Living Value of Your Death Benefit

by Wes Bridel on July 22, 2009

in Stewardship

This is what the "Golden Years" look like?!

This is what the "Golden Years" look like?!

Imagine you’re 65.  You’ve made it.  You’ve followed the advice of the mainstream financial pundits and advisers and you can finally retire.  You’ve got $1,000,000 of investments.  You’ve had a million dollars of term life insurance on your life, so now that you’re 65 and have a million dollars in assets, you’ve been told you no longer need this insurance.

Imagine that wonderful night, on your birthday, as your wife/husband takes you out to celebrate at the Oasis restaurant.  You’re at your favorite table, marveling from the spectacular terraced cliff side view as the sun sets just beyond the lake.  Taking in this majestic scene you reminisce over the many joy-filled and, at times, difficult years that you’ve shared together.  You remind your love how much he/she has meant to you over these years, and you inform him/her that at midnight tonight, your life insurance will be expiring because you don’t think he/she needs it anymore!

Let’s assume that your spouse does not kill you that night for this decision that you have made.  What would the next 20-30 years of your life look like?  Let’s assume that your $1M grows at a steady 8% year after year.  This is a very aggressive assumption historically (we’ll cover the differences between average and actual rates of return later), but we’ll use it for this example.

So at 65, you are bringing in $80,000/year.  You’re able to pay your taxes, mortgage, and all your other expenses with this amount, so you’re feeling pretty good.  Everything is working just as planned.

But what happens after 10 years of doing this.  When you consider the devastating effects of inflation on the dollar, what do you think the $80,000 will feel like to you?  Would you be able to live the same lifestyle?  You could probably make it, but where would you cut back?
What if you’re still healthy another 10 years later?  What do you think your original $80,000 feels like now?  At this point, you’re having to make drastic cuts in the way that you live your life.

The problem is that you’ve put so much pressure on your money to do so many things for you.  You can’t spend it!  What if you live too long?  You’re depending on it to provide you an income for the rest of your life no matter how long that is.  You want the peace of mind of knowing that it’s there.  You want to be able to give this money to your children and charities after you’re gone.  So you’re stuck in a downward spiral of poverty.  If you do begin to spend your assets, you’re in a state of fear about what is going to happen if the money comes to an end before you do!  Was this the golden retirement that you had dreamed of?  This is the reality of the future most people are crafting for themselves.

Tomorrow, let’s look at another option.  A better way of planning for your old age.  So make sure to share this post with someone who should read tomorrow.

This post is _Part 12_ in the series The Rock.To continue with this series, click on Pt 13.    To use this as a growth tool, you might start by reading Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8, Pt 9, Pt 10 and Pt 11.

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