I recently lost my step-brother the day before his 42nd birthday. His passing was a stark reminder that life is unpredictable and sometimes far too short.
Premature death seems unlikely but almost all of us know someone who passed too soon. According to data from the Center for Disease Control, 0.2% of 35-44 year olds died in the United States in 2007 (the most recent year reported). The death rate rose to 0.4% for those 45-54 and 0.9% for ages 55-64. These percentages may seem low but actually add up to hundreds of thousands of lives each year.
How can you prepare your finances for the possibility of premature death?
- Buy enough life insurance. Level-premium term life insurance is all most people need. Have enough life insurance to meet your financial goals (e.g. college for kids, retirement for spouse/partner, pay off debt) without your future work income. The group life insurance offered through your employer may not be enough. You can use this calculator to estimate the amount of life insurance you need.
- Create an inventory of your accounts, assets, and digital-assets with instructions on how to find and access them. Include a list of your usernames and passwords or use an application such 1Password to manage them.
- Execute a Will and, if appropriate, a Trust.
- Check that your beneficiary designations on your retirement accounts and life insurance are accurate and up-to-date.
- Title non-retirement accounts (e.g. savings, brokerage accounts) as Joint or Transfer on Death accounts.
Take care of these tasks now so you can rest assured that your loved ones will only have to worry about missing you if you die prematurely.
Life can be short. Plan for it.