How much do you need for a decent retirement? (1 Viewer)

[matttyl]

Well, some LTC carriers offered limited payment premium options (premiums only payable for 10 or 20 years and then the policy is “paid up”). Those options were 2-4x more expensive per year, but after those 10-20 years, you were done.

What I hated about these policies (selling them), is that there’s roughly a 75% shot it won’t pay you a penny back. And f you have a 90 day waiting period for benefits, only about 25% of people need LTC for longer than that. So for 75% of people it’s a total sunk cost. On the other hand I do have an ongoing claim now of over $1.2 last I looked. Over $300 per day for over a decade now (she had a stroke), and the policy has a “lifetime benefit”.

 

[matttyl]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Maybe, but with the uncertainty of if we'll need it and for how long, I think it makes more sense to have a slice of money invested for it and hope it ends up being enough if needed. I understand from your point of view, uncertainty = insurance. I just don't view it that way for LTC.

The issue with LTC is the unknown cost. You could need care for 3 months, or in the case I described above (or my own great grandmother), over a decade. That’s not cheap. Most people can “self insure”. But not all.

 

[matttyl]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

I think I was comparing more to paying for ltc out of pocket. I think. The thing with ltc insurance is that those early years when it is a bargain, you don't really need it as much b/c you have most of your retirement savings still. And the later years when you would need it more b/c the retirement funds are dwindling, you might have just been better off saving those premiums. Probably not easy to calculate though b/c there's no way to tell how much premiums will go up which is one of the things that really turns me off to ltc insurance. That and there's enough stories out there about difficulties collecting on your policy. At that point in your life, you're not even capable of fighting the insurance company so your kids are left doing it which is the last thing I want for them. Life insurance seems a lot more straightforward to me. Fixed premiums. I think no questions asked about collecting on it. I mean if you're dead, you're dead. And its more the inverse for when you need as it comes most in handy early on in the policy when you have no other savings to leave your family. There really is no alternative at that point.

Nursing homes and assisted living places take what you thought was enough and if you live long enough they take it all. My mother-in-law had $500K when she had her stroke and was broke before she croked. She lived another 15 years.

15 years and $500k? That’s less than $100 a day (without time value of money, though I doubt you’re investing it in this situation). A 15 year stay requires 7 figures minimum.

 

[JohnnyU]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

I think I was comparing more to paying for ltc out of pocket. I think. The thing with ltc insurance is that those early years when it is a bargain, you don't really need it as much b/c you have most of your retirement savings still. And the later years when you would need it more b/c the retirement funds are dwindling, you might have just been better off saving those premiums. Probably not easy to calculate though b/c there's no way to tell how much premiums will go up which is one of the things that really turns me off to ltc insurance. That and there's enough stories out there about difficulties collecting on your policy. At that point in your life, you're not even capable of fighting the insurance company so your kids are left doing it which is the last thing I want for them. Life insurance seems a lot more straightforward to me. Fixed premiums. I think no questions asked about collecting on it. I mean if you're dead, you're dead. And its more the inverse for when you need as it comes most in handy early on in the policy when you have no other savings to leave your family. There really is no alternative at that point.

Nursing homes and assisted living places take what you thought was enough and if you live long enough they take it all. My mother-in-law had $500K when she had her stroke and was broke before she croked. She lived another 15 years.

Yes @matttyl that was certainly sad.

 

[JohnnyU]

Other options for LTC are a deferred annuity and using your HSA.

Not sure an HSA is a great option, if only due to the limits on putting money into one. Let’s say you and wife are both covered by an appropriate health policy (HDHP), and you fully fund your HSA annually from 45-65. I understand that annual contribution limits change each year but let’s just say they are $8k a year. You also have to now assume that you’d be paying for all actually health expenses in those years out of pocket rather than out of the HSA to let it grow.

Sure in that case, if investing those HSA dollars, you could have a few hundred grand to pay for LTC expenses by either of you. But if you’re putting $8k away a year already, just buy an LTC insurance policy which would cost less (especially if starting at 45 in the above example) and would provide a few hundred thousand to each person, rather than that amount to share between the two (which won’t last long if both need it).

I'd rather go with my investing acumen than get an insurance policy. Sorry.

If you actually need the LTC for more than a year or two, there is no way you’re going to be able to invest well enough to offset that cost as well as a policy would do for the same $. The big question is if you’ll need the care, and for how long .

Isn't another factor the point in your life at which you'll need the care? I'd think that the longer before you need the care, the worse of a bargain ltc becomes. If you're getting the same amount of care at 70 that you're getting at 90, that's 20 additional years of premiums paid along with the lost opportunity cost that comes with that.

Well sure. Same with life insurance. If I make it to 90 my life policies weren’t much of a bargain. But it also meant I had a long life, and I’m ok with that.

I think I was comparing more to paying for ltc out of pocket. I think. The thing with ltc insurance is that those early years when it is a bargain, you don't really need it as much b/c you have most of your retirement savings still. And the later years when you would need it more b/c the retirement funds are dwindling, you might have just been better off saving those premiums. Probably not easy to calculate though b/c there's no way to tell how much premiums will go up which is one of the things that really turns me off to ltc insurance. That and there's enough stories out there about difficulties collecting on your policy. At that point in your life, you're not even capable of fighting the insurance company so your kids are left doing it which is the last thing I want for them. Life insurance seems a lot more straightforward to me. Fixed premiums. I think no questions asked about collecting on it. I mean if you're dead, you're dead. And its more the inverse for when you need as it comes most in handy early on in the policy when you have no other savings to leave your family. There really is no alternative at that point.

