The 21st century brought more than a new millennium to experience. Over the last two decades, inflation has continually outpaced wages and income, and this trend shows no sign of slowing. This inverse relationship between wages and costs means you need more dollars each year to purchase the same items as you did the previous year. Financial and estate plans are not impervious to the pressures of inflation. Here are three aspects of your financial plan that you should consider adjusting:
1) Spousal income replacement
With the advent of telecommuting, dual-income households seem to be taking over the landscape. For some, higher levels of household income have permitted better lifestyles. For others, two payments barely get the bills paid. If your budget and lifestyle depend on two revenues, you should review your life insurance coverage and ensure that both wage earners are insured. You, your spouse, and your family may be financially jeopardized if your insurance plan has not been recently updated.
2) Purchasing a new home and taking out a mortgage
Today, many homes are purchased with the help of a substantial mortgage. If you or your spouse suffered an untimely death, would your current life insurance be enough to pay off the balance of your mortgage? It’s essential to ensure your life insurance policy’s death benefit provides the necessary funds to accomplish your goals, protecting your family’s lifestyle.
3) College education costs
If you have college education plans for your children, you may be concerned about the rising costs of higher education. In 1977, the annual fee at Harvard University was $7,060. Thirty years later, you would have to pay $32,556-an increase of more than 350 percent (Figures from Forbes, Nov. 1, 1977, compared to the Harvard Admissions Office, 2008-2009 academic year). Putting money aside for your child’s education requires a long-term financial commitment and a disciplined approach to saving. However, it also requires a contingency plan for an untimely death. For this reason, you may want to include all or part of the projected education costs in your insurance plan.
Life insurance planning doesn’t end with these three scenarios. You may have other goals you want to hedge against if you or your spouse suffers an untimely death. Adjust your life insurance coverage for inflation to fulfill your wishes.