| Insurance for FIRE Posted: 05 May 2018 10:33 AM PDT From a daily thread a couple days ago there were a few posts requesting how various insurance products work & apply to fire. I decided to give my own take on what is useful for those on the journey to FIRE or have already retired early. I'm just a lay person. I'm a software engineer & finance nerd. I recommend talking with an independent agent or a fee only certified financial planner for your specific needs if you're unsure of anything. Generally the best purpose of insurance is insuring huge risks that would have a very detrimental impact on your own or others lives. The reason we get health insurance and pay huge premiums isn't to have a $20 copay on a $100 cash pay doctor visit, it's so in the unlikely event we have a heart attack and spend 10 days in the ICU we're not coming out with a $100k - $1 million bill. Being on the FIRE path presumably we have an emergency fund and can swing minor setbacks. Here is my take on insurance options for all aspects of FIRE, from those in the accumulation phase to early retirement to full retirement age. Insurance Options Private Long Term Disability Insurance What is it? - Insurance that pays you a monthly benefit if you're still unable to work after a waiting period of 90 days - 365 days.
How does it work? - Depending on the policy it pays out if you're unable to work in any occupation that fits your skills, experience and education. A much stronger policy specifies if you're unable to work in your own occupation at the time of disability. An own occupation definition is much stronger, such as the one from my policy:
Receive full disability benefits if you can't perform the duties of your occupation, even if you earn money working in another occupation - The stereotypical example is a surgeon who develops shaky hands. He or she may be able to teach still but will no longer get that juicy surgeon income and may have substantial nondischargeable student loans they have to still pay back. Under an any occupation policy the former surgeon will be screwed and won't be entitled to any payment.
Why do I need it? For most people their future potential income stream is their largest asset. If you're a 30 year old software engineer you could possibly be making $100k/year for the next 30 years, or $3 million in real dollars. You're FI/RE date may be set back or you might never be able to retire if you become permanently disabled and can no longer work. Medical debt is the hugest reason for bankruptcies. Disability insurance insures you still have an income while you're getting the medical treatment you need. Social security is inadequate. For most cases they require waiting a year before even filing a claim, and most cases take another year to settle. Social security pays very little too. This exceeds most emergency funds. Group coverage isn't much better, generally it's only two years of own-occupation then you are under the any occupation definition. If your employer pays your group plan then the amount is taxed while individual insurance is tax free. HR representatives are incentivised to work against you to both keep premiums down and increase productivity. Most group disability plans are actually marketed to HR as ways of getting employees to return to work sooner. How can employers get disabled employees back to work sooner and keep productivity high? They'll do everything to help the insurance company deny claims. I've seen it first hand happen to another software engineer that developed carpal tunnel syndrome. It's happened to me too. I dislocated my knee years ago in a sporting event. I was doing a Olympic style Fencing tournament. I was in pain and unable to walk for 3 months but the shitty short term group coverage I had & HR had determined that I could still do my software engineering job and denied coverage, so I had to go in to work anyways. Group coverage is subject to ERISA which is very employer friendly for disability. Your rights are very limited there. Did you know once an appeal has started you cannot introduce new medical information in it? You have to be very careful to get your ducks in a row on an initial group claim, and you need an attorney if you're having to go through the appeal process. With a private plan the courts are a lot more flexible and you can introduce new evidence as much as you want. ERISA cases represent about 90% of all disability lawsuits on a per insured basis. What coverage should I get? In the accumulation phase: A private individual plan is the best protection you can get. You want it own-occupation. You want it guaranteed renewable & non-cancellable so the company must keep the contract in force and can't raise your premiums. Coverage for partial disability (residual) without having to be totally disabled first. A cost of living rider if you're below age 45 to ensure your payments keep up with inflation. To age 65/67 so you're covered under retirement. Even if you're in a group plan you can still get some supplemental insurance. Also check out plans that protect your retirement contributions. They have the same premium as LTD insurance but the benefits go into a trust with investments you get access to at age 65. It's one way to get more coverage. Check out retirement contributions protection insurance. It's a LTD plan with the same rates but benefit payments go into an irrevocable trust that you gain access to at age 65. Since it goes into a trust it lets you get more LTD coverage than you could otherwise get due to over insurance reasons. Early Retirement: Carefully consider dropping the insurance. This depends on your goals and what policy you have, as at this point you're financially independent and no longer need to insure a future income stream. You may want to hang onto it though if you got the policy at a young age as the premiums may be very cheap compared to the coverage. Some policies like mine explicitly includes retirement as an occupation so you will have coverage. If you become disabled in early retirement you may still have substantial expenses related to your disability, so for peace of mind I'm planning on keeping my policy. Full Retirement Age: Most plans will terminate then unless you're still working. At this point the coverage is so little that it's best financially to drop it unless you've messed up and need to work still to make ends meet. What to avoid? Short term disability insurance. It covers for 3 months or less and is just as expensive as long term. Use an emergency fund. Most companies have group coverage which is adequate. Some agents love to stuff these policies with critical care insurance riders, return of premium riders, etc. These just inflate the cost of the plan and gets the agent more commission. Generally your better off investing the cost savings yourself. These days a lot of policies restrict collecting benefits for more than 12 months outside of Canada/USA/possibly Mexico. If you have plans on being an expat and don't want to move back to the United States then find a good agent to shop individual coverage. Opt out of group coverage if you're able to. An individual policy is miles better. Your employer can take away group coverage at any time and you'll likely lose it when your employment is terminated. There are no cobra rights for this. Risky activities/habits before getting the policy like scuba diving, mountain climbing, smoking, etc. They may exclude those activities or increase your rates significantly. Once the policy is in force as long as it's guaranteed renewable they can't cancel it and then you can start those activities. Don't lie or commit insurance fraud. How much does it cost? - On average for a well written strong individual policy, not supplemental, on average the premium will be 1-3% of your annual pre-tax income.
