Nobody likes to talk about death, especially when it’s the death of the person you love more than anyone else: your spouse. And nobody (really, nobody) likes to talk about life insurance except the agents who sell the stuff. As a financial planner for physicians, lately I’ve been having both of these conversations because you know that life must go on after your spouse dies, and you’ll need money to keep your family going.
If you’re thinking about getting life insurance, here are three questions a financial planner for physicians should as you:
- How will you pay your bills? Let’s assume for a minute that your wife/husband/partner died yesterday. What does today look like? Are you really thinking about going back to work right away? And if you do plan to return to work, can you really earn enough to support yourself and your kids? If you’re the doctor in your family, the answer may be an easy “yes”. But if you’re the spouse who stays at home with the kids or works part time, there may be more to consider here. Include some insurance to cover bills until retirement. When I do the math on this number, it usually runs between $2 million and $3 million.
- What about retirement? As a young doctor, you may be doing some financial planning for retirement but have you considered what your spouse will do without you? Since we’re talking about financial planning for all your goals, you might as well add some coverage to build a fund for your spouse’s retirement, especially if they’ll have a tough time supporting the family and saving for retirement. Assuming that life insurance proceeds will be invested to grow and support this goal, the number here is usually somewhere between $1 million and $3 million.
- Do you still want your kids to go to college? Of course you do. It’s the reason you started this conversation about dying and life insurance in the first place. But you might be shocked when you find out how much coverage you’ll need to build a College Fund. Ready? A private university runs about $40,000 per year. BUT, that cost of college rises at about 7% per year (really, that’s what it’s been for years), so if your child is newly born, you’ll need about $600,000 by the time they’re ready for school (or about half that if they’re going to a public university). Given calculations for the time value of money, you might need another $150,000 to $250,000 worth of coverage per child to pay for college.
You’ll also want to factor in the cost of other smaller goals like repaying debts or supporting extended family but these three questions are the biggies.
After your death, it all comes down to two questions, and one answer.
When your spouse calls your financial planner to ask, “Are we gonna be ok? Do we have enough?” be certain the answer is undoubtedly “Yes.”
W. Ben Utley is a Certified Financial Planner™ for physicians who want to stop worrying about money and start building financial security for their families. Contact him at 541-463-0899.