Random
Footballguy
Cool, thanks for this. Right now we are still in the information gathering phase, so this is good to know.
Fantasy Football - Footballguys Forums
This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!
Personal Finance Advice and Education! (1 Viewer)
- Thread starter No. 16
- Start date
matttyl
Footballguy
No problem. If there is one thing I can tell you/them - if you're going to pick the lump sum from them, or take the reduced amount/survivorhip benefit from them - be 110% sure that is exactly what they want to do, as they most likely won't be able to undo those choices later if they change their minds.
Random
Footballguy
Recent conversation with them indicates they are now leaning to keeping the pension (monthly payouts). I could not be happier about this decision.
matttyl
Footballguy
Which is great. Are they going to accept any survivorship benefit? Just the "straight pension" means that all payments stop if your mother were to pass away.
Random
Footballguy
matttyl
Footballguy
They may want to as soon as possible. Most spouses don't want their pension receiving spouse to not have some type of survivorship (unless there is a life policy in place). His retirement plan, should she no longer be around, likely includes some part of that pension. If they do that, all she's effectively done is purchased a rather expensive life insurance policy.
Random
Footballguy
Aside from paying off the house and deciding to retire, I'm not sure either has much of a retirement "plan". Good news is with a little budgeting they should each individually be able to comfortably live without the others benefits. My next project is to try to get a budget in place showing them this. From there they can decide between life insurance, survivor pension benefits, or neither.
ghostguy123
Footballguy
It seems like these situations are always either one or the other. Do any companies off some sort of split? In this case maybe something like $1,000 monthly with an immediate lump sum of 100 grand or whatever it would come out to be?
I am not sure how the survivorship works. I will have to look that up, though if someone gave me the basics on that I would appreciate it.
Random
Footballguy
Survivorship (as I understand it) she (retiree with pension) would basically accept reduced payments (from 1750 to 1550?) for 50%? of the benefits to continue after her death to her spouse until his death. I dont have the exact numbers in front of me.
Survivorship basically means the pensioner takes a reduced monthly amount, but if they pass before their spouse, the benefit continues for the spouse.
So, for example, if I were the one collecting the pension, I could either get something like $3,000 a month for my lifetime. If I die before my wife, she would not get anything additional, as payments stop at my death.
However, by taking the survivorship route, I would collect a payment of say $2,500 a month. If I die before my wife, she would continue to be paid $2,500 a month for her lifetime.
Obviously these numbers are made up to illustrate the point. I have seen some where there is a partial survivorship. For example, at my work, one can elect a 75% survivorship. The initial payment to the pensioner is higher, say $2,800 in the scenario above, but when I die, my wife's would then only get $2,100 a month for her lifetime.
matttyl
Footballguy
You can sorta do the first one - you take the full lump sum, say $200k, and you put half (or whatever) into something called a SPIA (single premium immediate annuity) which would generate income for either a set period of time (say 10 or 20 years), or for someone's lifetime, or for two people's lifetime, with possibly other payout options as well. The "rates" on these things are in the dumps right now because interest rates are so low. If you put $100k into one at age 65 for example, you may need to live another 20 years just to hit a breakeven.
As for survivorhip - a real world example (I do a lot of these in my line of work). Say you're 65 and retire with exactly a $2,000 per month pension. Your wife is 63. You can take the full pension of $2k a month for your remaining lifetime (which could be 1 year, it could be 40) and when that ends, so do the payments. Or you could take a reduced amount - at those ages of 65 and 63, you could take 76.3% (what the reduction would be for state employees where I live, pretty standardized tables) which would be 1,526/m for your lifetime and if anything ever happened to you, your wife would continue to get 1,526/m for the rest of her life. You could also do a 75% or 50% survivorshiop where your reduction wouldn't be as large, but any benefit paid to your survivor would be smaller.
What you've effectively done, though, in my above example is purchased a life insurance policy that cost $474/m, or ~5,700 a year (and growing with inflation). It's also ONLY payable if that specific survivor that you claim outlives you. If they live to 87, and you 90, you've reduced your pension by probably close to $150k over those 20 years and done absolutely nothing with it.