More Info Term Life Insurance What is it? - Insurance that pays out to the beneficiaries if the owner passes away.
How does it work? - Term life insurance specifies a dollar payout if the insured were to pass away in a certain term from the date the contract is in force, such as 10 year, 20 year, or 30 year term insurance.
Why do I need it? - If you have any dependents (legally married/domestic partner, kids, etc.) and your net worth is not enough to provide for them then you will want to replace the income stream that you've provided.
What coverage should I get? In the accumulation phase: Get this if only if you have dependents or a life long partner. It depends on your goals/etc. If you're the sole breadwinner and your partner doesn't work then enough to make your partner financially independent. If both you and your partner works then ~10 years income is recommended as they may be out of work for a long time grieving. If you have kids then at minimum it should be enough to see all of them getting to age 18, if you're generous, college. A stay at home partner should have a policy too as they provide valuable services such babysitting, cleaning, cooking, etc., which is costly to replace, and the breadwinner may be stricken with grief and have lowered income from taking time off/etc. If you're single you have no need for life insurance. There is no need to buy it until there is a financial need. Agents here will use scare tactics about uninsurability to sell you a policy but if you look at underwriting guidelines there is actually a lot of flexibility. Uninsurability is only for things like morbidly obese, heart attacks (even then, according to that underwriting you're insurable again if your heart attack has been six months or longer, or 3 months or longer after a heart bypass surgery.). So don't worry about spending money for some future uninsurability scare. Early Retirement: You don't need it. Your portfolio should be large enough to support your family. Full Retirement Age: You don't need it. Term will be too expensive at this point. If your heirs will have a ton of estate tax issues you may want to consult with an attorney on how to plan to minimize them, which life insurance may be one of many approaches. What to avoid? Whole life and universal life or anything that doesn't explicitly say term. Whole life and the like policies pay out the benefit for life but the premiums are at least 10x more expensive. Since its a guaranteed payout the insurance company has to invest very conservatively. You're better off buying term and investing the rest. Don't mix insurance products with investment products. For life insurance an agent will get 90% of the first year premium + 10% per year of the first year premium in commissions for as long as the policy is in force. If an agent sells one whole life policy it's just like he sold 10 term policies. This is the biggest money maker for agents in the insurance industry by far. The underlying investment options for the policy are mutual funds with high expense ratios with load fees. The only time whole/UL life insurance is appropriate is estate planning. For example, when you know your heirs are going to be paying estate taxes and you don't want them to. In that case a policy that equals the projected estate tax is appropriate to lessen the tax hit. The other appropriate estate planning use is if you have a lot of illiquid assets that are either problematic to sell quickly for estate taxes, you don't want sold at all, or you want to give to specific heirs - "Jim gets my 12,000 acres of hunting land in Colorado valued at 7 million", while making sure other heirs get an even split monetary wise - "while Jill gets a payout from the whole life policy equal to the assessed value of the Colorado land at the time of death." Talk to an estate planning attorney if any of these seem ideal for your case. Return of premium riders. These make the premium jump 3-4x. These sound good but your money is better invested elsewhere. They only pay out if you don't die or have any other claim on the policy and the policy expires on the expiration date without lapses/etc. If you die you've just paid 3-4x what you needed to, and if you don't die you may be keeping on a policy that's too expensive or not needed anymore. Accidental death riders. These are "feel good" riders that pay 2x the death benefit if it was an accident or catastrophic death. Insure your true insurance needs. Don't try to under-insure then make it up with an accidental death rider. Waiver of premium for disability/unemployment riders. This is what an emergency fund and long term disability insurance is for. For my quotes it bumps up the premium about 10-25%, and depending on the policy either pays the premium for 6 months to 1 year if you're unemployed or disabled for at least over a month. Some less policies will just suspend the policy, which is bad, as there will be no life insurance payout while it is suspended. Terminal illness rider. This is another "feel good" rider. It pays out between 50-80% of the policy amount, usually up to a cap of 1 million, if you're diagnosed with a terminal illness with a life expectancy of less than 12 months. To the lay person it sounds amazing to have this, but in reality there is something known as a viatical settlement where if you're that sick you can sell your life insurance policy to a third party. Viatical settlements may go up to 90+% of the value of your life insurance. While it's not a bad backup policy to have, don't go for a more expensive policy just