Ask Terry Questions Life Insurance

Life Insurance

By Terry Savage on January 12, 2024 | Insurance & Annuities

My wife and I are 69 years old. We have a combined IRA of $4 million 60% stock (well diversified in low cost mutual funds)and 40% bonds. In addition, we have chicken money of $500,000 in short term T -Bills laddered. Our house is free and clear and our credit card debt is less than $500 per month. No other debt. Our children are grown and self supporting and living on their own.

I have a $60,000 life insurance policy that costs $2,500 per year and is increasing about $200 per year. My question is do I really need that policy. My life expectancy according to the IRS table is 85. 15 years at $2,500 is $37,500. I would only net $22,500 based on what I will pay in. The cash value is minimal about $2,000 as I have been using it to pay the premium. I believe I should cash it in and invest the proceeds and yearly future premiums in the S&P 500 index. I think I would do better that way. What is your advice?

Terry Says

Simple decision. How bad would your spouse feel if you cashed in the policy and died a year later?
Seriously. There are two aspects to this question. The first is the financial — and I can see your point. When you took out the policy, you probably wanted to ensure that your mortgage would be paid, or your kids college would be taken care of. Now, the math shows that it isn’t working for you — and the need is gone.
So the only thing left is “superstition” — the possibility of tempting fate by cancelling this deal!
One thing is sure: Don’t sell the policy to any of those companies offering a slight premium to the cash value. You don’t want to give anyone else the incentive to see you dead!!



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