Tom and Linda Anderson : Law Enforcement agent catching up on retirement while paying for college.

The Situation

Tom is currently 51 and has been working for the border patrol since his late 20’s. Linda and he have been married over 25 years and are on the tail end of raising 3 children, Jack age 20, Katie age 17 and Ava age 14. Jack is a sophomore in college and Katie will start at Michigan State next year. Tom and Linda are also looking forward to Tom’s retirement at age 57.

However, with one child in college and two more coming soon, Tom ‘s life insurance needs remain high. As hardworking and caring parents, Tom and Linda have always put their children first.  But they find themselves in the tough predicament of needing to save extra money for retirement while helping their kids with college are looking for every dollar they can find to put towards that goal.  They are also concerned that the house won’t be paid off until Tom’s 63 and might want to pay it off sooner if possible.

He thinks he’ll need life insurance for 9-10 years, once Ava is done with college.

Tom makes 150,000 per year has had FEGLI for years.  He increased his option B to 5(X) his salary in the most recent open enrollment in 2016 although the payment is high.  Reducing his life insurance is not an option but he wants to know if he can save any money, especially now.

Tom is slightly overweight and his doctor has him on a small dose of blood pressure medication.  His overall health is good, he’s a nonsmoker but has some history of heart disease in his family.  It’s for these reasons that Tom never ‘shopped’ his life insurance.  He didn’t think he’d get it and certainly not at a good price. 

The Plan:

Right now, Tom has 912,000 of life insurance that is costing him 106.40/pay of 2766 annually.    That number rises each year but really makes a bump when Tom is 55 when the prices jumps to 196.00/pay to 5113.00 annually.

The issue really arises when Tom retires at age 57 (mandatory for law enforcement) He can continue with FEGLI at this pre-retirement death benefit but that premium will go to 9761.00 a year and then 15,294 per year for the last year Ava is in school.   

The total out of pocket for Tom would 21,679 at retirement with a total 10-year cost of 66,545 to keep the policy for 10 years.   Ouch.

Although Tom didn’t have a total clean bill of health and would not qualify for the best rating, he definitely was eligible for a good rate and we found him  a 10-year term policy with a death benefit of 1,000,000 for 1700.00 year, a full  1000.00 per year cheaper than he is getting now and will remain the same the entire time of the 10 years.

The Benefit

Between now and retirement, Tom will have saved over $11,769.00.  If you had in his total 10-year costs, he will have saved over $64,000!  That’s money that can be saved into retirement, making college tuition payments or even paying off that house a few years in advance.