because it has a better terminal illness rider. The insurance company is making money off hoping through your ignorance you exercise the rider so they can then get the policy off the books and profit 10-40% vs the full policy being paid out. On the open market you can easily find a settlement for an illness that death is expected in two years, not one, and perhaps more than the caps the insurance company has. Disability income rider. This lumps a short or long term disability plan into life insurance. Avoid the rider here and get a full policy for disability. The rider here will have the most unfriendly group-like language in it such as any occupation and be just as expensive. Long term care insurance rider. Same issues as the above disability income rider. Group coverage. Over the ages it is a lot more expensive than an individual policy. It starts out really cheap before age 35-40, but over the lifetime you'll pay more than term. It's only for those who term is more expensive or are uninsurable. Plus your employer can take it away at any time and you'll likely lose it when your employment is terminated. There are no cobra rights for this. Risky activities/habits before getting the policy like scuba diving, mountain climbing, smoking, etc. They may exclude those activities or increase your rates significantly. Once the policy is in force as long as it's guaranteed renewable they can't cancel it and then you can start those activities. Don't lie or commit insurance fraud. How much does it cost? - It's cheaper than you think! For a 30 year old healthy male 20 year $1m term policies are about $480-$580/year.
Health Insurance What is it? Pays for part or all the cost of receiving healthcare & medications. How does it work? - It depends on the policy and if it is a high deductible or traditional policy. Generally you have a deductible and an out of pocket max. Depending on your policy you have to pay cash or co-pays until you've hit your deductible for the year, then once you hit your out of pocket max you won't have to pay anymore for that year for stuff the policy covers.
Why do I need it? - Medical debt is the hugest reason for bankruptcies. An emergency could cost over $100k - $1 million dollars.
What coverage should I get? - Accumulation Phase: Carefully compare group plans with your employer with the market place and pick the best coverage for your situation and family needs. If you're young and healthy you can look into high deductible health plans that are compatible with a health savings account, allowing you to save a lot of tax deferred money and save taxes.
- Early Retirement: Currently with the ACA subsidies in place and careful tax planning if you're more of the /r/leanfire mindset, you can get a lot of affordable coverage from the marketplace. You can also look into getting company coverage if you are still doing some consulting on the side.
- Full Retirement: It's really tricky to get private coverage once you're eligible for medicare. Unfortunately this is one area I'm not too knowledgeable in.
What to avoid? - Going uncovered/self insured. With the affordable care act there are penalties for doing so.
- Avoid indemnity plans. These plans don't provide the coverage you think you're getting and have a lot of outs for the insurer to not pay. Even if the insurer does pay, you typically have to pay first and submit requests for reimbursement, making it a lengthy process.
- Watch out for plans that only have coverage in one state or no international coverage. All plans should have emergency coverage but the insurance company will do their best to deny emergency claims.
Auto Insurance What is it? - Insures you for liability and insures your car if you should get into an accident, it gets stolen, or acts of nature damage the vehicle.
How does it work? - Auto insurance is split into multiple parts:
- Liability - covers bodily harm you've inflicted on others.
- Property - covers property damage you've inflected on others.
- Collision - covers damage to your car from yourself or others.
- Medical payments - quick source of cash for medical payments for anyone including yourself.
- Uninsured/under-insured motorist liability - bodily harm to yourself if the other motorist has no insurance or less insurance than this amount.
- Uninsured/under-insured motorist property - Same thing as liability but for property. Some states don't allow this, so instead you need a collision waiver coverage instead, where it will waive your deductible.
- Comprehensive - This covers acts of nature/god, glass breakage, etc. It's usually pretty cheap for the coverage.
Why do I need it? - Most people get too hung up on the value of their car and don't think about the liability risk. For FIRE folks the biggest risk by far is the liability risk, as auto claims can easily go up to $400k+ payouts if you hit an entire family in another vehicle. A lot more people are driving really expensive cars these days and with better safety cars are meant to crumple, making a car be totaled a lot more often than in the past.
What coverage should I get? - All phases: My recommendations are to get the max liability you can up to your Umbrella insurance requirements (umbrella description is later on.) and max property liability. Economically getting collision if your car is currently valued about $20k or more makes sense. Once you get to about $10k of value assuming more deprecation you'll have paid more than the value of the car in premiums in the next 5-10 years, so it's better at that point to just do liability/uninsured only.