Nursing homes and assisted living places take what you thought was enough and if you live long enough they take it all. My mother-in-law had $500K when she had her stroke and was broke before she croked. She lived another 15 years.

15 years and $500k? That’s less than $100 a day (without time value of money, though I doubt you’re investing it in this situation). A 15 year stay requires 7 figures minimum.

Actually it was more than $500K because she was also getting social security. All in all ithe 500k lasted her about 12 years and after that the SS went to wherever she was living.

 

[Judge Smails]

Show me a life insurance or LTC policy of any kind that doesn’t skyrocket the last 20 years of an 85 year olds life and I’ll consider buying it. Never seen it. All are cheap until then.

Any whole life insurance policy. They are permanent with level premiums.

Term is cheap until 85. In fact most carriers won’t sell a person a term policy after age 65.

Yep. High premiums for a long time. Not a fan of Whole Life.

 

[matttyl]

Show me a life insurance or LTC policy of any kind that doesn’t skyrocket the last 20 years of an 85 year olds life and I’ll consider buying it. Never seen it. All are cheap until then.

Any whole life insurance policy. They are permanent with level premiums.

Term is cheap until 85. In fact most carriers won’t sell a person a term policy after age 65.

Yep. High premiums for a long time. Not a fan of Whole Life.

I get that. You just asked for a policy where the premiums don’t skyrocket. In fact you can have a whole life policy where the policy is “paid up” (no more premiums due) at 85 or any age you like really.

I understand that premiums are higher than term, it’s a situation of you get what you pay for. Term is cheap because only about 2-3% of them actually end up with a death claim. People generally outlive them or cancel the policy before the end of the term. Whole life policies (unless canceled by the insured) always end up paying a death claim as no one lives forever.

I could bore you with the details of my own policy. The basics are the premiums over what a term would have been have had a ROR of about 4% so far, but will soon be closer to 7% because had I bought a term when I first purchased my policy it would have expired and I’d need to get another. I just like the idea of going into retirement with a paid up permanent life policy that I know will go to spouse/kid so I can “free up” everything else - and have a liquid emergency fund I can use at any time.

 

[-OZ-]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

 

[jwb]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

Of course everyone is different but to me, this is the way it's supposed to work.

After 25 years my wife and I just cancelled ours. I'm 57 / her 61. 250k policy. No kids. When we took it out, it was to get the survivor to the next stage of their life without an immediate struggle. But back then, we were newly married, had maybe $5k between us, older cars, some old debt, and a house/mortgage with little-to-no equity.

Now we have lots of home equity, IRA's, decent bank accounts, zero debt, newer paid-off vehicles, etc. Either one of us would be fine money-wise. At our renew price, it made no sense. We bought a gym/aqua center membership instead for 1/6th the monthly premium.

 

[matttyl]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

But let me also give you a personal example - my own father. Retired about two years ago with more than enough to have a very, very nice retirement. Literally zero “traditional need” for any life insurance. He and mom are fine. Well, that’s what we thought until last Fall when we discovered his cancer is back. Stage 4, in his lungs. He’s doing amazing with his treatments (chemo), but we need to be realistic with the situation. Had he just had term while working, (and he did have some term) he’d have no coverage today.

 

[-OZ-]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

 

[NutterButter]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

With my dark humor, I tell my kids they have 2 more years to have me whacked if they want to collect. Right before my 49ed birthday will get them maximum payoff between life ins and inheritance.

 

[-OZ-]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

With my dark humor, I tell my kids they have 2 more years to have me whacked if they want to collect. Right before my 49ed birthday will get them maximum payoff between life ins and inheritance.

at least i get another 22 years!

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

 

[-OZ-]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

 

[-OZ-]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

And at least with the SBP, there is a cost of 6.5% of your benefit if memory serves (for the full benefit).

If your “federal civilian pension” is with FERS - same applies. When you retire you’ll need to pick between a full pension just for your lifetime (and have your spouse sign off that it’s cool with them), or take a reduced pension with a survivorship to your spouse (if married, this is the default choice). That deduction is 10% I believe, unless age difference is more than 5 years. Thats 10% of your pension that you'd be giving up to buy a life insurance policy. Depending on a whole lot of factors, you *may* be better off buying a life insurance policy and taking the full pension.

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

Added to reply above with FERS info.

 

[Judge Smails]

Somebody mentioned it above. How many of you are planning on helping your kids with down payments for a first home and how are you approaching it with retirement planning? We’ve helped our kids throughout. Paid for first car, college education, majority of wedding cost, seeded 529’s for grandkids, etc. But it is tough out there for young adults in high cost areas. Sure, they can move to a lower cost state (we’re in CA) but do we want them to? My other 2 kids (daughters) are about to start families and housing is a big issue. Decent apartment is $2500 here. Way more in certain areas. A house seems unattainable to them at current costs and interest rates. Many of their friends are choosing not to have kids because they don’t see how they can afford them, even with good jobs. Housing is the biggest factor.

