Frugal Confessions said:

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

 

It depends. But, I'm 27 and my wifeis 28 and we both have 1 million dollar term policies.  Why?  Because we both make a substantial income and if one of us was to die suddenly I want to make sure our future dreams can be carried out.

We are similar to YFS. We have term policies right now that we will eventually eliminate. We also make good incomes and want to make sure things are covered for the future.

Cut any intermediates out. Despite being an advisor, it is provable that advisors know nothing about the unknowable future that nobody else really knows about, as well. The problem with listening to advisors is that they will tend to recommend funds that pay them in some manner. Your costs go up and your returns go down. If you have any beliefs that advisors or brokers actually know anything, then the Bergstress, Tufano, and Chalmers study is well worth reading and can save you a lot of money over your life. Their careful study demonstrates that brokers add no value and just increase costs. I maintain a permanent link to it here on one of my websites: "Costs and Benefits of Brokers"

Finally, on the topic of Roth accounts, only a relatively small portion of the population would benefit from Roth contributions compared to "traditional" retirement contributions, when the traditional contributions would have reduced their currently taxable income. The Roth versus traditional analysis is one of the most complex financial planning decisions, because the payback justification depends on how one lives one's financial life. Furthermore, there are multi-generational considerations, as well, for those most likely to benefit.

I have written a bunch of articles on the Roth decision. Start with this one: Roth IRA Retirement Planning and then look at the bottom of this article for links to a other articles on this subject. Most people should maximize current tax reductions rather than make Roth contributions.

Also, I remember that Jeff Rose published some good Roth articles a year or so ago. Click on this Good Financial Cents site in his signature above block and search his site for "Roth."

Hope this helps.

Thanks for the response. It is something to think about; on the other hand, we are pretty low key and low maintenance (not to say you guys aren't), so I guess I just can't see us needing that unless we wanted to be "set for life", you know? I think it is very caring though that you guys want each other to have the best and to still realize your dreams in the event of the horrible happening.

On a side note--I see you are in D.C. I love that city!!!

________________________________________

YourFinancesSimplified said:

Frugal Confessions said:

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

 

It depends. But, I'm 27 and my wifeis 28 and we both have 1 million dollar term policies.  Why?  Because we both make a substantial income and if one of us was to die suddenly I want to make sure our future dreams can be carried out.

Frugal Confessions said:

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

It depends. But, I'm 27 and my wifeis 28 and we both have 1 million dollar term policies.  Why?  Because we both make a substantial income and if one of us was to die suddenly I want to make sure our future dreams can be carried out.

Roger, hello! Thanks for your addition to the discussion. Because I work in the environmental field and go onsite to industrial complexes, I have both short-term and longterm disability as anything could happen, really.

First, it's probably a good idea to get disability insurance.  Life insurance is good, and definitely something you should have if you have those who depend, in whole or in part, on your income.  But, there is also the risk of losing your ability to work while still remaining alive, and so having insurance to cover that possibility is also important.  (Sorry to sound morbid, but considering out topic of conversation, it can't really be helped.)

Also, when trying to calculate the needed amount of insurance for your policy, it's tempting to assume that your spouse will be able to continue pulling in the same income after you are gone, but you shouldn't count on it.  With physical issues they could suffer (hence our disability insurance addition) and the mental state they may be in following a death like that, it's better to take the cautious approach and assume that any income dependent on your and your spouse's continued work will disappear, and to make your calculations based only on the monetary needs of the household (with some consideration for any investments you might have available, particularly if you are approaching retirement and getting ready to live off that money, anyway).