What to avoid? - Other cars. Insurance rates heavily depend on your driving history, number of accidents, etc.
- Avoid riders like mechanical breakdown insurance - it covers way less than what you think, and is only an extended warranty, and won't cover anything if its still covered by a manufacturer's warranty.
- Towing coverage isn't that good on most policies or has limits. Go with AAA if you need towing coverage.
- Shop around and get at least 4-5 quotes. Claim service matters a lot. Some insurers only use the cheapest body shops. See if you get any discounts for being a member of a professional organization or owning the company's public stock.
Homeowners/Renter Insurance What is it? - Insurance to cover anything related to your home - coverage for the dwelling, coverage for the contents, and liability coverage.
How does it work? - The policy is broken up into property coverage(excluded on renters), contents coverage, and liability coverage (if someone slips & falls on your property, or if you damage a rental.)
Why do I need it? - You need it if it would be a severe hardship to lose your house or you have a mortgage on it.
- You need contents coverage if it would be a severe hardship to replace everything.
- You need liability insurance for a bigger umbrella policy, and especially as a renter as you may damage the property and have a huge liability.
What coverage should I get? - All phases:
- For homeowners - make sure the property coverage is enough to fully replace your home with new construction. There are severe underinsurance penalties if you don't have enough coverage, punishing you more.
- For renters - Enough liability to get Umbrella insurance coverage. You're renting the property and don't want to be on the hook for any severe damage you cause.
- For everyone - Add up how much it would cost to replace your property with brand new items if everything was lost. I was surprised to find out my tiny 2 bedroom apartment the replacement value of my contents is $55,000. If I lost it all I'd be really harmed financially.
- You can drop all of this insurance if you fully own your home, expect no liabilities, and your portfolio can afford the hit to buy a complete new home/contents at 4% SWR. If that's not the case then you need this coverage.
- Get sewer/sump backup coverage. It's cheap and without it the insurance company will deny a claim if sewage gets backed up into the home.
- Look into flood & earthquake insurance. Unfortunately, I don't know as much about these policies and I'm not in a place to offer advice here.
What to avoid? - Actual cash value policies. You always want to get replacement cost coverage. If you have an actual cash value policy the insurance adjuster will try to ascertain the market value & condition of the item or property. With replacement cost they have to get you the same item or cut a check for the cost it would take for you to replace the item. Under an actual cash value policy they are free to replace with "like kind" items. A top of the line 60'' OLED LCD TV could be replaced with a 60'' bottom of the line LCD TV. Under replacement cost coverage you could get your specific model back or a better item. Replacement cost coverage saves a lot of back and forth with adjusters too, giving you time savings.
- Be careful of policies that have limited coverage such as only $2,000 for jewelry/firearms/etc. You may need an additional rider for those, or get scheduled coverage, or go for specialized coverage from a third party that handles your particular possession.
Umbrella Insurance What is it? - Umbrella insurance is an extended liability insurance that kicks in once you exceed your liability limits on your auto or homeowners/renters policy. Coverage starts at $1 million and is very cheap and cost effective for the coverage. I pay $160/year for $1m of coverage.
- Umbrella insurance also provides coverage should you be sued for: libel, slander, false arrest, malicious prosecution, shock/mental anguish, or other personal liability situations.
How does it work? - Umbrella insurance has requirements that you maintain $X of auto & renter liability. On my policy it's $300k liability/$100k property for auto and $100k liability for renters. They insure past those amounts, so say if you only had $200k of auto liability then you're on the hook for $100k of that until the $300k start for umbrella kicks in. So in an auto liability case I'm covered for $1.3m with a $1m umbrella policy.
Why do I need it? - It provides you with protection that exceeds most auto & homeowners policies. We're insuring the extreme case here such as if you hit someone's Ferrari, or have some huge liability lawsuit. It's nice to have a lawyer fighting for you in these cases.
What coverage should I get? - If you have a income of more than $50k per year or significant non-retirement assets then you should strongly consider a policy. Your wages could be garnished. You could lose assets or be forced into bankruptcy.
- Buy a $1m base policy as it should cover all realistic scenarios you could get yourself into. $2m or higher only if you have retirement assets of that amount or your income is 10x that amount.
What to avoid? - Nothing. I haven't seen any riders for this product. The product is pretty specific and I've not encountered any up-selling on this policy.
Long Term Care Insurance What is it? - Provides coverage if you're in a nursing home or hospital for a long term by paying your nursing home up to the dollar amount specified.
How does it work? - Like disability insurance there is a waiting period of 90 days or more. Some policies the waiting period only starts from the date you start receiving long term care, not the date of initial hospitalization. So you need to be able to at least swing the initial payments.