My initial thought (and what I offered my kids) was a matching program. Started with I’ll match up to your first $25K saved. But thinking that’s not enough. I’d rather help them now vs later but don’t want to impact our own retirement too much. I have 3 kids so it would be 3X anything I plan on doing. (If I do $50K, $100K). Will be talking to my accountant next month. Worst case I can work a year longer than planned to fund it. At 4% withdrawal rate I’m looking at each $100K costing $4K a year in retirement income. $333 a month. How are you all thinking about this when looking at retirement? I know some are providing the full down payment and then working out how to get repaid down the road (when the house sales, etc). So do you plan to partner, outright gift or nothing at all?

 

[dgreen]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

And at least with the SBP, there is a cost of 6.5% of your benefit if memory serves (for the full benefit).

If your “federal civilian pension” is with FERS - same applies. When you retire you’ll need to pick between a full pension just for your lifetime (and have your spouse sign off that it’s cool with them), or take a reduced pension with a survivorship to your spouse (if married, this is the default choice). That deduction is 10% I believe, unless age difference is more than 5 years. Thats 10% of your pension that you'd be giving up to buy a life insurance policy. Depending on a whole lot of factors, you *may* be better off buying a life insurance policy and taking the full pension.

I hadn't thought of the survivor benefit that way, so it's an interesting consideration.

BTW, there's either a 5% or 10% reduction in exchange for either a 25% or 50% benefit.

 

[-OZ-]

Somebody mentioned it above. How many of you are planning on helping your kids with down payments for a first home and how are you approaching it with retirement planning? We’ve helped our kids throughout. Paid for first car, college education, majority of wedding cost, seeded 529’s for grandkids, etc. But it is tough out there for young adults in high cost areas. Sure, they can move to a lower cost state (we’re in CA) but do we want them to? My other 2 kids (daughters) are about to start families and housing is a big issue. Decent apartment is $2500 here. Way more in certain areas. A house seems unattainable to them at current costs and interest rates. Many of their friends are choosing not to have kids because they don’t see how they can afford them, even with good jobs. Housing is the biggest factor.

My initial thought (and what I offered my kids) was a matching program. Started with I’ll match up to your first $25K saved. But thinking that’s not enough. I’d rather help them now vs later but don’t want to impact our own retirement too much. I have 3 kids so it would be 3X anything I plan on doing. (If I do $50K, $100K). Will be talking to my accountant next month. Worst case I can work a year longer than planned to fund it. At 4% withdrawal rate I’m looking at each $100K costing $4K a year in retirement income. $333 a month. How are you all thinking about this when looking at retirement? I know some are providing the full down payment and then working out how to get repaid down the road (when the house sales, etc). So do you plan to partner, outright gift or nothing at all?

I like the idea of matching the down payment. We’ll See what we’re able to do when the times come. But like you said, anything we do is planned for each kid. I think a better way for us will be to have a certain amount we plan to give for whatever purpose. For one that might be their wedding, a down payment for another, a vehicle, or initial costs on a business. They won’t all have the same life sequence.

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

And at least with the SBP, there is a cost of 6.5% of your benefit if memory serves (for the full benefit).

If your “federal civilian pension” is with FERS - same applies. When you retire you’ll need to pick between a full pension just for your lifetime (and have your spouse sign off that it’s cool with them), or take a reduced pension with a survivorship to your spouse (if married, this is the default choice). That deduction is 10% I believe, unless age difference is more than 5 years. Thats 10% of your pension that you'd be giving up to buy a life insurance policy. Depending on a whole lot of factors, you *may* be better off buying a life insurance policy and taking the full pension.

I hadn't thought of the survivor benefit that way, so it's an interesting consideration.

BTW, there's either a 5% or 10% reduction in exchange for either a 25% or 50% benefit.

Different pension plans have different %s, but they are all generally based on the same actuarial tables. Your 10% reduction for a 50% benefit is close to my original example above of a 22% reduction for a full benefit.

Keep in mind that’s 50% of the *reduced* amount. So that’s $2,250 a month from the original $5k. Many people don’t realize this about their pension until it’s time to retire. Financially speaking the worst election you can make is a full survivorship option if you both end up living long lives - but that’s the default for most pensions if you’re married. You’re just buying a life insurance policy that very well may never pay anyone anything.

 

[dgreen]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

And at least with the SBP, there is a cost of 6.5% of your benefit if memory serves (for the full benefit).

If your “federal civilian pension” is with FERS - same applies. When you retire you’ll need to pick between a full pension just for your lifetime (and have your spouse sign off that it’s cool with them), or take a reduced pension with a survivorship to your spouse (if married, this is the default choice). That deduction is 10% I believe, unless age difference is more than 5 years. Thats 10% of your pension that you'd be giving up to buy a life insurance policy. Depending on a whole lot of factors, you *may* be better off buying a life insurance policy and taking the full pension.

I hadn't thought of the survivor benefit that way, so it's an interesting consideration.

BTW, there's either a 5% or 10% reduction in exchange for either a 25% or 50% benefit.

Different pension plans have different %s, but they are all generally based on the same actuarial tables. Your 10% reduction for a 50% benefit is close to mr original example but of a 22% reduction for a full benefit.

Keep in mind that’s 50% of the *reduced* amount. So that’s $2,250 a month from the original $5k. Many people don’t realize this about their pension until it’s time to retire. Financially speaking the worst election you can make is a full survivorship option if you both end uAp living long lives - but that’s the default for more pensions if you’re married. You’re just buying a life insurance policy that very well may never pay anyone anything.

