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Life Insurance After Retirement


Now that I have left my job, I no longer have any life insurance coverage. Here was my coverage from my previous employer.

Basic life insurance: $930,000

Business travel accident: $581,000

Accidental death and dismemberment: $814,000

So if I died a fiery crash when I was on a business trip, my family would have received nearly 2.5 million dollars in insurance payment. This would be enough to raise baby RB40 and pay for his education. Of course, I’m more valuable than $2.5 million and Mrs. RB40 would rather have me around instead of a pile of cash. In the end, I survived my job and retired early instead. Now, I have exactly $0 in life insurance coverage.

I never thought much about life insurance until we had a kid. Nobody was really dependent on me for their well being. Mrs. RB40 was (and is still) working and can take care of herself even if something were to happen to me. However, my whole outlook changed after we had a baby. Raising a child can cost nearly $300,000 and Mrs. RB40 would be hard pressed as a single parent. That’s why I increased my life insurance coverage to the maximum allowable in the employer sponsored program. The life insurance payment would have replaced my paycheck and at least my family would be provided for.

policy genius


Usually when you are retired, you won’t need as much life insurance because your income is already greatly reduced. Your family should already be living comfortably without the need of life insurance payment. My case is a bit different because I am a stay at home dad. If something happened to me, baby RB40 would have to go back into daycare full-time which costs $15,000 per year. I’m also earning some income from various sources so that needs to be replaced too. This means I will need to purchase life insurance for a while longer. I think when our kid is out of college and working full time, then we will no longer need life insurance.

Social Security

Your child can qualify to receive your social security benefit if you earned at least 6 credits. You can earn up to 4 credits each year that you pay into social security. Fortunately, I have accumulated over 40 credits and I’m qualified to receive social security benefits. If I passed away, my child can receive my social security benefit until he is 18 years old. I used this quick benefit calculator at the Social Security Administration’s website and it estimated that baby RB40 would receive around $1,800 per month. Mrs. RB40 would receive the same amount of benefit until our child is 16 years old. These two checks from social security will help tremendously, but there is a huge hole when he turns 18. College tuition is rising every day and the social security benefit will cut off right around the time for him to enter college. Higher education is extremely important to us and we want to make sure nothing will stop him from going to a university. That’s why I still need additional life insurance.

The first option is to get spousal life insurance from Mrs. RB40’s employer sponsored plan. We plan to add me in the next open enrollment in November. I’m not exactly sure what the coverage amount is. I think it’s much smaller at around $250,000 so I probably need a little more coverage.

I think term life insurance is the right choice for me because it is simpler and we are already invested in the stock market through our taxable account and retirement plans. I used the life insurance calculator at Genworth and it seems I would need about one million dollars in coverage. This amount will pay off the house, pay for college, cover funeral expenses, and replace my small post retirement income. The estimate is $35 per month. This is actually not bad and I will need to follow up on it.

I know some of our readers are retired or near retirement. Do you think life insurance is essential after you retire? I think if you have any children, you really need to have some life insurance.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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{ 29 comments… add one }
  • 101 Centavos August 4, 2012, 7:02 am

    Some state-level associations for self-employed people have good rates on simple term life insurance.

    • retirebyforty August 5, 2012, 12:30 am

      I’ll see if we have anything like that in OR. Thanks for the tip.

  • agirlin August 3, 2012, 2:01 pm

    I’m not sure if you’ve already addressed this, but since you’re now retired (congratulations!) what are you doing for health insurance? Are you simply on Mrs. RB40’s medical coverage plan? That’s something I’m trying to research since medical insurance tends to be fairly expensive and I’m still fuzzy on the details on how a high-deductible health plan plus HSA works.

  • Don August 1, 2012, 7:13 pm

    Yep, I definitely need life insurance (just in case…). My cost are lower where I live (is that a banjo playing in the background?), so it would be a bit easier for me, but still I’d sleep better knowing that my kids and wife are covered. That said, they would get at least a little from social security (or so I believe), but not enough to live the way I want them to live.

    • retirebyforty August 1, 2012, 10:59 pm

      I know what you mean. Life would be very difficult as a single parent already. We’d better make sure at least they don’t have to worry about finance.

  • Linda August 1, 2012, 4:10 pm

    Your wife will only get a Social Security check if she isn’t working or making under their limis which isn’t much. After my husband’s father died, he earned too much money and his benefits were reduced until the money was paid back.

    • retirebyforty August 1, 2012, 4:54 pm

      I thought my wife will get a social security check because she will be raising our kid. I’ll double check.

  • krantcents August 1, 2012, 12:44 pm

    It is individual, but everything revolves around your needs. Be sure to lock in the premium for 20 or 30 years.