Why do I need it? - Nursing care facilities are expensive. They can easily range from $200-$400 a day, or $100-$150k annually. You'd need a 2.5m - 4m portfolio to self-insure that spending at a 4% safe withdrawal rate otherwise if you ever recover your retirement could be seriously hampered.
- Some nicer facilities may refuse medicaid or have long waitlists for medicaid. You get much better service being a cash payer. (Note if payments eventually switch to Medicaid it'd be illegal for them to refuse coverage.)
- Medicaid & estate planning issues.
What coverage should I get? - Accumulation Phase: You don't need to consider this at all. Most carriers even refuse to quote anyone below age 30-45 as at this age group a lot of people shopping for LTC are people likely to get Huntington's disease or some other genetic disease. Plus the LTC insurance market is in an upheaval currently and your rates may increase significantly or the carrier may go bankrupt by then.
- Early Retirement: Starting in your 50s to age 65 it's a good idea to look into this insurance to see if it fits your needs.
- Full Retirement Age: By now it should be a serious consideration in your financial planning. If you decide to get the coverage it's recommended to get at least a five year policy so you can move assets into trusts and spend down to get medicaid, avoiding the five year look-back period.
- Ideally try to get a policy that lasts at least five years. Insurance companies used to offer a lifetime benefit but had large issues as it turns out it was a bad bet - they were paying more than receiving in premiums.
- The policy must be guaranteed renewable. It's very doubtful you will get a non-cancellable policy as the market has gone through turbulence and have increased rates a lot. If you run across a non-cancellable policy it's a huge consideration.
- An inflation rider. Even if you're buying coverage at age 65 chances are you may not need it until age 85 or higher. At 3% inflation the dollar amount you're protecting will be half the purchasing power after 17 years.
What to avoid? - Policies under five years. It will limit your flexibility in options if that time should ever come.
- Return of premium rider. This isn't life insurance and isn't competitive at all to what you could invest yourself. Why make your insurance more expensive?
Critical Care Insurance What is it? - It is a named perils policy that pays the specified lump sum if you suffer any of the named perils. The coverage varies greatly by insurer and covers 7 - 14 named perils on average. Some common benefits are heart attack, stroke, life threatening cancer, major organ transplant, kidney failure, Alzheimers, paralysis, blindness, deafness, coronary artery by pass, etc.
How does it work? - If you're diagnosed with the named peril above based on your doctor's statement or icd codes you will get a payout. If you suffer a myocardial infarction you will get a payout for their heart attack benefit.
Why do I need it? - You don't. It is not replacement for health insurance. It only names a few very specific illnesses. It doesn't pay out for similar or leading up to illnesses. For example, lets say you go to the ER for a "heart attack" and after diagnosis the doctor diagnoses you as having angina. It is definitely a serious head to the emergency room situation but you won't get a payout as it wasn't specifically a "myocardial infarction." Likewise, on the policy quote I've gotten, "Heart failure" isn't covered. A heart attack is a lack of oxygen to the heart, usually due to from a blockage, while heart failure means the heart muscle itself cannot pump blood properly.
What coverage should I get? - Get generalized health insurance instead of this and a good long term disability insurance plan.
- This coverage can be expensive like $500/year for $100k payouts.
What to avoid? - This entire insurance product.
Travel Insurance What is it? - Comprehensive coverage providing health insurance coverage outside your home nation, coverage for cancelled, missed trips/flights, missing baggage, and medical transportation/evacuation.
How does it work? - It is a lot of different insurance products combined into one comprehensive policy. For most of the policies out there it is secondary insurance. That means if you have an insurance policy with anything else you need to make a claim first, then if the claim is denied, you then make it with your trip insurance. This mostly comes up with the health insurance side of the policy.
- Most health insurance on the trip insurance will only cover 30-60 consecutive days outside your country of residence.
- It doesn't cover pre-existing conditions from 60-180 days prior to the purchase date depending on the policy unless you purchase a waiver. They can look back in your medical record to determine if you had a pre-existing condition.
- If you cancel your trip for a specific valid reason for the contract - such as an illness that prevents you from taking the trip, you can get 100% of your trip cost back.
Why do I need it? - The most important part of this insurance from a FIRE preservative is the health insurance. Many health plans, especially those on the health insurance exchange, don't provide any international coverage outside of emergency coverage. Even if it is a true emergency the claims process can be problematic for international vs working with a travel insurance company that has experience working international claims day in and day out.
- The other huge benefit is medical transportation back to a better hospital or your home, which your health insurance certainly won't pay for unless it was absolutely essential to your life. You have more leeway with travel insurance.
- The other good need for this insurance is expensive non refundable trips like cruises or scuba liveaboards. Generally the insurance costs between 1-3% of the total trip cost.
- The other features of policies are nice to have
What coverage should I get? - The biggest thing in this area is reviewing claim service and making sure you have good health coverage abroad.