Last edited by a moderator:
Sand
Footballguy
And Fidelity has local branches, so if you're close enough you can walk in with a checkbook and come out with a funded account. I've dealt with both places and much prefer the online design and functionality that Fidelity has. For me it was an easy choice, though Vanguard is the other (IMO) superb place to put money.
ghostguy123
Footballguy
Yeah, sounds like surivorship is highly individualized then just based on the health of you and your spouse, age of your spouse (is she 25? is she 65?), family history, etc...........................
Good info, thanks.
Good info, thanks.
Last edited by a moderator:
matttyl
Footballguy
Yeah, if you've been given 2 years to live due to some health issue, you take the largest survivorship option available. If the spouse has that situation, you take your full pension without any survivorship benefits selected. I'm going on the assumption that both the retiree and their spouse have no reason to think they won't live long lives, and are relatively close in age at the time. For most folks in that situation, a traditional life insurance policy would be the best way to go.
matttyl
Footballguy
Likely different from plan to plan. Typically the original survivor is the only one you're allowed to have. If they predecease you, you can go back to your full pension, but any reduction you've had is simply lost.
The reason you can't later take another survivor makes sense, though. Say I'm 85 without a spouse and have a large pension. I just found out I have stage 4 cancer. What's stopping me from electing a survivorship option with some friend (same sex or otherwise, now)?
matttyl
Footballguy
Some of those stories were fascinating. Towards the end of the War, they didn't take attendance, and the South would take anyone willing. I've heard stories were guys who said they found had to describe the battle to "prove" they were a part of it in order to get a pension.
Anyway, just read some of the bylaws of the pension plans to state employees here. It's very, very restrictive in your ability to change anything after your initial choices are made. So much so that if your survivor wishes to give up their survivorship benefit (while you're both still alive), they have to prove good health. That way if they get diagnosed with something terminal, you can't immediately go back to your full pension amount. You would have to wait till they pass away.
Bob Sacamano
Footballguy
Random
Footballguy
Ok, so thinking about all of this life ins stuff, I went looking for ours. I was the one that had the 15/mo and my wifes is 10/mo. Well, as it turns out, those were 10yr 150K term policies. And they expire next year. So my question is this. At what point is life ins not necessary? I mean, we have substantially more assets than we did 10 years ago, so getting another 150K policy seems prohibitive (I'm sure the cost is much more now @ 38/40 yrs old). Though I do have about 2yrs salary through work (obviously thats only good as long as I'm there).matttyl said:
Is it ever a good (smart) choice to forego life insurance?
Last edited by a moderator:
IMO, as long as you have a mortgage and/or dependent children living at home, you will want some form of life insurance to cover those expenses should you die and your income is lost.
If you have no children still dependent on you, no mortgage/major debt and your loved ones could survive without your income (ie you have plenty of assets saved), then you likely do not need life insurance.
I think it was mentioned earlier in this thread, but you are much more likely at this age to become disabled and unable to work, so it likely is more important to have adequate disability insurance, especially if you don't have coverage through your work. With life insurance, you have to die for your family to collect, if you are disabled and have no coverage, then it is a burden on your family to provide care for you.
matttyl
Footballguy
Answered by someone else just above, but as long as someone is still dependent on your income, you'll still need (or want to have) coverage. If you died today, how long could your wife continue her standard of living? Any kids? Are their colleges fully funded?
So yeah, why do you think those policies were $15 or $10 a month? They were only providing $150k, and only for 10 years, and for a couple who were likely healthy and 28 and 30 when they took them out. I'd take that bet (assuming I could take a few hundred or thousand other similar bets to cover myself)! Both of you make it to next year (which is extremely likely), that's $3k you'll never get back. That may not seem like a whole lot of money, but what did it do for you? And now you'll likely want to do it all again, and those policies will be even more expensive.
