Thinking of dropping one of my disability policies

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Topic Author
Orthodoc1.
Posts: 61
Joined: Sat Mar 13, 2021 10:19 am

Thinking of dropping one of my disability policies

Post by Orthodoc1. »

Hello. I am a 60 year old orthodontist with 2 disability policies. One is through the dental association, which posted a large increase in premium upon renewal after I turned 60. My premium for $3000 monthly benefit after a 180 day waiting period rose from $2200/ yr premium to $3000. My second policy is though the orthodontic association, which pays a $7500 monthly benefit after a 90 day waiting period and rose much more modestly to $2700/ yr annual premium. From what I understand, both policies will pay out until age 67 and then stop. I am contemplating dropping the $3000 monthly benefit one which became much more expensive relative to the $7500 monthly benefit especially considering it has double the waiting period. My financial and family situation is as follows:
- I am self employed and earning approximately $400,000 per year (varies yearly)
-My wife is 59, is a general dentist who works part time and earns approximately $150,000 per year
- We have 4 kids in their 20s who have zero college debt ( They all had various scholarships and we paid remainder)
- I have a son who graduated dental school and is not training to be an orthodontist. He has 2.5 years remaining . We paid about 60% of his dental school expenses which were approximately $500, 000 for 4 years and plan on paying 60% of his orthodontic training which will be approximately $220,000 for 3 years.
_ I have another son who is in 3rd year of 4 years in Medical school for which we plan on paying approximately 60% of his approximately $360,000 four year cost of attendance
-2 car leases which we deduct as a business expense totaling $1500 per month.
- Home worth approximately 5.2 M with mortgage paid off 20 years ago
-No other debt
-Approximately 5.6M in savings with $660, 000 in I bonds, $780,000 in tax free Municipal bonds and the remainder in mostly Total Stock Market Index and Short term bond index with a 45/55 allocation. Approximately 50% of our saving is in tax deferred. We put in approximately $110, 000 combined in Individual 401k plans.
- We plan on working approximately 5 more years, then live off savings and apply for social security at age 70.
- Our annual expenses are approximately $150,000 per year not counting helping kids with educational expenses.
I am thinking that maybe I do not need disability insurance at this point, especially the $3000 monthly benefit per year policy. I feel that we could afford to retire now but prefer to work another 5 years to help the boys with post doctoral education and still enjoy working.
Any thoughts?
Drelk3
Posts: 33
Joined: Sat May 28, 2011 8:27 pm

Re: Thinking of dropping one of my disability policies

Post by Drelk3 »

Based on an age of 60 with the 180 day elimination your maximum benefit would be $234,000 if policy pays to age 67. This number decreases by the $3000 benefit every month. The $3000/year premium doesn’t seem that unreasonable right now but as the maximum benefit decreases, self-insuring may seem more practical. I faced similar issues about 8 years ago and was glad I kept my policies - especially when I fractured my femur. I paid my premiums personally and not through my LLC and it was nice to receive tax free dollars for awhile as I recovered

Drelk3
AB609
Posts: 176
Joined: Thu Oct 17, 2019 9:02 am

Re: Thinking of dropping one of my disability policies

Post by AB609 »

With your assets and the fact that you wife has a good income, I don't think you need both policies. Your kids are pretty well into their programs and the likelihood of you becoming disabled in the next couple years is small unless you have something medically going on now or have risky hobbies. Even with paying $500K or so in remaining tuition, you still have plenty of assets left to provide $150K in yearly expenses.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Thinking of dropping one of my disability policies

Post by Gill »

Orthodoc1. wrote: Sat Oct 23, 2021 5:58 pm
-2 car leases which we deduct as a business expense totaling $1500 per month.
Can't help but wonder, how does an orthodontist and a general dentist justify this? I imagine you also deduct insurance, repairs, gasoline for say a total of $25,000 a year.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Topic Author
Orthodoc1.
Posts: 61
Joined: Sat Mar 13, 2021 10:19 am

Re: Thinking of dropping one of my disability policies

Post by Orthodoc1. »

Hello Gill. We practice in multiple locations and work in shifts and travel from one to the other during the work day. Do you have any advice regarding the question about the disability policy that I am considering dropping?
ralph124cf
Posts: 2985
Joined: Tue Apr 01, 2014 11:41 am

Re: Thinking of dropping one of my disability policies

Post by ralph124cf »

Definitely drop the $3,000 policy. The $7,500 is certainly a better deal, but with your financial position you don't actually need it.

Ralph
Tuxedo
Posts: 57
Joined: Thu Dec 10, 2015 8:15 pm

Re: Thinking of dropping one of my disability policies

Post by Tuxedo »

You don't need either.
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Thinking of dropping one of my disability policies

Post by afan »

To clarify
Back when * had disability insurance, it would gave paid for some time, one year or two years, I don"t remember, if one kept working past the regular end date:

Get disabled at 62- pay to 65.

Get disabled at 65- pay to 67.

Get disabled at 70- pat to 72.

If your benefits really cut out at 67, no matter your age when it happened, then the total benefits you could receive become quite small and the coverage is not worth much.

How mutable are your retirement plans? If you found you wanted to be able to contribute more to the kids, would you keep working? If you had a large unbudgeted expense, would you keep working? The longer you work, assuming the policy would pay benefits if you were working but became disabled past 65, then the more valuable coverage.

The worse your health, the higher the likelihood of going on disability, and the more valuable the coverage.

You could make a great argument that you do not need either policy now. But the $7,500 policy could come in handy if you went out before you finished helping you kids. If that is 2.5 years, you could rake another look at that point. Even the $3,000 policy might be worth holding onto that long.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
Topic Author
Orthodoc1.
Posts: 61
Joined: Sat Mar 13, 2021 10:19 am

Re: Thinking of dropping one of my disability policies

Post by Orthodoc1. »

Actually, we did not plan on paying for doctorate and post doctorate education, just 4 year college but we can afford to so we want to ease the boys' stress a little. We definitely want them to have some loans so they come out hungry to work. My wife and I came from very humble beginnings. Our parents could not pay anything towards our tuition and a very minor part of our living expenses. We came out of school with loan payments that were 18% of our gross income our first year and they were not tax deductible. As a result, we lived in a very small, old, low cost condo for a few years and worked 60 hours per week. The banks would not lend us money for a house nor to buy a practice. We are having them take the lower cost loans at 1% origination fee and 6% interest but avoiding the Grad Plus loans that have a 4% origination fee and more than 7% interest. Interest accrues while attending school for dental and medical school loans. No subsidies. That being said, if we could not afford to kick in as much, we know they would still be ok.
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