- After that, the features on the policy are "nice to haves."
- One "nice to have" coverage is cancel for any reason coverage. It lets you cancel for any reason and usually get 75% of your trip cost back. It's typically not too much more to add onto a policy.
- I'd only buy insurance for international trips or really expensive nonrefundable trips that you couldn't afford to take a second or third time in the same year if you had to cancel.
- If you're traveling 3+ times a year internationally you can look into getting annual travel insurance to take care of the health portion. It won't have much, or any, coverage for trips but it will cover the biggest risk for FIRE folks.
What to avoid? - Things you don't need like accidental death. Your life insurance is good enough if you need that coverage, so don't go out of your way to load up on policies with a high accidental death benefit.
- under insurance if you plan on using any of the trip cancellation features. Most policies deny your claim if your non refundable costs are greater than what you've purchased the insurance for.
- Overlapping coverage. No reason to get rental car coverage for example if you're already covered elsewhere (credit cards, your auto insurance, etc.)
- Insurance provided through the cruise line/airline/trip provider/travel agent. Usually its very limited coverage just for that specific trip, or your refund is another trip on the carrier instead of cash, and it's marked up a ton compared to the open marketplace.
Scuba Insurance/insurance for your high risk activity of choice - Scuba diving is excluded on a lot of policies like life insurance, disability insurance, etc if you're a scuba diver before getting the policy.
- If you're a diver you should get it, period. Divers Alert Network is the go to for a diver and they've been really helpful and good to the community.
- If you're vacationing then your trip insurance may be adequate. You may have to get a special sports rider depending on the policy. Trip insurance may deny if you go under 60-80-100-120 ft depending on policies. DAN insurance has no depth limit as in an accident you may have inadvertently gone beyond your limits.
- Then having the DAN card will get you in a chamber right away and first class service as there won't be any question of ability to pay. DAN also has some nice things like a small life policy and some disability coverage as well due to injuries from the sport.
Insurance not listed. What is it? - Phone insurance, extended warranties, GameStop's disk protection, Pet insurance, etc.
How does it work? - Pays out for certain events that are unlikely to occur.
Why do I need it? - You don't. These are insuring against minor expenses or have a ton of outs for the insurance company to deny coverage. Generally things like cell phone insurance will only pay out half a phone's value, maybe replacing it with a refurbished phone, and is pretty costly, almost equal to a payment plan of getting a new phone. You're better off being careful and having an emergency fund for when things happen.
What coverage should I get? - Only plans you absolutely 100% know you will make more money by having it than not. For example maybe you're in construction and your phone gets dropped/damaged more often than not.
What to avoid? submitted by /u/IncendiaryGames [link] [comments] |
| Reuters article from May 2, 2018: The myth of outliving your retirement savings Posted: 05 May 2018 01:01 AM PDT |
| Daily FI discussion thread - May 05, 2018 Posted: 05 May 2018 04:09 AM PDT Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments] |
| Discussing with parents their plan. Looking for tips or suggestions. Posted: 05 May 2018 06:46 AM PDT Hi, This weekend I sat down with my parents and asked them about their plans for retirement and savings. My father is 58 and mother 54. They make around 105k combined and have saved around 400k in retirement. My mother has a job as a mail lady for +20yrs(Im unsure if that qualifies for any government insurance once reitred) They have a house with 100k loan left out of 230-250k house. They also live in the North midwest. Im surprised we have this much since my childhood we did not have very much. First thing I discussed with them was about cars and they were saying as they age they may switch to leasing cars when they retire. Their reasoning is they don't want to be working on cars or get stranded during the winter. They were also thinking they would be withdrawing 40k plus a year. Their plan is to pay off the loan for the house before they retire in the next 6 years. Possibly downsize if they find a place they like.(they have been looking for 3 years so not sure that will happen) They were supporting my sister until she just got a good job to move out this year. She is not good with money and it will be up to me to help them. They just redone their will where I will have the power if anything happens to them or they lose their mind to Alzheimers.
