My husband and I for 30+ years had similar… sort of whole life policies. We dithered over whether to keep them after kids were grown. In later years had to pay into them each year, but I kept a spreadsheet show that even after considering that expense the cash values were growing about 3% per year (even when the market went down). I considered it part of our diversification.
As we got older, the amount we had to pay increased… and I figured it might get too expensive for us to justify long before we needed the payout. So we cashed them in. Husband’s one year, mine the next in order to not have taxes on all the growth in same year. That gave us extra funds (bought a car) and simplified our life by eliminating those bills. As we get older, simplifying is good. And now no more worries about “gosh, what if we get sick and don’t pay in timely manner”.
We had term insurance. I figured one or both of us would die right after we didn’t pay the huge increase to keep the policies at the end of the term. It’s now been over a year, so that worry is over.
I think I already mentioned that we were really winging it with life insurance! Other than what our employers offered at no additional cost, we did not have any. Don’t recommend this strategy!
I feel somewhat guilty about our life insurance story.
In our early 60s our 20-year term policies ended and continuation was offered at a higher rate. I was concerned abut DH’s health so we paid the new premium with the idea that we would keep it in force while we were working. We also each had small policies through a military association.
DH also had employer insurance. After his dx with pancreatic cancer at 63, and progression to long term disability, we were able to take advantage of two options — both term and whole life. One factor was called “portability” and the other was “conversion”.
I feel guilty that we (I, really) maxed both employer options — and in the end, collected on four life insurance policies of various sizes. (Total did not exceed 6 figures).
Would I have been OK without the money? Yes, but in our case opting to extend made sense. I’m happy to help our kids — and also have less worry about money.
We stopped life insurance when our youngest graduated from undergraduate school. Our house was already fully paid for. College costs and our mortgage were the biggest reasons we had life insurance. If one of us had died when we still were paying these bills, we would have benefited from a life insurance payout.
We don’t have any life insurance now except for a VERY small (and free) policy I get as a member of a professional organization.
I guess technically I actually still have a life insurance policy. I paid for life insurance as a federal employee for my entire career (and it wasn’t even good insurance). When I retired, if I paid for it until I was 65, I could keep it forever, but the value goes down every year, to a certain amount (I can’t remember what that is). At that time it made sense to go ahead and keep paying.
Don’t feel guilty at all. That’s literally the point of insurance. It was all built into their actuarial tables and accounted for in the rates they charge.
On the insurance front, we did have Term Life for quite a while when the kids were around but got rid of it when our FA persuaded ShawWife that she no longer needed the insurance. For a number of years, I had a defined benefit plan called a 415(i) plan that was based upon a whole life insurance policy and annuities in my DB plan. At some point that got changed to a 412(i) plan – I think I have the numbers correct but it has been a while – that utilized the same insurance vehicle. My recollection was that this was something the insurance industry lobbied for as it set a really low projected rate of return for my calculation of what I would need to get the defined benefit and hence enabled me to save over $200K per year pre-tax IIRC. At some point, I was about to hit the maximum size for a DB plan (or something like that) and I had to roll it into a 401(k). At that point, it was either too hard to keep the insurance policy in a 401(k) or we decided to drop it and took the cash value of both the policy and the annuities. I think I was getting a guaranteed minimum rate of return of 5% in those years (some of which were down years for the market). My memory is a bit fuzzy, but I defintely benefitted from the insurance industry’s lobbying.
One of our FAs has suggested some kind of insurance as part of estate planning, but it did not seem compelling at the time.
Do you know how the employer Roth match contribution is treated, taxwise? When the money is taken out is that portion of it taxable? I assume the money has to be taxed at one point.
We have only ever had term, taking the maximum allowable through our employers. We didn’t need to pay the premiums after retirement, because our nest egg was enough to live on if one of us died.
My in laws, OTOH, were talked into whole life by an insurance guy from their church. They cashed in one policy when they were in their 80’s; I think that they probably could have made more had they invested it, but they didn’t care. They bought a universal whole life policy covering both of them (second to die) that they later converted to paid in full … and the insurance company hasn’t yet “found” the policy. The company went out of business & the new (very large, national) insurance company has been giving us the runaround on replacing the policy MIL (actually, SIL) lost. So my view of whole life isn’t so hot - the agent made money, but he’s nowhere to be found these many years (35) later.