  • Kim August 1, 2012, 12:35 pm

    Your wife might need or want to stay home if something happened to you. I think it’s smart to have a million in coverage. So glad you didn’t have a fiery crash on a business trip!

    • retirebyforty August 1, 2012, 10:55 pm

      I’m glad I didn’t take too many business trip. 🙂

  • Sean @ One Smart Dollar August 1, 2012, 11:17 am

    I am just like you were. I have never really thought about life insurance but now that we are close to having our first child, it’s something that is on my mind.

    • retirebyforty August 1, 2012, 11:39 am

      You should see if you can increase your employer sponsored coverage. That’s the easiest way to do it.

  • jim August 1, 2012, 10:39 am

    Usually I don’t think people need life insurance after they retire but thats usually because people retire when they are older and don’t have dependents. I think anyone with dependents should definitely make sure they have adequate life insurance.

    One thing about group versus individual insurance is that with individual insurance you usually have to have a health physical to qualify. They can be pretty picky and its common to not get the best rates as most people have some sort of health issues. On the other hand group insurance is dependent on your employer so if you’re laid off or something then that can leave you uninsured abruptly.

    • retirebyforty August 1, 2012, 11:38 am

      That’s true. I’ll have to get a health check and see what kind of rate I can get. I can probably go with a bit smaller policy to reduce the rate a bit.

    • Steve August 3, 2012, 11:38 am

      If you don’t smoke and don’t have any major medical problems, you should be able to get individual term insurance. You might not get the absolute best rate if you have some minor problem, but you should be able to get a decent rate. The rate will probably be better than what you would pay through your employer. And it is then portable, not tied to your employment, which could end at any time (voluntarily or otherwise). The only reason to go with employer insurance is a) if you have a medical problem that makes you unisurable or would give you a really high rate (this is why group insurance is more expensive for people without those situations) or b) if you have procrastinated getting life insurance and thus choose acknowledgedly mediocre employer insurance over the worse option of no insurance at all.

      Even employer insurance usually (in my experience) requires a health screening to go beyond a certain, not very high amount.

      • retirebyforty August 3, 2012, 3:52 pm

        The rate from my employer was pretty decent. I think it was around $30-40 per month. I’ll have to check.

  • [email protected]&More August 1, 2012, 10:33 am

    It depends on your situation. If the kids are grown up and you have a full nest egg then I don’t think you would need it. However if you are still getting side income and have kids about to enter college and don’t currently have the funds to cover it I say you definitely need it. It depends heavily on the specific situation!

    • retirebyforty August 1, 2012, 11:37 am

      If the kid is grown up and out on his own, then we won’t have to worry about life insurance. That will be another 20 years to go though.

  • William @ Drop Dead Money August 1, 2012, 9:38 am

    I’m well over 40, also retired, and I still carry basic term insurance about double the remaining balance on the mortgage.

    I’d like my wife to be conflicted about my departure: “Miss you, Honey, but thanks for the easy life” 🙂

    • retirebyforty August 1, 2012, 11:35 am

      Heh heh heh. You’ve got the right idea.

  • Money Beagle August 1, 2012, 7:56 am

    That’s a pretty fair deal. I also have my life insurance through my company but know if I left or was let go I would need to address this gap.

    • retirebyforty August 1, 2012, 11:35 am

      One of the many things to do after you leave a job.

  • Kurt @ Money Counselor August 1, 2012, 7:54 am

    That does seem pretty cheap for $1 million on term life. Happy (but not surprised) you are taking a responsible approach to your early corporate-job retirement by replacing the benefits you had that you still need. Hope you’re enjoying your new life without corporate stress.

    • retirebyforty August 1, 2012, 11:34 am

      They probably assume perfect health. I’ll have to get a quote that factor in my various health conditions. Life is good at the moment. Thanks. 🙂

  • John August 1, 2012, 6:53 am

    Most of the time, an employeer sponsored (or group) term-life insurance is more expensive than an individual term-life insurance. You probably need 20 year term-life insurance (possibly 25). I have mine with ING, but I also like Amica, though.

    • retirebyforty August 1, 2012, 11:33 am

      I’ll take a look at ING and Amica too. Thanks.

  • Edward Antrobus August 1, 2012, 3:56 am

    I can’t say I understand why you need so much. The two Social Security survivor benefits checks would equal over $43,000 per year. Surely that’s enough to raise your son until he turns 18. Then that $250,000 life insurance policy from your wife’s employer will more than cover any college costs.

    • retirebyforty August 1, 2012, 11:32 am

      I think $43,000 extra before tax is good, but being a single parent is difficult. I would like them to be able to hire some helps if they need it. The extra would pay off the house, funeral expense, and any emergencies that come up. When you have a kid, you want them to be provided for.

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