Feel free to ask for any more information or spelling corrections. Im on my mobile and trying to figure out how I can help them organize and prepare more. submitted by /u/Otherstar9 [link] [comments] |
| Moving up in income, confused about the best path forward Posted: 04 May 2018 09:00 PM PDT I received a significant raise last year and it is putting me out of the range for tax advantaged retirement accounts. I had been regularly contributing to a Roth IRA, but I am going to be above the max Roth income this year. I contributed to a regular IRA last year but turbotax yelled at me and I ended up having to do a recharacterization to a Roth since I was above the normal IRA limit but still below the roth limit back then (last year to recharacterize...). I'm trying to figure out what to do this year. I max out my 401(k), but in lieu of contributing to a roth, what else should I do? Reading about a backdoor roth, you have to first contribute to a normal roth and then convert it after the fact. I'm a bit confused. Can I contribute to a normal roth if I'm over the limit? Is it just the fact that I cant deduct it from my income up front that I'm not able to do, but I can still contribute anyway? Is that even the best route to take? I'm reading articles that say its not a good idea to do a backdoor roth if you cant deduct that from your income. Does that have anything to do with the trump tax plan and the fact that its almost impossible to get itemized deductions anymore? Sorry if these are dumb questions but there's a lot going on and my head is spinning. Is it better to contribute additional funds to my employer retirement account? Like I said I am maxing my before tax 401k contributions, but it has the additional options of after tax and roth. Would either of those be better as far as taxes? I'm also contributing $1000 a week to a vanguard S&P index fund. Would I be better off putting more into any of those other options offered by my employer? submitted by /u/retiremunt [link] [comments] |
| FIRE calculation for "two stage" retirement? Posted: 05 May 2018 01:15 PM PDT Hi. I'm looking for suggestions on how to calculate required savings for early retirement. I'm 32 years old now, let's say I want to retire at age 45 with $50,000 spending money a year. I live in Canada and have a job with a defined benefit pension. Because of that it's looking like funding for retirement will have two distinct phases: Age 45 to 65: I will be relying solely on withdrawals from invested savings to get the $50k per year to live on. At age 65 I'll start to receive CPP payments (Canadian Pension Plan, around $6k per year), OAS payments (Old Age Security, around $7k per year), and pension payments from my work (lets say $20k a year). The remaining $17k will have to come from personal savings, and based on a SWR of 3.5% I will need $485k. If I use the same SWR starting at age 45 I will need $1.4M, however because of the big income boost at age 65 I'm thinking it might make sense to draw down part of my personal savings from age 45 to 65 since much less is required when the other benefits kick in. Any thoughts on this approach? Can anyone recommend a conservative approach for estimating the savings required at age 45 so that I can spend $50k a year until age 65 and be left with at least $485k? submitted by /u/kimchifarts123 [link] [comments] |
| Debt payoff, Roth vs. Traditional 401k questions Posted: 05 May 2018 07:32 AM PDT Hello all, I've read some and know that the "Roth or Traditional" debate is as old as time. Searching and reading here and led me to more info but has not made what I should do in my specific situation any clearer. Details as follows: Life Situation: Married filing jointly, 2 dependents ages 4 and 1. We are ages 28/29. FIRE Progress: Just starting out. Would like to FI/ER around 40 maybe? Gross Salary/Wages: About 85K with bonuses that vary/year. Yearly Savings Amounts: We are currently putting 20% into a Roth 401 K (not an IRA) with a 6% company match. I should be able to max this next year. I am also close to maxing our HSA. Our total debt is about 12k in student loans. Current expenses: Our spending, including putting aside $750/month in sinking funds for car repairs, etc. is $40K/year. We rent and live in a L/MCOL area. Assets: Not much. We've been paying debt aggressively for the last few years. Liabilities: 3 remaining student loans: 3K @ 5.35%, 4K @4.25%, and 5K @ 3.15%. Specific Question(s): My questions are as follows: -I just paid off the last 3.5K of one of my 4 (original) student loans (interest rate was 5.85%). This brings my available cash (in a taxable account) down to around 4K. Do I continue to use my bonuses/extra (some are not matched) to snowball these loans? Do I hoard the cash in a taxable account for emergencies? I'd really like to be completely debt free, but the $200/month going to the loans isn't a huge effect on cash flow. -Does it make sense for me to be putting the entire 20% into the Roth 401K? It seems to me that taxes won't get lower than they are now, but I often see the traditional 401K recommended often for tax purposes. Should I choose one or the other? Split it between both? I expect to pay about 3K in federal taxes this year if I leave everything as is. -My husband will go back to work at least part time in the next few years and all of that income will obviously go into some form of retirement/savings. What order should I max my tax-preferred options? I am thinking 1) Roth/Traditional 401K (max at 18.5K) 2) HSA (max at 6.9K) 3) Roth IRA (max at 5.5K/spouse). Any reason to do that differently? Thanks for the feedback! Edited to: Use specific format from FAQ and say yes, I've read articles linked from the FAQ about traditional vs. Roth 401K's. submitted by /u/ladderlogic [link] [comments] |
