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Aaron H | Can I economically ensure that, if I died, my wife could live forever on $1M life ins proceeds & avoid sharks? |
I am married with a newborn. My wife does not know finance at all. I want to legally ensure that nobody, including family members, could prey upon her financially if I died. Also, I would like to inexpensively ensure that she would live comfortably forever on $1 million in life insurance proceeds. I might want for the insurance proceeds to be invested in a balanced Vanguard index fund portfolio and for her to spend 4% per year, adjusted for inflation. Spending a lot on planning for our very simple situtation is not my intent (we own zero real property). Thank you so much! |
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Doing the Right Thing
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The best way to get a million dollar policy with a low cost is get a 30 year term.
Then open a Roth IRA (if you qualify) and invest in the mutual fund you picked, which is Vanguard. Though, I wouldn't just invest in one Vanguard fund, I would invest in other Vanguard funds.
You do not want to put your money in life insurance. First, there are high expenses associated with cash value, which affects the rate of return. Second, if you want to use it while keeping the policy enforced, you have to take a loan out and owe monthly interest on it as well, which is usually between 6-8% loan interest. Third, if you die someday, the life insurance company keeps your cash value. |
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NONAME
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You could have that policy paid out into a trust, or some type of annuity, so the interest money just pays out forever but can't be touched in principal.
You don't need to spend a lot, but spending a little on a family law attorney would be money very well spent. Nothing is "very simple" when it comes to death, inheritance, and a million bucks. If it were that simple, you wouldn't have as much concern as you clearly do. |
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Precious Gem
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Since no one lives forever, it shouldn't be a problem. May
I suggest you teach your wife about financing now. Have you also planned for college for your child? By the time she/he gets
old enough to go to college that 1 mil might not be enough.
Also have you figured in cost of living increases? |
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Jen G
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I like what Dave Ramsey has to say on insurance issues. He suggests a 15-10 year term life insurance policy that is 8-10 times your income so your family can bury you and live well for many years.
Education is the best thing you can do to protect your wife. Start getting her involved in the financial decisions now so she understands it now. This way, if you do die, she will be armed with knowledge to keep the family sharks away. |
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Kitty
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A simple formula : Take any amount, divide it by 2 and then drop a zero.
We will do ONE MILLION for the example :
$1,000,000.oo divided by 2 = $500,000.oo DROP a zero = $50,000.oo.
Can your wife and children live off $50,000.oo a year?? If so then she will need to put that one million dollars in an investment account and NOT a bank savings account in the untimely event of your death. |
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cvanbelle
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That is great of you to think of her. You need to set up a will with a trust for the life insurance. Since she is the beneficiary you will have to change the trust as beneficiary and have her as the owner of the trust. Put withdrawal restrictions regarding the invading of principal. If you put that earnings only could be withdrawn then the mill would last forever. If you let them invade principle then draw goes down. I think the guideline of 4% of total account balance per year sounds good. You also need to discuss this with her and ensure she gets a pre-nup should she ever remarry. |
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Franco
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I think your best plan would be to stipulate in your will that on your death the money should be invested in an income type mutual fund investing predominantly in equities. The capital should belong to your child, but the income to be paid to your wife.
The income from this will be about 3% (ie $30,000 pa)and, with professional management, it should be rising sufficiently to compensate for inflation and provide a rising real income. If you wish you can also stipulate that in the event of your wife remarrying or cohabiting, the income to her be be reduced to say 1/2or 3/4of the total available.
Note that a bank a/c paying about 5.5% will not achieve this, because inflation will reduce it to about 3% with no prospect for improvement over time.. |
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jacksaw
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she has to put money to use very wisely
Invest in gold bars
invest in stock
growth can be 50 to 55% yearly (long term) |
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jerman1919
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a simple way for you to acheive this is to allocate when she recieves the balance of your life insurance. for example state in your will that you want 75% of your life insurance put into a vanguard account that she can not access for a number of years. Allocate when she can recieve what amount of money. this will help her know what resources she can have and when and also the money will continue to grow should something happen. |
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mrwords2002
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I don't know much about money things but if your wife is a heavy shhopper it won't last her long. If not it would probably be fine for her. |
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miztiffany
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I was just thinking about this same topic yesterday...try to read some of the advice that Suze Orman gives on yahoo...she is the best. I found this article yesterday and I think it might help you.
http://finance.yahoo.com/expert/article/moneymatters/961 |
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