IF HE DIES FIRST, WILL I HAVE ENOUGH MONEY TO LIVE ON?

If both spouses are retired, a common concern the wife often has is: if my husband dies first, “Will I have enough money to live on?” You see, if he does die first, quite often she loses some or all of her deceased husband’s company and/or military retirement income. Additionally, for sure the smaller of the two Social Security checks will be discontinued.

AN INHERITANCE

Recently, a 72 year-old couple came to see me regarding a $100,000 inheritance the husband had received from a relative. Together we evaluated their financial health, goals, and desires. I learned that a few years previous, upon his retirement, he elected a company pension option which included a larger monthly pension check ($3,500 a month) while he was alive, but a reduction in the pension check of 50% (to $1,750) should he predecease his wife. This now concerned both of them; hence, we set out together to find the best way to use this $100,000 inheritance to help make-up, as much as possible, his wife’s cash flow shortage should he indeed predecease her.

AN ENHANCEMENT

The Solution: A Modified Endowment Contract, which is a specific type of life insurance policy. Here is what we did: we submitted his health information to a number of different life insurance companies and received back various offers; ultimately, he chose to put the $100,000 inheritance into a onetime lump sum fixed** Modified Endowment Contract, which he felt was the most favorable option for his circumstances. By doing so, he was able to create a $250,000 “nest egg” right away via an immediate future guaranteed* death benefit. His comment was similar to many others, “There is no other way I could multiply this money for my wife so quickly, at no risk.”

A DEATH

As it turned out, eight months later, he passed away. Unquestionably, the loss of her husband was devastating to her, but she was grateful that it was not compounded by financial concerns. She received $250,000, completely income tax-free, which helped offset the reduction in his company pension check, as well as the loss of one Social Security check.

A REVERSE CONCERN: HER FOR HIM

A lady, age 70, came to see me; she was concerned about providing sufficient finances for her husband’s care and well-being (as he was already in poor health), should she predecease him. To prepare for such a possibility, for several years they carefully managed to live without $10,000 per year from their required minimum IRA distribution, and tucked it away into a savings account. Her question was, “Is there anything we could do better with the $10,000 per year?”

Ultimately, they were pleased to find out about an option of re-directing the same $10,000 a year that they were already setting aside, to a fixed $400,000 life insurance policy on her life (due to her excellent health) for her husband’s benefit—guaranteed payable to his account within a few weeks after her death, if she passes away first.

Now, if by chance he passes away before she does, the life insurance policy provides an option for her to access a portion of the $400,000 death benefit for her own long term care needs—nursing home, assisted living facility, or home health care— should she need this type of assistance.

HAVE YOU THOUGHT ABOUT AN INCOME REPLACEMENT PLAN?

These two different examples, and yet very much the same, and so many more I’ve participated in over the last 30+ years, demonstrate that with advance planning there are a number of favorable methods to financially prepare for the surviving spouse.

Because these concepts are available for individuals through age 85, many retirees have repositioned funds from savings accounts, CD’s, Savings Bonds, brokerage accounts, yearly IRA required minimum distributions (RMD), proceeds from the sale of a home, inheritances, reverse mortgages, etc., all in an effort to make up for an inevitable income loss to a surviving spouse.

TO FIND OUT MORE

To get together for a consultation (in person or by phone) to review your particular circumstances, contact me by phone (800-285-3373); or E-mail us your specific concern to info@CapitalEnhancement.com, and you will receive a speedy reply of the possible options you may want to consider.

*Guarantees are subject to the claims paying ability of the underlying insurance company
** I would never recommend anything but a fixed product.