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Planning for my death

Home Estate Planning Planning for my death

  • Avatar FIREjr 
    Participant
    Status: Physician
    Posts: 1
    Joined: 07/12/2019

    Hello all, first time poster. Just got my first attending job in an academic center and trying to sort out what types of insurance I need to take advantage of. Currently 34. I already have a 2 mil term life that expires when I turn 50 plus a small group life paid by my employer. I have a plan for contributing to retirement savings and paying down debts. I found this really nice retirement spreadsheet that estimates how long your retirement will last if you retire at various ages (https://templates.office.com/en-US/Retirement-financial-planner-TM04022385)

    Is there any similar calculator you know of (or similar method) that would allow me to input my current income, savings rate, insurance policies and when they expire and let me estimate how long my insurance payout + retirement savings would last for my family at any given age of death? Yeah… it’s morbid, but I’m trying my best to find out if I have a time period (ie right now or when my term life expires) where I might need a little additional insurance coverage to ensure that my family is well cared for should this unfortunate event come to pass….

    Thanks!

    #229832 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1799
    Joined: 01/08/2016

    can’t you just add up your current assets and life insurance policies and use the 4% rule?  I mean, I’m sure your family would rather have you around, but $80k/yr plus SS benies is nothing to sneeze at.

    if you use WCI principles, you shouldn’t need that $2M policy in 16 years.

    and planning is not morbid.

    #229939 Reply
    Avatar nephron 
    Participant
    Status: Physician
    Posts: 227
    Joined: 05/09/2019

    I agree, your insurance needs should decrease the further along you get in your career because you will have more assets.   I think imagine most physicians would do fine with a 20 year term policy, you should have enough assets put together if you are saving for retirement in 20 years so that your family will be alright just using up the retirement assets that were saved for you after you died.   In 20 years, your children, if you have any, should be grown and independent or close to it, any college savings you were planning on should be close to done, and your spouse, if you have one, should be alright just using up the assets you had saved for your own retirement but unable to use due to your untimely demise.   I think that 2 million dollar policy that goes away at age 50 should be alright, you just have to think about what would happen to everyone if you suddenly died at age 51 to decide if you should get more now or just go with this.

    #230013 Reply
    Liked by Infinity
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2509
    Joined: 05/01/2017

    $2M is always a good starting point for docs.

    You just have to think about who is left behind. If you have 8 kids things might not be luxurious but even then they would be fine.

    Biggest thing is to sit down w/ spouse (it’s not morbid it’s incredible responsible) and game it out. If I die do you want to work or do you want to be done with work forever? It’s not that complex of a question.

    I have seen many, many spouses left after a sudden or not-so-sudden death w/o life insurance. It is beyond devastating it’s a double tragedy. You have to deal with the loss of a loved one and then rapidly deal with the fact that your lifestyle was dependent on their continued income. If I die my wife and daughter are fixed up. If the wife wants to work she will do so but it will be on her terms and not to keep the lights on.

    Another decent rule of thumb for life insurance: you die, you want your spouse to do 3 things —

    1. Pay off mortgage

    2. Get kids through college

    3. Juice the retirement

    #230022 Reply
    White.Beard.Doc White.Beard.Doc 
    Participant
    Status: Physician
    Posts: 937
    Joined: 02/06/2016

    The term life insurance is very important for young families.  If you save and invest every year for retirement, every decade the need for life insurance goes down.  We don’t need life insurance anymore because our kids finished college and we have enough to retire whenever we decide we are ready.  Our last term life policies will expire in the next few years and we won’t be buying any more life insurance.

    If you want your spouse to pay off the mortgage and have 80k/year to live on, you would need 2MM plus the value of your mortgage in face value of your term insurance. e.g. 2.5MM with a 500k mortgage balance.

    And don’t forget, disability is more likely than death, so be sure you have a good disability policy.

    #230052 Reply
    Avatar fasteddie911 
    Participant
    Status: Physician
    Posts: 304
    Joined: 05/31/2016

    I created my own spreadsheet and ran different scenarios of savings rates, drawdown rates (if I die and family needs to drawdown savings+insurance) at various ages.  I factored in paying down debts, SS survivor benefits, potentially lower expenses, etc.  I’d imagine 2M until age 50 may be close, but depends on your expenses, debts, portfolio size, etc.

    #230062 Reply
    Avatar Dont_know_mind 
    Participant
    Status: Physician
    Posts: 957
    Joined: 11/21/2017

    One way of looking at insurance is as MPMD describes.

    The way I look at it is as the cost of laying off a risk. So it depends on the cost and the risk. I think it is not necessarily related to net wealth.

    I have a reasonable net wealth, but I still have a 2M death and 200k/year disability. I keep these because my investments are cashflow negative, illiquid and if I died I would prefer it if my wife kept these or offloaded the assets in a way that realised the maximum value.

    I still have an umbrella and house insurance. Sometimes I consider cancelling those as theoretically I should be able to self insure, but it would involve selling assets and realising CGT.

    I think of death and disability insurances like getting a fixed rate mortgage. You have offloaded the interest rate risk at a cost of the difference between FRM and the ARM. It is rational to do this whatever the value of your portfolio, if this is a risk you want to offload at this price.

    If you have adequate term death and disability, what risks are left as far as income go ? From what I can see mainly unemployment – which is low in medicine.

    Insurance’s helped me to take more risk (i.e risky investments) than I otherwise would have, particularly after children were born. It should not be viewed as an investment and you are unlikely to make a positive return on it, but it does allow you to manage risks at a limited cost.

    #230071 Reply
    Liked by Hank, MPMD

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