How Much Are You Worth To Your Family?

Posted on August 26, 2021 by

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Did you know birthday cake is a health food? It clearly is, if you examine the outcomes.

It is a proven fact that the more birthdays you have, and therefore the more birthday cake you eat, the longer you live. Pretty persuasive. I think the evidence supporting healthy eating and exercise is less persuasive.

We will grow older or we will not

All planning therefore should be dual.

  1. The plan that deals with how you will organize your affairs and how you will use your resources should you stay alive.
  2. Your plan to deal with obligations and preferences created while living should you not make it.

Many people know their legal obligations but seriously underestimate their duties to those who had been counting on them.

How much are those other obligations

For simplicity, assume all the legal obligations are paid off upon your death. Let suppose $2,000 a month plus inflation and taxes are needed to keep everyone in their present world. How much capital is that?

You need to know four more things.:

  1. How much income will the capital earn? Usually a conservative rate as it cannot be lost. Do you know how much you can have for predictable income. Today you could expect something in the range of 2% for 5-year bank deposits.
  2. How much income tax will it cost?
  3. How much will inflation affect the survivors?
  4. How long do the survivors need the income?

Answer:

Assume the income of $2,000 a month is needed for 20 years, yield is 1.5% after taxes, and inflation is 2%.
Your heirs are counting on money that requires capital of $677,643.47 to support. Add to that education funding for the children and maybe retraining for the surviving spouse, plus 90 days income to readjust to new life, and the costs of funeral.
New question #1
How much do you have of that now?
New question #2
What are you going to do about it?

A thought

A 30-year-old male, non-smoker in good health can buy $1,000,000 of 20 year term insurance  with a level premium throughout the period. From a major carrier it will cost less than $55 a month or about $600 a year.
Can you explain to the potential survivor group why you don’t need it? Adulting involves thinking about this sort of thing.

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com 

Category: Personal FinanceTags: , ,

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