FERS (and the old CSRS) is a % of the unreduced benefit.

 

[matttyl]

Well, that’s also the rub. I assume (correct me if I’m wrong) what you mean is that you’ve accumulated enough assets to not need the coverage (as you’ll have enough to leave to the next generation). You don’t really know that for sure, we’re hoping that we do. What if that was in 2000, or 2008, or 2022.

We also don't know what estate taxes will be in 2 years, much less 20-60 years. Currently, unless things change, in 2026 estate taxes will kick in at $5M per individual. Thats going to hit a lot of people hard.

With 5 kids, that $5 million isn’t going to be an issue.
We’re giving to our kids throughout their lives. Not worried at all about leaving them anything when we die.
For myself, we’ll make enough in pensions and SS to cover our living expenses and all have COLA. I do want to make sure if I die my wife has living expenses covered but that’s done without the life insurance after 70.
Term to 70 covers us well.

You've likely already heard this, or maybe you haven’t, but I do want to mention it if you haven’t looked - permanent life insurance can be used to maximize a pension. I do a lot of this with state employees here in Va.

Example - you hit age 65 with 30 years of service working for the state (and their retirement system). You’ve accumulated a pension of $5k a month let’s say. But you realize that if you die that pension ends and your spouse gets nothing. So you take a survivorship pension meaning it will be there for your life and your spouses life, until the second individual dies. Doing so, though, reduces your pension to 78% of it, assuming in this example both spouses are 65. That’s a reduction of $1,100. And it’s buying “life insurance” for the other spouse - with a benefit of $3,900 a month (adjusted for inflation) for their remaining lifetime. That could be a month, or 20+ years. It could also not happen if that spouse passes first. And that $1,100 reduction adds up to over $260k of pension reduction even without inflation, by age 85.

Just a thought if this applies to anyone.

That’s just the SBP for us.

Survivor benefit plan? Military?

Yes, and there’s a similar benefit for my federal civilian pension when that time comes.

And at least with the SBP, there is a cost of 6.5% of your benefit if memory serves (for the full benefit).

If your “federal civilian pension” is with FERS - same applies. When you retire you’ll need to pick between a full pension just for your lifetime (and have your spouse sign off that it’s cool with them), or take a reduced pension with a survivorship to your spouse (if married, this is the default choice). That deduction is 10% I believe, unless age difference is more than 5 years. Thats 10% of your pension that you'd be giving up to buy a life insurance policy. Depending on a whole lot of factors, you *may* be better off buying a life insurance policy and taking the full pension.

I hadn't thought of the survivor benefit that way, so it's an interesting consideration.

BTW, there's either a 5% or 10% reduction in exchange for either a 25% or 50% benefit.

Different pension plans have different %s, but they are all generally based on the same actuarial tables. Your 10% reduction for a 50% benefit is close to mr original example but of a 22% reduction for a full benefit.

Keep in mind that’s 50% of the *reduced* amount. So that’s $2,250 a month from the original $5k. Many people don’t realize this about their pension until it’s time to retire. Financially speaking the worst election you can make is a full survivorship option if you both end uAp living long lives - but that’s the default for more pensions if you’re married. You’re just buying a life insurance policy that very well may never pay anyone anything.

FERS (and the old CSRS) is a % of the unreduced benefit.

Interesting. That’s a little bonus that many pensions dont have.

Anyway, just becomes a math problem at that point. How much life insurance can you buy for that 10% reduction? Would that (tax free) amount be better than the 50% reduced (taxable) pension your survivor would receive? Obviously a lot of this depends on longevity. If your survivor outlives you by decades, the lump sum death benefit might run out. If they only outlive you by a few years, the lump sum death benefit may have been the better choice. Worst case would be if you outlive your survivor - you *may* be able to go back to your full unreduced amount, but all that you gave up (the 10% reduction in your example), you never get back. At least with a life policy you could just change the beneficiary (or cash in the surrender value).

 

[NutterButter]

Telling my kids that I'm giving them X dollars for whatever responsible thing they want to spend it on. It could be college, grad school, retirement, house. Its basically half the cost (I'm divorced so ex covering the other half of college) of what it could cost to go to the most expensive college. If they choose to blow it all on college, there's no promises there will be anything additional to help them at other points in life. If they make a more practical college choice, they'll have a good chunk left over for a house if they decide to use it for that purpose. I basically want to give them a good financial helping and leave it up to them to choose how they use it. In addition, I've always been a big fan of the kids staying at home for a few years after college, charging them some rent and then giving it back to them when they decide to get a house.

 

[JohnnyU]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

 

[-OZ-]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Congrats!

What will you be doing in retirement?

 

[JohnnyU]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Congrats!

What will you be doing in retirement?

Take my pool cue on the road. Oh wait, I forgot I am married. Swim, Fish, Travel, play pool, go to local colleges and pull their fire alarms and run.

 

[Nugget]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Congrats!

What will you be doing in retirement?

Take my pool cue on the road. Oh wait, I forgot I am married. Swim, Fish, Travel, play pool, go to local colleges and pull their fire alarms and run.

Congrats! You are a couple years ahead of me, but I am practicing shaking my fist at the clouds.

 

[JohnnyU]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Congrats!