Also, if much of your "assets" are in retirement type funds, and you pass away at 38 (I'm assuming you're the 38 year old), and your wife is 40 - she'd be both taxed AND penalized to touch that money before age 59 1/2.
Random
Footballguy
Ok, I'll address each question so there's a more complete picture. First, I'm the 40yo. She actually makes more at her job than I do at mine. 2 kids (8 and 3), a small college fund for each we only contributed to for 1 year (not currently contributing). Fully fund Roth IRAs, fully fund HSA, 401K (8% +4% match), and she is a teacher with a pension. And we have a decent number of rental properties that will be paid off before the Term Life policy expires. We have yet to use any of the rental property income in our personal lives (all goes to paying off the loan/purchasing more).
Your 2nd paragraph actually sounds like you're arguing against purchasing the policies again. Yes, we paid $3K for the 10 years of coverage (which is why I'm questioning buying this again - likely at 2 or 3 times the cost). At the time, we were planning on having our mortgage paid off by now, but we purchased the investment properties instead.
Yes we have retirement assets, but thats not really what I'm referring to. More so the rentals (she could sell them and net 10+ years of my day job income, if I were to pass, or keep them and net more than my day job income annually). I suppose I could do the same if she were to pass.
matttyl
Footballguy
With kids those ages, I can't see a situation in which you wouldn't still need coverage. If either of you were to pass away, would the survivor go back to work the next day - or would there be a substantial period of time (due to the two kids of that age) that you would lose both incomes?
My second paragraph was in a way saying that maybe some permanent coverage would have been the better choice for both of you 10 years ago rather than just 10 year term which you'll likely want to replace with more expensive term next year. It should have at least been considered, in my opinion. (having said that, I fully understand that $15 and $10/m premiums are very hard to say no to).
I don't know anything about the rental real estate you're talking about, but what if one of you passed when the real estate market is in a downturn? Think of your 3 streams of income right now as a 3-legged bar stool. What would happen if one of those stream (stool legs) were to suddenly end? What if a second one had to end for a period of time as well due to the circumstances? Would those ROTHs still be fully funded each year? What about the HSA and the 401(k). Her pension down the road would go away. Just saying lots of things would likely change if anything happened to any of those streams, much less two of them.
My second paragraph was in a way saying that maybe some permanent coverage would have been the better choice for both of you 10 years ago rather than just 10 year term which you'll likely want to replace with more expensive term next year. It should have at least been considered, in my opinion. (having said that, I fully understand that $15 and $10/m premiums are very hard to say no to).
I don't know anything about the rental real estate you're talking about, but what if one of you passed when the real estate market is in a downturn? Think of your 3 streams of income right now as a 3-legged bar stool. What would happen if one of those stream (stool legs) were to suddenly end? What if a second one had to end for a period of time as well due to the circumstances? Would those ROTHs still be fully funded each year? What about the HSA and the 401(k). Her pension down the road would go away. Just saying lots of things would likely change if anything happened to any of those streams, much less two of them.
Last edited by a moderator:
Random
Footballguy
You're starting to sound a little like a salesman. So can you give me a generic quote on 38yo female, 40yo male? On whatever term and amount you think we should get?
I do have life ins coverage worth about 2yrs salary through work (obviously thats only good as long as I'm there). Not sure what she has through work.
Last edited by a moderator:
matttyl
Footballguy
Sorry, I try not to sound too much like a salesman, but it's what I do. Please PM me with some details and we'll go from there.
dino259
Footballguy
What about the premiums he paid for house insurance? What did that get him since his house didn't burn down?
I have enjoyed the discussion about life insurance as I have looked at this and have consulted with a friend who looked into the wealth building path at one time. There are absolutely benefits to both sides. You seem to be slipping into salesman mode. You can't ignore the insurance coverage side of the term policy. There is peace of mind being insured in case something happened.
Random
Footballguy
What details? Probably not going to pm anything I wont post here. A generic (range) is fine.