Lastly, I've heard a number of different estimations of how much insurance you should shoot to get, from as little as one year worth of income (just enough to funeral costs and other final expenses, particularly recommended if you are single and have no dependents) to twenty times your annual income (if you want your dependents to have enough to invest to completely replace your income at a modest rate of return of 5%).  My thoughts?  It's probably better to shoot for the moderately high end of the scale; maybe not twenty times your salary, but a good five to ten times your salary coming to them from a term life insurance plan should provide your loved ones with a fairly comfy cushion in the event something happens.  (It would also be a pretty good idea to review your insurance needs on a semi-regular basis, and possibly add new term policies to your mix if needed to keep up with inflation or an increasing lifestyle; as Jeff touched on, the level of insurance required by a young couple sharing a studio apartment is much less than that for a family of five with a sizable home in the suburbs, in both income multiple terms and pure size.)

Again, sorry to get morbid there at times, but it's hard to discuss life insurance without talking about, well, what causes those pay outs.  Besides, better to be open about it now, than to leave your loved ones (or yourself) struggling later.

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

Term insurance for you both is still a good idea.   Before we had kids, my wife and I had about $100k on the both of us: both term.   I've gradually increased it over the years as our family has grown. 

If it's helpful, here's a post that I did regarding how much term insurance should you buy that walked through my logic of deciding how much I needed. The post is a bit outdated since I only had one child when I wrote it :)

Hey everyone!

  I feel so stupid admitting this- but a year or two ago I opened a Roth IRA and later a Life Insurance policy with my friend's dad who works for a financial group.

 

 I'm 25 with no health problems…do I need a Life Insurance Policy, even a small one? 

Also, can anyone share what the average sales charge is for Roth contributions?  I don't know if I'm getting duped on this, and if I am being overcharged, is is possible to move your Roth elsewhere?  

 

I really should have considered this sooner, but I was naive and didn't think to consider these things.  It's great to be contributing from age 23, but if I'm going to be putting money aside, I want it to be maximized!  Thanks!

Shannyn,

If you're comfortable doing yourself, then as the others have said, you shouldn't pay much.  Maybe $30 a year tops for an IRA fee, but most of the online brokerages will do it for free.  

If the advisor is actually helping you with your choices, then a small fee is probably worth it.   Having been in the business for almost 10 years, then my hunch is that the advisor stuck you in some mutual fund with a load attached to it and you'll never hear from him again.   I hope I'm wrong, but I've been in the business too long and see otherwise.

Regarding the life insurance, you don't need it.   I guess you could justify if it was less than $10 month to keep it in case you suddenly became uninsurable later on – unfortunately, I have seen that happen a few times to rare and unpredictable medical conditions. 

Hope that helps!

Update:   I just saw that you are paying $40/mo for your insurance?   Is it term, and if so, how much is the face value? 

I have this inkling suspicion that you were sold some type of permanent policy, whole insurance perhaps?  If that's the case, then drop it.  You definitely don't need it. 

Lesson learned- money makes friendships weird.  

We live in a home with a mortgage and bills that either of our incomes we could live off of. It would be tighter on my income if he passed away though.

Will give this all some more thought.

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

Life insurance typically is used to pay off debt and provide either an income stream or lump sum to replace lost income.  It is much less complex when you have no children.  If your Husband were to pass away, would you be able to stay in your current home and maintain your current lifestyle?  Were you counting on part of your Husband's pension/401k to cover expenses in retirement?  You will need to include this in planning the amount of coverage you will need.

Here is a link to a life insurance calculator to help with the numbers.

Paul

What do you guys think about life insurance policies for husband and wife? We don't have kids, and we do have a mortgage but a fairly low one.

I would get a term policy for the amount you both feel you need to live off of should one pass.  I.e. If going to one income puts substantial pressure on quality of life, what amount makes up for it, maybe $2,000 per month.  How long will you need that for?  Then calculate out the amount.

If you are planning on having kids, I would get life insurance before you are pregnant, because heaven forbid complications arise and your husband has a child and you're not around.  He will need to hire help, daycare, etc.  It adds up.  Then add the basics on top of that. 

Plus, the younger and healthier you are, the cheaper the policy.  My wife and I each have 30 year term life for $1.5 million each, and pay about $80/mo for it for both.  It is cheap for the peace of mind you get.  And you may not need or want anything near this much.