What will you be doing in retirement?

Take my pool cue on the road. Oh wait, I forgot I am married. Swim, Fish, Travel, play pool, go to local colleges and pull their fire alarms and run.

Congrats! You are a couple years ahead of me, but I am practicing shaking my fist at the clouds.

I see young people doing that. You don’t have to be retired to do that, but then then again I’m talking about unemployed young folks.

 

[Gally]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Take it to the "I want to retire early" thread.

Congrats



(although, looking at the "40+ years in the work force" comment maybe the "retire early" thread isn't quite right either...hahahahah......good thing there is a "I want to retire soon" thread instead)

 

[JohnnyU]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

Take it to the "I want to retire early" thread.

Congrats



(although, looking at the "40+ years in the work force" comment maybe the "retire early" thread isn't quite right either...hahahahah......good thing there is a "I want to retire soon" thread instead)

Yes, not retiring early. I'm 65 already and will be 66 when I hang it up.

 

[IvanKaramazov]

had I bought a term when I first purchased my policy it would have expired and I’d need to get another.

There’s the rub. There comes a point where many of us don’t need life insurance.

Of course everyone is different but to me, this is the way it's supposed to work.

After 25 years my wife and I just cancelled ours. 57 and 61 respectively. 250k policy. No kids. When we took it out, it was to get the survivor to the next stage of their life without an immediate struggle. But back then, we were newly married, had maybe $5k between us, older cars, some old debt, and a house/mortgage with little-to-no equity.

Now we have lots of home equity, IRA's, decent bank accounts, zero debt, newer paid-off vehicles, etc. Either one of us would be fine money-wise. At our renew price, it made no sense. We bought a gym/aqua center membership instead for 1/6th the monthly premium.

We're a few years younger, but this is us exactly. We took out a similar-sized term policy about 20 years ago when we were in our early 30s and had young kids. If anything happened to me, we wanted to make sure their college was paid for and that my wife would be okay. Now our kids are done with school and my wife would be just fine financially if I wasn't around. I'm going to quit working in a few years anyway. What's the point of keeping a life insurance policy when you've already reached safety?

 

[IvanKaramazov]

Somebody mentioned it above. How many of you are planning on helping your kids with down payments for a first home and how are you approaching it with retirement planning? We’ve helped our kids throughout. Paid for first car, college education, majority of wedding cost, seeded 529’s for grandkids, etc. But it is tough out there for young adults in high cost areas. Sure, they can move to a lower cost state (we’re in CA) but do we want them to? My other 2 kids (daughters) are about to start families and housing is a big issue. Decent apartment is $2500 here. Way more in certain areas. A house seems unattainable to them at current costs and interest rates. Many of their friends are choosing not to have kids because they don’t see how they can afford them, even with good jobs. Housing is the biggest factor.

My initial thought (and what I offered my kids) was a matching program. Started with I’ll match up to your first $25K saved. But thinking that’s not enough. I’d rather help them now vs later but don’t want to impact our own retirement too much. I have 3 kids so it would be 3X anything I plan on doing. (If I do $50K, $100K). Will be talking to my accountant next month. Worst case I can work a year longer than planned to fund it. At 4% withdrawal rate I’m looking at each $100K costing $4K a year in retirement income. $333 a month. How are you all thinking about this when looking at retirement? I know some are providing the full down payment and then working out how to get repaid down the road (when the house sales, etc). So do you plan to partner, outright gift or nothing at all?

We will almost certainly help out with down payments, but we don't have a formal plan at this point yet. My son is just now (finally) shopping for an engagement ring, and my daughter is wrapping up her last year of college, so I have a little while yet. Fortunately, neither kid lives in a high-COL area, so "helping with a down payment" isn't going to be that bad.

 

[matttyl]

What's the point of keeping a life insurance policy when you've already reached safety?

As mentioned above, everyone’s situation is different, but (and these mainly apply to permanent policies, rather than term):

Potential estate taxes is one. We have no idea what they’ll be in two years, much less 40+ years from now.

Tax free income from the policy if needed. These last two years in the market has been great, but what if you retired in 2022? The S&P dropped roughly 25% in the first 3 quarters of your retirement. Yes of course you’d have been diversified, but that still hurts no matter who you are - you wouldn’t want to be drawing from your 401k a when the market is going down like that (sequence of return risk). Having an asset that’s not correlated to the market that has tax advantages would be a great alternative there. If markets are down and taxes are up, pre tax money is likely the last place you wanna draw from. Draw from other sources to allow your primary bucket to stabilize.

Pension maximizing. Just closed a policy for this earlier today. Wife is a teacher with a pension, retiring in a year or two. Rough figure is a pension for her life only (ends at her death) of about $5k a month. Husband wasn’t crazy about that as he’d get nothing if she pre-deceased him. So they could take a “joint and survivor” pension, but the $5k a month drops to around $4k. That’s $1k a month reduction is in effect buying a life policy that only pays if she dies first. Instead, they bought a life policy on her that’s far, far less than $1k a month that gives him a large tax free pot of money to live on if she dies first. If he dies first, she can either cash it in for its cash value, or change the beneficiary.

Long term care. Lots of policies now allow for tax free distributions (effectively from the death benefit) to pay for long term care while you’re still alive. These are pretty new, but can be set up pretty nicely if done right.

