By Jon L. Ten Haagen, CFP ®
I just met with a young man I have known for many years. I know the entire family. Over the last few years he has moved south and married to a wonderful young lady with whom he has purchased a home. He was very happy because we discussed his future a few years back and he mentioned buying a house in the future. He wanted to save for the house and at the same time wanted to save for the future. We agreed that a ROTH IRA would make sense because he would not be buying for at least five or more years. He was able to take money out of the ROTH tax free for a first time home purchase.
We were reviewing his investment positions and going over details they should be addressing (if they haven’t). This is what CFPs do – go over all the areas which should be addressed periodically.
We talked about life insurance since they are now married and own a home together. They had not thought about it and do not have coverage. God forbid, what happens if one of them passes? The remainder has a large mortgage to cover on one salary. Then if they cannot afford to carry the expenses they will have to quickly sell the home – perhaps at a loss because of the quick turnaround. With their head swirling around because of the emotion of the loss of a loved one how does one think straight and rationally?
The next thing would be how would a newlywed (or for that matter, anyone) fair having to deal with their loss, then working to sell the house, maintain their job and figure out how to make ends meet at such a trying time. So easy to buy a term life policy to cover the cost of the home mortgage, living expenses to cover the few years to get back on ones feet and perhaps go back to school for some education to find a better paying job.
Next we discussed wills. They do not have wills. As a married couple all would go to the surviving spouse. However, what if you had some family heirlooms which you wanted to go to a family member. I had an experience with two watches I got from our parents estate. We could have fought over them (they were expensive) but it was rationalized in that dad and I had raced together and I should have the watch he wore when racing with me. These many years later, my brother’s daughter, my goddaughter, got married and I gave she and her brother the watches (along with a wedding check) and the joy I got from giving them something that belonged to their grandparents and the joy on their faces will live with me forever. They are speaking with an attorney and getting wills done and signed.
Next, we reviewed their investments. We discussed their 401K plans and the investment choices they made. We reexamined their ROTH IRAs and emergency funds and agree that since they are making more money now to increase their contributions on a regular automatic monthly amount. I had them create a budget and balance sheet so they can clearly see what money is coming in and where the money going out is spent. This will be a yearly review.
Overall it was a very gratifying meeting. I have helped a young couple get on a level program of coverage and investments going forward. We will be reviewing these plans periodically going forward.
So, how is your family coverage? Is it enough to cover the expenses of losing a loved one and maintaining the family obligations and comfort?
If you feel that we can help you get a game plan together we would welcome the opportunity. Thank you for your readership. I get great gratification hearing from you our readers when I get thru and you say thank you for making something clear. Enjoy your summer and please feel free to give us a call. We are free to speak with and there is no obligation going forward.