Married, 55, grown kids: Should I buy life insurance, or invest in stocks? The ultimate decision
Presently I am a married 55 year old man married with two grown kids. One of my term life insurance policies expires soon and they have offered me a policy that will never increase in price for the rest of my life. The premium is quite a bit higher and the amount is less than what I presently have.
I do invest pretty heavily but lately the market has been very unpredictable. Would I be better off to perhaps take those additional monies and invest it?
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The following is from Wikipedia - Term life insurance (with very minor editing)
Because term life insurance is a pure
death benefit, its primary use is to
provide coverage of financial
responsibilities, for the insured.
Such responsibilities may include, but
are not limited to, consumer debt,
dependent care, college education for
dependents, funeral costs, and
mortgages. Term life insurance is
generally chosen in favor of permanent
life insurance because it is usually
much less expensive (depending on the
length of the term). Many financial
advisors or other experts commonly
recommend term life insurance as a
means to cover potential expenses
until such time that there are
sufficient funds available from
savings to protect those whom the
insurance coverage was intended to
protect. For example, an individual
might choose to obtain a policy whose
term expires near his or her
retirement age based on the premise
that, by the time the individual
retires, he or she would have amassed
sufficient funds in retirement savings
to provide financial security for
their dependents.
This suggests the questions "why do you have this policy?" also "how many term life policies do you need?" or "how much insurance do you need?"
Clearly you will be better off investing the premiums in the market. Your beneficiaries may be better off either way (depends when you die and to a lesser extent on market performance).
If you are not able to retire now but expect to be able to later, you should strongly consider having sufficient insurance to provide income replacement for your spouse. This is a fairly common why.
Life insurance is not an investment -- by definition, since the companies need to take a profit out of it, the average amount paid in exceeds the amount paid out, yielding a negative rate of return.
Get life insurance if your death would cause severe financial hardship for someone. If you have sufficient savings that your wife could recover and move on with her life without hardship, and your kids are grown, you probably DO NOT need life insurance.
If I were in your shoes, I would invest conservatively fully aware that for the next few years the stock market is going to be depressed, but then again, don't take that as advice. Every situation is different, weigh the pros and cons carefully and if required, consult a qualified professional.
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