More efficient transfer of wealth to the next generation. I can leave my IRA/401k to my wife and all is good. But if she then passes and leaves it to our kid, they have to withdrawal all of both of ours in 10 years. That could happen during their peak earning years so they could be paying at a far higher tax rate than she and I are getting a deduction from now. HSAs are even worse (and I hope to have a 6 figure one at retirement). I’m of the mindset that you should primarily use assets/products for what they were designed for. I plan to use my retirement accounts for just that - retirement income; and life insurance for wealth transfer. It’s tax free with no strings attached.

 

[opensourcebeer]

What's the point of keeping a life insurance policy when you've already reached safety?

As mentioned above, everyone’s situation is different, but (and these mainly apply to permanent policies, rather than term):

Potential estate taxes is one. We have no idea what they’ll be in two years, much less 40+ years from now.

Tax free income from the policy if needed. These last two years in the market has been great, but what if you retired in 2022? The S&P dropped roughly 25% in the first 3 quarters of your retirement. Yes of course you’d have been diversified, but that still hurts no matter who you are - you wouldn’t want to be drawing from your 401k a when the market is going down like that (sequence of return risk). Having an asset that’s not correlated to the market that has tax advantages would be a great alternative there. If markets are down and taxes are up, pre tax money is likely the last place you wanna draw from. Draw from other sources to allow your primary bucket to stabilize.

Pension maximizing. Just closed a policy for this earlier today. Wife is a teacher with a pension, retiring in a year or two. Rough figure is a pension for her life only (ends at her death) of about $5k a month. Husband wasn’t crazy about that as he’d get nothing if she pre-deceased him. So they could take a “joint and survivor” pension, but the $5k a month drops to around $4k. That’s $1k a month reduction is in effect buying a life policy that only pays if she dies first. Instead, they bought a life policy on her that’s far, far less than $1k a month that gives him a large tax free pot of money to live on if she dies first. If he dies first, she can either cash it in for its cash value, or change the beneficiary.

Long term care. Lots of policies now allow for tax free distributions (effectively from the death benefit) to pay for long term care while you’re still alive. These are pretty new, but can be set up pretty nicely if done right.

More efficient transfer of wealth to the next generation. I can leave my IRA/401k to my wife and all is good. But if she then passes and leaves it to our kid, they have to withdrawal all of both of ours in 10 years. That could happen during their peak earning years so they could be paying at a far higher tax rate than she and I are getting a deduction from now. HSAs are even worse (and I hope to have a 6 figure one at retirement). I’m of the mindset that you should primarily use assets/products for what they were designed for. I plan to use my retirement accounts for just that - retirement income; and life insurance for wealth transfer. It’s tax free with no strings attached.

I just wanted to say 'Thanks' for the insight on pension maximizing. I'm in a similar situation with me having the pension and, up to now, planning on taking the joint and survivor option to make sure my spouse was taken care of.

 

[IvanKaramazov]

I am realizing now that I kind of lucked out with my pension. I am grandfathered into a much better system than what new hires are getting.

First of all, new hires have fixed retirement dates: early retirement at 62, regular at 65. I was hired under a "Rule of 85" system when I was 26, so I can retire on my 56th birthday. That's six extra years of retirement!

Second, my wife gets 60% of my benefits if I die first. Period. There is no opt-in or opt-out and no adjustment to my benefits. The state just gives me that. New employees have to choose whether they want survivor benefits at retirement, and their benefits get adjusted downward if they want the same level of survivor benefits that I get for free.

Needless to say, I was not thinking about any of this stuff when I was 26. I was just trying to figure out where the nearest restroom was located. But I'll take the dumb luck.

 

[dgreen]

I am realizing now that I kind of lucked out with my pension. I am grandfathered into a much better system than what new hires are getting.

First of all, new hires have fixed retirement dates: early retirement at 62, regular at 65. I was hired under a "Rule of 85" system when I was 26, so I can retire on my 56th birthday. That's six extra years of retirement!

Second, my wife gets 60% of my benefits if I die first. Period. There is no opt-in or opt-out and no adjustment to my benefits. The state just gives me that. New employees have to choose whether they want survivor benefits at retirement, and their benefits get adjusted downward if they want the same level of survivor benefits that I get for free.

Needless to say, I was not thinking about any of this stuff when I was 26. I was just trying to figure out where the nearest restroom was located. But I'll take the dumb luck.

Yeah, those are nice benefits.

With the Federal government, I only have 0.8% deducted each paycheck for my pension. Newer employees (since 2014) pay 4.4%. And they get the same benefits I do despite contributing quite a bit more.

 

[-OZ-]

I am realizing now that I kind of lucked out with my pension. I am grandfathered into a much better system than what new hires are getting.

First of all, new hires have fixed retirement dates: early retirement at 62, regular at 65. I was hired under a "Rule of 85" system when I was 26, so I can retire on my 56th birthday. That's six extra years of retirement!

Second, my wife gets 60% of my benefits if I die first. Period. There is no opt-in or opt-out and no adjustment to my benefits. The state just gives me that. New employees have to choose whether they want survivor benefits at retirement, and their benefits get adjusted downward if they want the same level of survivor benefits that I get for free.

Needless to say, I was not thinking about any of this stuff when I was 26. I was just trying to figure out where the nearest restroom was located. But I'll take the dumb luck.

Yeah, those are nice benefits.

