, so the surviving spouse would still be earning income to cover expenses, in addition to the life insurance. Sounds like you have enough for that, assuming one of you doesn't make a lot more than the other.

    Leave a comment:


  • Neuro
    started a topic Specific Life insurance question

    Specific Life insurance question

    I hope someone can help/ advice with this specific scenario.

    We are a double physician couple ( 42 and 40 years old) who have employer based life insurance policy ( combination of term and cash value) which is quite reasonable. The rate goes up 10% every time. We are on the hook for just the income tax on the premium - less than 500 dollars a year.

    I have a 1.6 million insurance with 125 K in cash value which is potable. I can also carry this insurance when I leave although I have to keep paying the premiums if I want to. My wife has a 1 million insurance with 50 K in cash value.

    We currently maximize all our retirement accounts and have a mortgage of 400K. We intend to pay that amount in the next 5 years. Our annual expenses are around 100 K and our average combined income is 450 K.

    Do we really need any additional insurance? I was initially planing on getting 1 million each for both me and my wife which would be less than 500 dollars a year. But I am having second thoughts given that we both work, area aggressively paying our debts and maximizing our retirement accounts.

    Thanks in advance

     
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