Last edited by a moderator:
matttyl
Footballguy
Well of course there is, and a huge one. Again, I try not to slip into salesman mode too much, but as I said before I'm just a believer in permanent coverage. It's not just homeowners insurance that does that - it's every type of insurance, other than permanent (whole) life insurance. Health insurance when you don't get sick? Money lost as well. I just like the idea of being able to call the carrier up in 10 or 20 years after I don't die and ask for my money back. Or have the ability to continue the coverage at the exact same unchanged rate, there is value to that as well.
ETA - for comparison, a 30 year old (his age when he got his current policy) could have had a really, really nice whole life policy of 150k for ~1,500 a year. 10 years into the deal (where we are now), he'd have 13,575 of cash value. So, would it have been worth it for him to have spent an extra 13,200 in premium to have 13,575 of cash today (we'll call that a wash), and have the ability to continue with 150k of coverage indefinitely for the same 1,500 a year? Lets say he can get another 10 year term for the same ~180 a year he's paying now - in 10 more years he'd have put in 3,600 into that policy and have nothing to show for it then other than the coverage he's had the past 20 years. The whole life policy at that point has needed exactly 30,000 of premium (26,400 more than the term) and it would have 41,400 of cash value (which is exactly 4.5% on the difference, non-taxable), and a death benefit of over 180k. It would also have that coverage continuing at age 51 without him having to buy yet another term policy at that time should he need to, at whatever health level he happens to be then.
Last edited by a moderator:
matttyl
Footballguy
Was going to ask about health related stuff. I really hate to just generically quote "best health rating" as when we look at the "cheapo term carriers" only like 10% of applications get that rating. Everyone thinks they are fully health with zero issues, but that's honestly rarely the case. The last two really big applications I submitted, the folks said there was no reason they wouldn't get the best class (both mid 60's) - both were declined (pending additional information/testing/screening).
Random
Footballguy
matttyl
Footballguy
Just something really, really quick. I quoted $250k for each of you, and did so at "select preferred non tobacco" (or some similar equivalent from different carriers). I did this for two reason - 1) most carriers have a breakpoint there and 250k may actually cost the same or less than 200k, and 2) anyone with two kids of those ages really should have twice that, especially an FBG. I also did 20 year terms, which aren't that much more than 10 year for folks of your age as neither 10 or 20 years gets you anywhere close to average life expectancy for semi-healthy folks.
For you, 250k of 20 year term would be 22-25/m (a few carriers fell in that range). She would be in the 18-21/m range. These are also based out of my state of Virginia, so your state could be slightly different.
Random
Footballguy
Thank you. 250K seems like plenty (neither of us are very high income earners). 20-25/mo seems very reasonable as well. Again, thanks for running those numbers. I'll touch base with my ins guy in the hopes we are close to this.
matttyl
Footballguy
No problem. I'd just hate for you to think that 150 or 200k was all that's "needed", when a break point at 250k might not be that much more if anything each month. Let me know if you have any other questions, happy to help.
Chadstroma
Footballguy
@matttylInsurance and taxes are my two big blinds spots in personal finance.
So, in as much as life insurance goes. When an employer offers basic life insurance for free (I think it is a year's worth of salary) and then offers more that you pay for (multiplier of salary). In general, is this a good, bad or neutral thing? I mean, are you getting a discount (generally speaking) versus contacting an agent and getting a policy on your own?
So, in as much as life insurance goes. When an employer offers basic life insurance for free (I think it is a year's worth of salary) and then offers more that you pay for (multiplier of salary). In general, is this a good, bad or neutral thing? I mean, are you getting a discount (generally speaking) versus contacting an agent and getting a policy on your own?
matttyl
Footballguy
No, not at all. Generally, those policies are "guaranteed issue" - meaning that anyone working for that company can get it without answering any medical questions. What happens is all the unhealthy folks flock right to it. Now, the company may pay a portion of that additional charge, but most don't. If you're healthy, young, and a non-smoker, you can typically do much better on your own. Moreover, you don't have to worry about losing the coverage because you change jobs or the company cuts back on benefits.