With the Federal government, I only have 0.8% deducted each paycheck for my pension. Newer employees (since 2014) pay 4.4%. And they get the same benefits I do despite contributing quite a bit more.

2017 hire here. (Who knew FBG censored the middle finger?)

But my military pension and VA is quite nice.

 

[matttyl]

What's the point of keeping a life insurance policy when you've already reached safety?

As mentioned above, everyone’s situation is different, but (and these mainly apply to permanent policies, rather than term):

Potential estate taxes is one. We have no idea what they’ll be in two years, much less 40+ years from now.

Tax free income from the policy if needed. These last two years in the market has been great, but what if you retired in 2022? The S&P dropped roughly 25% in the first 3 quarters of your retirement. Yes of course you’d have been diversified, but that still hurts no matter who you are - you wouldn’t want to be drawing from your 401k a when the market is going down like that (sequence of return risk). Having an asset that’s not correlated to the market that has tax advantages would be a great alternative there. If markets are down and taxes are up, pre tax money is likely the last place you wanna draw from. Draw from other sources to allow your primary bucket to stabilize.

Pension maximizing. Just closed a policy for this earlier today. Wife is a teacher with a pension, retiring in a year or two. Rough figure is a pension for her life only (ends at her death) of about $5k a month. Husband wasn’t crazy about that as he’d get nothing if she pre-deceased him. So they could take a “joint and survivor” pension, but the $5k a month drops to around $4k. That’s $1k a month reduction is in effect buying a life policy that only pays if she dies first. Instead, they bought a life policy on her that’s far, far less than $1k a month that gives him a large tax free pot of money to live on if she dies first. If he dies first, she can either cash it in for its cash value, or change the beneficiary.

Long term care. Lots of policies now allow for tax free distributions (effectively from the death benefit) to pay for long term care while you’re still alive. These are pretty new, but can be set up pretty nicely if done right.

More efficient transfer of wealth to the next generation. I can leave my IRA/401k to my wife and all is good. But if she then passes and leaves it to our kid, they have to withdrawal all of both of ours in 10 years. That could happen during their peak earning years so they could be paying at a far higher tax rate than she and I are getting a deduction from now. HSAs are even worse (and I hope to have a 6 figure one at retirement). I’m of the mindset that you should primarily use assets/products for what they were designed for. I plan to use my retirement accounts for just that - retirement income; and life insurance for wealth transfer. It’s tax free with no strings attached.

I just wanted to say 'Thanks' for the insight on pension maximizing. I'm in a similar situation with me having the pension and, up to now, planning on taking the joint and survivor option to make sure my spouse was taken care of.

DM me if you wanna talk specifics. There can be a few things to be very aware of if doing this, and when best to do it.

 

[the moops]

I was hired under a "Rule of 85" system when I was 26, so I can retire on my 56th birthday. That's six extra years of retirement!

This is nice indeed. The school district I once taught at, and a neighboring town my dad taught at, had a rule of 90. I think that is fairly common these days. Anyway rule of 85 is way better

 

[the moops]

What's the point of keeping a life insurance policy when you've already reached safety?

As mentioned above, everyone’s situation is different, but (and these mainly apply to permanent policies, rather than term):

Potential estate taxes is one. We have no idea what they’ll be in two years, much less 40+ years from now.

Tax free income from the policy if needed. These last two years in the market has been great, but what if you retired in 2022? The S&P dropped roughly 25% in the first 3 quarters of your retirement. Yes of course you’d have been diversified, but that still hurts no matter who you are - you wouldn’t want to be drawing from your 401k a when the market is going down like that (sequence of return risk). Having an asset that’s not correlated to the market that has tax advantages would be a great alternative there. If markets are down and taxes are up, pre tax money is likely the last place you wanna draw from. Draw from other sources to allow your primary bucket to stabilize.

Pension maximizing. Just closed a policy for this earlier today. Wife is a teacher with a pension, retiring in a year or two. Rough figure is a pension for her life only (ends at her death) of about $5k a month. Husband wasn’t crazy about that as he’d get nothing if she pre-deceased him. So they could take a “joint and survivor” pension, but the $5k a month drops to around $4k. That’s $1k a month reduction is in effect buying a life policy that only pays if she dies first. Instead, they bought a life policy on her that’s far, far less than $1k a month that gives him a large tax free pot of money to live on if she dies first. If he dies first, she can either cash it in for its cash value, or change the beneficiary.

Long term care. Lots of policies now allow for tax free distributions (effectively from the death benefit) to pay for long term care while you’re still alive. These are pretty new, but can be set up pretty nicely if done right.

More efficient transfer of wealth to the next generation. I can leave my IRA/401k to my wife and all is good. But if she then passes and leaves it to our kid, they have to withdrawal all of both of ours in 10 years. That could happen during their peak earning years so they could be paying at a far higher tax rate than she and I are getting a deduction from now. HSAs are even worse (and I hope to have a 6 figure one at retirement). I’m of the mindset that you should primarily use assets/products for what they were designed for. I plan to use my retirement accounts for just that - retirement income; and life insurance for wealth transfer. It’s tax free with no strings attached.

I just wanted to say 'Thanks' for the insight on pension maximizing. I'm in a similar situation with me having the pension and, up to now, planning on taking the joint and survivor option to make sure my spouse was taken care of.

