If you don’t have enough money saved for retirement, it’s easy to know what to do. At least in broad strokes. You need to keep making money and saving.
However, if you’ve reached a point where you’ve accumulated wealth, when can you finally live a little? Can max savers with a huge stockpile cancel their life insurance and long-term disability insurance to free up some fun money?
That’s what a listener of the Clark Howard Podcast recently asked.
We’re Max Savers With Enough Money To Retire. Can We Cancel Our Life Insurance and Long-Term Disability?
A pair of lifelong max savers have become financial outliers relative to their age.
When can they cut back and enjoy a bit? And is life insurance and long-term disability a good place to start?
That’s what a listener wanted to know on the April 21 podcast episode.
Asked Brian in Florida: “My wife and I are in our late 40s and have always been max savers. We have reached the point where 4% of our net assets exceed our annual pay from our jobs — net of what we currently contribute to retirement accounts. I feel that we are at the point where we could both quit our jobs if we wanted to, but we generally like what we do and will probably keep working for now.
“We each have $600,000 level-term life insurance policies that we each pay $60 per month toward. I have a long-term disability policy with a $3,000 monthly benefit that I’m paying $600 a year and cost increases with age.
“Do you approve of us canceling these policies to put this money back in our lives since we no longer need them for replacement of income? And do you approve of us gradually phasing out our retirement contributions so we can start ‘living a little?'”
Clark’s Take: Can Brian and His Wife Relax a Bit?
Many of us would love to be in Brian’s position. These are good problems to have. At the same time, it can be difficult to determine when you have “enough.” And when you can be less stringent with your saving habits. Especially if you’ve been a max saver.
“Max saver is a term I love too. You have been so careful with money,” Clark says.
“There’s a financial writer named Allan Roth. He wrote a column about people who will not spend money and enjoy things. They deprive, they deprive, they deprive. And they’ve got plenty of money at that point because they’ve always done that.
“In your case, live a little, just as you said.”
Should You Keep Term Life Insurance and Disability Insurance If You’re Financially Set?
Back to the issue of Brian’s insurance policies.
As for the long-term disability policy, you can let it go, Clark says. Go ahead and save the $600 per year. It’s no longer essential in your life to keep paying that policy.
However, you may want to keep the level-term insurance policy for $720 per year for each of you, Clark says.
“You’ve probably had it for a while. And the more you get into it, the better the premiums work for you,” Clark says. “If you have a charitable organization that means a lot to you, you could have that level-term policy go to that.
“If it’s a situation where you want the survivor to just really live a lot when you’re gone and have that money to go travel the world, you could keep the level term in place.”
Don’t Forget To Have Fun, Clark Says
Some people have a goal to die with as much money in their name as possible. If that’s what satisfies you, no judgments here. But it’s not a necessary philosophy. Especially if you’re financially set.
Brian and his wife, the max savers, inspired Clark to recall and recite some advice he gives to those who suddenly get a large sum of money.
“If somebody wins the lottery or gets money from a sad event like an inheritance, I’ve always said that you invest 90% and you use 10% as frivolously as you want so you have that safety valve,” Clark says.
“You do something fun with it but most of the money is put aside for long-term security. Y’all are so set financially. You’re good.”
Final Thoughts
Being a max saver can help you achieve real wealth and lots of big financial dreams. But at some point, you have to decide when you can start enjoying all the money you’ve accumulated, even just a little bit.
It’s vital to save enough for retirement, Clark says. But after that, you can decide what else you want to do with your money, time and energy.
If you’re unsure what you can do safely, you can consider hiring a fiduciary financial advisor.
