Assuring Your Family

Nothing excites us like the inevitability of death and taxes. At least taxes may come with a refund. During your working years, if you are married or have dependents, they expect you to bring in your salary, wages, 1099 income, etc. For many, that comes on an every-couple-of-weeks schedule. You probably don’t think much about it, especially if it just gets directly deposited in the bank.

Then there are those bills, such as the rent, car payment, parking fees, utilities, and the like. You may also have these paid directly out of your account.

What about the savings for the beach house, the kids’ college, and the travel you’re hoping to do in early retirement? Maybe you’ve started to save for some of those goals and plan to start on the others at a future date.

But what if that orderly process suddenly stopped—not because of unemployment or disability but due to a fatal car accident or an unexpected illness. How will the bills continue to get paid? Many people have had to turn to things like Go Fund Me pages to cover a partner’s burial before they can even think about coping with the missing income going forward. Where will the money come from to continue this orderly life? How will the income be replaced? Even if the person who is suddenly gone didn’t work outside the home, how will his or her household contribution be covered? 

Replacing your income - Let’s say you are 25 and make $50,000 a year. If you expect to work until age 65, then, not counting raises, your family expects that over the next 40 years, you will bring in $2 million (40 x $50,000) in pretax income. If you’re 45 and expect to work 20 years until 65, that reduces to $1 million (20 x $50,000). 

You may find these numbers shockingly high. But it’s not as much money as it seems to be. For one thing, along with reducing these figures for taxes, their purchasing power needs to be adjusted for inflation, as prices will certainly rise over the next 20 to 40 years. And this by no means accounts for all possible considerations that could stretch these dollar amounts to the breaking point, such as caring for a special needs child or losing your home during a natural disaster. 

But even if $1 or $2 million isn’t as much as it sounds, it would be a lot for your family to lose if you died suddenly. In that case, life insurance could help them weather the lost income, though it would do nothing to ease their emotional loss.