Financial Vulnerabilities

In my previous post, How Much Money Do I Need I asked you important questions to help you understand the facts you gathered. Here in part two I continue to help you analyze and understand the facts.

Understand the Facts, Part 2

What if your husband died today, you are 50 years old and you need $10,000 a month to live on until you reach 85. Let’s also forget any pension plan benefits you might get. Ditto for Social Security. Let’s assume that you can earn 7% on your investments (7% net after tax is a very high number by the way) and that you want your income to keep pace with an assumed inflation rate of 3%. You would need to invest $2,363,990 to accomplish this goal. If you wanted to have the income stream last to age 95, instead of age 85, you would need $2,815,139.Although most people think they will spend less if their spouse dies I have never seen that to be true-when crisis strikes expenses mount. Travel increases-spending the holidays at home that first year may be too painful. Counseling bills are important. The desire to work decreases. Onetime expenses of administering the estate occur. Understand where the financial vulnerabilities are and work to solve them.

Do you know what you would need if your husband became permanently disabled?

Sadly, you would need MORE than if he died, because in the addition to your normal expenses there would be his medical bills and other costs associated with his disability. Group disability insurance might be available from his employer. Individual coverage is also available,  and you should get three proposals from three unrelated agents before making a decision. Tell the agent you want to get quotes only from companies with a “Comdex” rating of a least 90.

If your business partner dies will you lose the business? Yes, unless you have the ability to purchase the dead partner’s share of the business from his or her estate. The bomb-proof answer to this problem is a properly drafted buy-sell agreement funded with insurance-unless both partners have sufficient assets.

Take the time now to analyze your Financial Vulnerabilities. If you have any challenges or need additional information please feel free to comment below.

Check back next week for my post, Will I Have Enough Money to Retire.  This will help you analyze additional facts you have gathered.

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