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Originally Posted by disneysteve
I would disagree with this. Not the fact that you will die. Obviously, that part is true. However, that doesn't mean you will always need insurance in place to cover funeral costs. Hopefully, you are saving money in other ways. As we get older and our financial assets increase, our need for insurance gradually decreases.
I've reduced my life insurance twice in the past 10 years and I expect to reduce it farther next time I meet with my agent. Eventually, I expect to reach a point where I don't need it at all as our savings and investments grow to be sufficient to support the surviving spouse and cover funeral costs.
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There is merit to your point and each person's situation is different. The penalties for IRA withdraws, when transferred to a spouse is what? I do not think Roth or 401k assets could be withdrawn for funeral expenses without being taxed witha 10% additional penalty? So the issue becomes that middle ground between ages 50 (when mortgage is paid off) and 62.5 (when a 401k can be liquidated). 62.5 is not even something I am sure of...
Buying a new insurance policy at 50 when the term expired appeared expensive (relative to costs of similar insurance at age 28). Meaning if cost at age 50 for term was same as cost for permanent at age 28, it made sense to lock that cost/rate in now. There is risk with new policies (health could change, rates could change).
401k and Roth are for retirement... if something were to happen to me my wife would depend on these accounts for retirement income (most of our retirement savings are currently in my name).
What little my wife has in her retirement accounts I could liquidate to pay for her funeral... but I still think the penalties outweigh this technique while young.
There is a chance the permanent insurance would have enough cash value for kids (which don't exist yet) to go to college. It might make sense to surrender it then.