| How to semi-FIRE? Posted: 04 May 2018 07:47 PM PDT After a few more years of maxing out 401k and Roth IRA, I could stop contributing to my retirement accounts and just let them grow. And so, in a few more years, it would be awesome to quit the grind, find a part-time job that still pays the bills, and spend the rest of my time with my kiddos. What are the best ways to do this? My background is in manual software testing, leadership/management, and now product strategy. Seems like it would be easy to find PT QA work as an independent contractor. Relatedly, does anyone have experience with FlexJobs? submitted by /u/FIREmumsy [link] [comments] |
| How do people who retire "not early" do it? Same SWR? Posted: 04 May 2018 05:06 PM PDT Do 67 year olds use an SWR of 3-4%? If so, does that rate still work when your portfolio is in a much safer allocation, eg Target Retirement Fund? Follow-up: what asset allocation is required for the 3-4% SWR to not be considered a "failure"? submitted by /u/cashnprizes [link] [comments] |
| Am I doing this right or should I change some thing up? Posted: 05 May 2018 12:59 PM PDT Currently 38, 0 debt, About 3 months in bank for major issues. have about 30k in Mutual funds. Another 20k in IRA invested in S&P index and another 25k in TSP account. Currently saving around 760 a month split between S and C TSP funds. For a few reasons not buying a house in the area I live in. Expecting pay increase in few months and plan to dump it in to my TSP. So thoughts on things I should be doing different? submitted by /u/tadaka_phoenix [link] [comments] |
| a work benefits strategy for defeating student loans Posted: 05 May 2018 06:50 AM PDT So I had a wonderful epiphany last night. By far the biggest hurdle for me to reaching FI is my student loan balance, which is well into the -$80K region. I have constantly been looking for new ways to defeat this monster and throwing everything extra at it. Recently I took a job at a university, where free tuition is one of the perks. I realized that I could easily enroll in enough classes to qualify as a "part-time student," put my loans on deferral, and get interest suspended on the subsidized ones I have (although unfortunately more are unsubsidized than not). Then I would continue my usual loan payments as usual. I figure it would save about $200/mo in interest, and actually double the speed with which those particular subsidized loans are paid down. Any holes in this plan? Mostly I wanted to bring it to the attention of others who might have a similar situation and similar work benefits. submitted by /u/lassevirensghost [link] [comments] |
| Income increased by 3x, investment advice to retire in 20 years? Posted: 05 May 2018 12:27 PM PDT Hi team! I just got a job offer that will increase my household income from ~30k/yr to over 100k/yr. I was hoping for some some advice to help determine where to save my money. -I'm 24 and my wife is 21, and we both work in the software dev industry. -We've got 7k in a Vanguard for emergencies, and have had two Roth IRA's for a year and maxed out each them out last year (5.5k each). -I don't have anything in a 401k yet, and my new job doesn't offer a 401k match (not sure if they offer 401k at all?). -Our monthly budget puts us at around 4k for monthly expenses. -We want to retire sometime in our 40's. What kind of retirement accounts should we put our money in? Because we've already got a start on a Roth IRA, is it best to keep contributing there first? Should we be opening other retirement accounts as well? What kind of savings would we need to tide us over from when we 'retire' in our 40's to when we can start accessing our actual retirement accounts? Any advice would be helpful :) thanks! submitted by /u/throwaway_benice [link] [comments] |
| How to invest my time Posted: 05 May 2018 04:15 AM PDT Hello, I am currently a student at university (age 20), I am becoming very frustrated by the fact that because I am at university I can only seem to be expected to do more menial jobs (have done so for years now, potash, waiter etc) whilst my friends who have not gone to university are already doing interesting jobs that go further than customer service (no disrespect to these jobs, I have done them from the age of 15 and fully respect the commitment but feel am ready to do something new). After applying for many customer service jobs and not being hired by any I am now in a long summer of 4 months. I don't want to waste this time as I have done every time before. So my question to this sub reddit is what can I do to best invest my time over this period? my main goal is to make some money whilst not being in a job I have done a hundred times before Any advice is welcome, thank you in advance submitted by /u/JKSWMEMES [link] [comments] |
| anyone gone fire and then run out of money Posted: 05 May 2018 11:37 AM PDT |
| Is the new BMW you dream of stopping your FIRE plans? Posted: 05 May 2018 04:02 AM PDT Well, I thought about this recently.. If I disregard my total net worth and only consider my savings rate, then let us imagine that I have been saving X amount of money in year 2017. This is obviously not a fixed number, since the stock market fluctuates and my savings fluctuate. If I theoretically wanted to buy a new luxury car, such as a BMW, I recently thought that I should compare the cost of the car to a period of saving instead of comparing it to my networth. If I focus on how long it would take me to save up for the BMW, I think I would be less inclined to buy it. It might be only a little chunk of my net worth, but it would take a long time to earn the money back. Are anyone else thinking like this? submitted by /u/gorillaz0e [link] [comments] |
| It seems too simple to use savings rate to calculate time to FIRE. How does this compare to other calculators? Posted: 04 May 2018 04:20 PM PDT Other online calculators say I need 1.5x the retirement amount that I've calculated using savings rate. I'm new to FIRE so trying to figure out where I stand. Thanks. submitted by /u/Pleiades444_2 [link] [comments] |
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