Think of it like auto insurance - some company out there says that will give coverage to anyone without asking about driving record or anything. All the folks with DUIs and multiple tickets will flock right to it. If you've got a decent driving record, you can do much better shopping for yourself. Same idea here.
Chadstroma
Footballguy
Makes absolute sense.
What about the accident/dismemberment offered through the company as well? You wouldn't have the same dynamic as above. Is that a good idea? Cost advantage?
matttyl
Footballguy
It still can't hurt to check. My company offers incredible rates on life insurance. I have some through them and some through a private term policy I got through Met Life.
matttyl
Footballguy
Can depend on the company (you work for) and the carriers offering the plans. If you're young, and you work for a young company (average age of employee) the rates can be very low. Keep in mind, though, that the majority of those plans have "age banded" life rates - means that you (making up numbers here) might be paying $10 a month for an extra x2 salary addition at age 30, but at age 40 it could be $30 a month, and at age 50 $60 a month. The rates aren't "locked in" like they would be for the duration of a term policy.
Chadstroma
Footballguy
matttyl
Footballguy
Depends on the rates - but if you already have life insurance of an appropriate amount (which pays no matter how you pass away), why buy this that would only pay if you pass away in a very specific way?Accidential Death and Dismemberment Insurance.
Chadstroma
Footballguy
FUBAR
Footballguy
Chadstroma
Footballguy
My guess is that the cost is less than life insurance and then it also has the extra protection of being a supplement to long term disability insurance in that if I lost an arm- I would get paid out.
Or something.
Like I said.... insurance and taxes are blind spots for me. I really don't know and haven't put the time/effort into knowing. As I get older (hitting 40 next year) I have started (key there is started... basically, I had the thought "Hey, I need to learn more about insurance and get some") to think about insurance. Other than that.... I don't know.
I also have to spend time looking for new home/auto coverage too. Was not happy with Allstate with my major accident a couple of years ago and I am sure I can get less expensive coverage as well.
Or something.
Like I said.... insurance and taxes are blind spots for me. I really don't know and haven't put the time/effort into knowing. As I get older (hitting 40 next year) I have started (key there is started... basically, I had the thought "Hey, I need to learn more about insurance and get some") to think about insurance. Other than that.... I don't know.
I also have to spend time looking for new home/auto coverage too. Was not happy with Allstate with my major accident a couple of years ago and I am sure I can get less expensive coverage as well.
wilked
Footballguy
Here's a good movie that dissects most of what you are interested in
http://m.imdb.com/title/tt0117998/
http://m.imdb.com/title/tt0117998/
NutterButter
Footballguy
Dark question, but does your family still collect life insurance if you kill yourself? I always thought that wasn't the case
matttyl
Footballguy
Suicide is only excluded on the majority of policies for the first 24 months. After that, it wouldn't matter for the claim. Carriers believe that one can not contemplate taking their own life more than 2 years in the future, but it has happened (not with any of my clients).
One that has come up more often (more and more recently, tragically) is "act of war". That's excluded on most policies as well. It was originally there years ago in case the guy was drafted or something, "war" meaning the military connotation - but the question was raised by quite a few carriers after 9/11, and in other terrorist actions since. For the most part, though, a carrier doesn't want to be in the news for not paying a claim after the policy holder was killed by some religious fanatic.
Last edited by a moderator:
Did seem like his plan....I think the two years were up sometime this month. However, looks like he was posting last night
Last edited by a moderator:
Rick James
Footballguy
Any idea if LIBOR is going to stay low for the next few years?
Wife has 118k in student loan debt at an average rate of 7.5%. We can get a lower rate through SoFi (3.99 fixed or 2.94 variable, both 5-year). Lower when I co-sign. Any projections for LIBOR?
Wife has 118k in student loan debt at an average rate of 7.5%. We can get a lower rate through SoFi (3.99 fixed or 2.94 variable, both 5-year). Lower when I co-sign. Any projections for LIBOR?
Similar threads
