The future is uncertain, but your choices are not.
We often go about our daily lives living in the present moment without a clear picture of our future and the possibilities it may bring. What will happen to us each time we leave the comfort of our homes?The outcomes of our lives are dictated by the choices we make, by chance and by lifestyle. Take a moment to think about how your life could be impacted if you walked out the door one morning on the way to work and died in an accident. This is a hypothetical example obviously, but, I'd like you to think of the possibility not the probability of this occurrence. Now, take a moment to think about your family and its profile. How many kids do you have? Does one of them have a special need that requires additional care? How much does this cost? Among your other living expenses, would your surviving spouse be able to afford the care without your income? What changes could you make right now to protect your family against the possibility?This story is meant to be a mental exercise to invoke action, and below, I attempt to dig deeper to pinpoint areas where gaps may exist in your planning.
What will your family do without you and your income?
Let's take this a step further and dive into a realistic scenario to quantify the impact financially to your family if your income disappears. Assume you earn a comfortable after-tax income of $120,000 per year and this affords your spouse to stay at home, be with the kids and and take care of the house. Traditional as it may sound, you have three kids, and they rely on your income to support them financially. Your youngest child is 2 years old, which means, for the next 18-20 years, she, and the rest of your family will depend on your income.If you passed away, the amount your family would need today to replace your income for the next 20 years, would be $2,045,962. This calculation assumes the lump sum was invested and earned 6.0% interest over that 20 year period and taxes were paid on the interest earned. If it were not invested, the lump sum needed to replace your income would surpass $2,500,000.To further elaborate, below is a simple estimated breakdown of your household budget. Remember, if your income disappears, the expenses do not!Monthly Income and Expenses:Income: $10,000
Mortgage: $3,000
Homeowners Insurance: $100
Car Payments: $500
Car Insurance: $125
Gas: $350
Food: $1000
College Savings: $675
Other Savings: $1000
Fun: $750
Everything else (Estimate for: clothes, repairs, toiletries, medicine, toys, vacations, birthday parties, gifts, holidays, etc.) $500After everything is paid for, you're left with $2,000 per month to build an emergency fund, life insurance premiums, invest or for unexpected home or auto repairs.The next section takes a dive into one of your key budgeting items, college savings, and what you can expect in Florida.
Have you started saving for your kid's college education?
How much will it cost to go to college? Will your surviving spouse be able to afford school for the kids without your income?In Florida, we are fortunate to have programs that help parents save for their children's future education. Parents can choose to use a 529 Savings plan, Florida Pre-Paid, or save/invest on their own. Using the Florida Pre-Paid program, the monthly cost, per child, to send them to one of the twelve Florida state universities in 2020 is $176.97 for tuition, and another $47.89 to include dormitory expenses. This comes out to $224.86 in total, but does not include other expenses such as food plans or books. If your child decides to go to school out-of-state or to a private university, the school fees will be higher and the existing programs may not cover the full expense.Last, the final section of this mental model looks at your retirement years to help you frame questions for a path to stability.
Will your savings be enough for retirement?
If you were challenged to come up with an amount of income that you would reasonably like to have during retirement, what would that number be? Is your current financial plan adequate enough to get you there? Have you factored in 2-3% annual inflation in your desired income amount? If not, what should your desired level of income be to maintain your lifestyle and expenses accounting for inflation (how much larger is it)? What would happen to your existing portfolio or savings if we experience a significant economic downturn again like we did in 2008-09? Will you be able to recover with your current appetite for risk? What would happen if that downturn occurred in the year you expect to retire and your capital shrunk by 50 percent? Would you have to continue working to maintain your lifestyle?What changes can you make today to shore-up your financial health and create a more comfortable future despite market volatility?
Would you like guidance on these issues?
An appropriately designed life insurance program can relieve the financial burden your family will experience and also prepare you for a comfortable retirement.I would enjoy the opportunity to get to know you and develop a plan to protect your family. If you are interested in discussing your options and budget, please complete the form below and I will personally get in touch with you.Joe Schaefer - MBA - Florida Life Insurance Professional
© Joe Schaefer - MBA - Florida Life Insurance Professional