DM me if you wanna talk specifics. There can be a few things to be very aware of if doing this, and when best to do it.

@matttyl is an incredibly knowledgeable and kind fella. I spoke on the phone with him last year or so when my wife was changing jobs and we were unsure what health insurance plan to go with. I had messaged him many years ago about similar stuff so followed up and he immediately sent me his # and told me to call for it would be easier over the phone. Super kind and smart dude. Thanks again dude!!

 

[SFBayDuck]

You bastards and your pensions!

I mean, congratulations, very well deserved and I’m happy for all of you.

 

[matttyl]

What's the point of keeping a life insurance policy when you've already reached safety?

As mentioned above, everyone’s situation is different, but (and these mainly apply to permanent policies, rather than term):

Potential estate taxes is one. We have no idea what they’ll be in two years, much less 40+ years from now.

Tax free income from the policy if needed. These last two years in the market has been great, but what if you retired in 2022? The S&P dropped roughly 25% in the first 3 quarters of your retirement. Yes of course you’d have been diversified, but that still hurts no matter who you are - you wouldn’t want to be drawing from your 401k a when the market is going down like that (sequence of return risk). Having an asset that’s not correlated to the market that has tax advantages would be a great alternative there. If markets are down and taxes are up, pre tax money is likely the last place you wanna draw from. Draw from other sources to allow your primary bucket to stabilize.

Pension maximizing. Just closed a policy for this earlier today. Wife is a teacher with a pension, retiring in a year or two. Rough figure is a pension for her life only (ends at her death) of about $5k a month. Husband wasn’t crazy about that as he’d get nothing if she pre-deceased him. So they could take a “joint and survivor” pension, but the $5k a month drops to around $4k. That’s $1k a month reduction is in effect buying a life policy that only pays if she dies first. Instead, they bought a life policy on her that’s far, far less than $1k a month that gives him a large tax free pot of money to live on if she dies first. If he dies first, she can either cash it in for its cash value, or change the beneficiary.

Long term care. Lots of policies now allow for tax free distributions (effectively from the death benefit) to pay for long term care while you’re still alive. These are pretty new, but can be set up pretty nicely if done right.

More efficient transfer of wealth to the next generation. I can leave my IRA/401k to my wife and all is good. But if she then passes and leaves it to our kid, they have to withdrawal all of both of ours in 10 years. That could happen during their peak earning years so they could be paying at a far higher tax rate than she and I are getting a deduction from now. HSAs are even worse (and I hope to have a 6 figure one at retirement). I’m of the mindset that you should primarily use assets/products for what they were designed for. I plan to use my retirement accounts for just that - retirement income; and life insurance for wealth transfer. It’s tax free with no strings attached.

I just wanted to say 'Thanks' for the insight on pension maximizing. I'm in a similar situation with me having the pension and, up to now, planning on taking the joint and survivor option to make sure my spouse was taken care of.

DM me if you wanna talk specifics. There can be a few things to be very aware of if doing this, and when best to do it.

@matttyl is an incredibly knowledgeable and kind fella. I spoke on the phone with him last year or so when my wife was changing jobs and we were unsure what health insurance plan to go with. I had messaged him many years ago about similar stuff so followed up and he immediately sent me his # and told me to call for it would be easier over the phone. Super kind and smart dude. Thanks again dude!!

Thank you for your kind words. I know insurance can be very confusing, especially when “rules of thumb” don’t apply to your specific circumstances. I just try to help when and where I can.

 

[kupcho1]

I haven't read the entire thread, but if it hasn't already been stated, you should definitely put a budget spreadsheet together. I'd recommend:
Budget (3 tabs)

• baseline budget tab projecting costs for housing, transportation, medical (insurance cost, copays, etc.), food, discretionary (e.g., non-essential such as Netflix, travel), etc.
• actual budget tab where you track what you actually spend on each line item
• delta tab (i.e., budget - actual) to see how you're doing

Investments
tab that allows you to project out what your income (pension, SS) and investment earnings will be in the out years
my columns for this tab are

• age
• year
• income required (i.e., budget and don't forget taxes!)
• income (multiple columns for SS, pension, any other sources)
• shortfall (i.e., income required - total income)
• portfolio value beginning balance (1/1)
• portfolio value end balance (12/31) = (beginning balance - shortfall) x (1 + CAGR) where CAGR is your expected portfolio real rate of return

I also have tabs for cash flow (because I'm borderline maniacal about keeping the smallest possible balance in checking), medical (to track HSA spending and investment performance, plus keeping track of EOBs can be a nightmare) and taxes.

You'll need to make a whole host of assumptions, but I've found this to be a very effective way of managing retirement.

Let me know if I can assist should you (anyone) need help.

 

[the moops]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

So how much do you need for a decent retirement?

 

[Gally]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

So how much do you need for a decent retirement?

$5 Million

 

[the moops]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

So how much do you need for a decent retirement?

$5 Million

I gotta work until i die then

 

[Gally]

After 40+ years in the work force it hit me like a ton of bricks today and I decided I am going to retire in June. It will be strange for sure, but I’m ready. My wife and I ran the numbers and it’s time. I’m excited. I think back when I was young and you don’t see this moment in time ever getting here, but here I am. I’ll turn 66 next June.

So how much do you need for a decent retirement?

$5 Million

I gotta work until i die then

Maybe go with a slightly less than decent retirement.