I do not know the answer that question, so I just opened the article that I had linked in the comment that you are responding to, and it says this, which I have not attempted to verify.
Is Employer Roth 401(k) Matching Taxable?
No, the contribution isn’t taxable if the employer’s matching contribution for Roth 401(k) holders goes into a traditional account because these contributions are made on a pre-tax basis. If the matching contribution goes into a Roth account, then yes, it’s taxable.
I wonder if the employer match is taxed in the year in which the contribution is made to the Roth 401(k) account? My children do not have this option, so I have not researched it yet.
Editing to add, Schwab confirms my guess that the contribution is taxed in the year which it is received.
…employer contributions made as a Roth contribution are after-tax and will be taxable to you in the year you receive the contribution. But the earnings and principal will generally be tax-free for qualified withdrawals in retirement. (Also, starting in 2026, if you made more than $150,000 in the prior year, your catch-up contributions are required to be Roth contributions.)
I do not intend to cash out policies - change beneficiary(ies) as time moves along. Right now, my life insurance policies go equally to our two daughters. As time goes on, we may change DH’s beneficiaries - right now they are to me.
After we make a transition and are in our ‘retirement house’ near DD1/family, and have things stabilized, it will be having everything in order in that state. As last step, more on estate planning. Have to do wills for that state too. We are retired now and have been long-time residents where we are now.
Some transitions ‘cost money’. Want to think carefully and in ‘right time’ on various steps.
We had some significant life insurance policies in place before we became aware of a broker with term policies later on. We have ‘paid up’ insurance (we no longer pay premiums) and make payments on 30-year term insurance policies on DH. I had aggressive cancer and no more insurance policies for me, but thankfully I survived. Risk/reward on continuing to pay on the term policies - the term policy annual amounts are reasonable.
DH and I sort of had to learn on our own about insurance policies.
My dad was fortunate to know an insurance broker who told him policies were going to go up for smokers, and dad got two policies with two different companies. He was so glad he had those policies. He died 2 days before he turned 64 of small cell lung cancer (only one chemo at the time for that and it was ineffective); he had quit smoking 20 years earlier, but his lungs were damaged (emphysema). He probably also had a genetic predisposition as well, as his younger brother died earlier of the same cancer. Current chemos might have helped, but he always admitted the worst mistake he made was starting to smoke when in the military in the 1950’s to be ‘one of the guys’.
We stumbled through having purchased a few policies that we dropped. Had reasonable policies but had we known a good insurance broker with a broad range of insurance policies (as we had later), we never would have purchased the non-term policies and instead purchased term policies. Our DDs benefitted from our experience. We also taught our DDs more with money, saving, cash flowing things, etc. – but we were good with the way we did things.
DH’s employer had insurance on him as a company benefit - twice his annual salary and 3X his salary if death on company time/travel. We never purchased any through employer benefit because it tends to be more expensive/less portable - and with term, not 30-year-term policy. He also had short-term and long-term disability as an employer benefit. I had purchased disability insurance, and had to fight for them to pay it - and because I was SAHM, I only received the 100% disability amounts - when I was still partially disabled, because it was ‘income replacement’ I lost benefits I had paid for. It was a wash on what I got back during disability time, and within a year I then canceled it. I never planned to be a SAHM, but I might not have survived the cancer with both sides of the candle burning (kids were in 8th and 10th grades and husband had to travel for work).
“How badly did the insurance company treat you on disability policy approval?” They actually sent a retired FBI agent to see how well I was at home (I had a friend who was retired GS here for me who could be an advocate). I learned he wrote a favorable report (for me to receive disability payments on my policy) but the claims person still gave me grief. I said “I guess I will have to call my attorney” and the next day it was approved. My board-certified oncologist completed the paperwork; their MD (who never examined me) didn’t think I had a legitimate claim. Insurance companies give a run-around because some will just not challenge. Terrible!