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If you died today, would your spouse be able to reach FIRE?
I know, I know. It’s a morbid question. But, I saw this topic posted on the “ChooseFI” Facebook group recently, and it got me thinking.
As I’m sure you are aware, death is not a topic people enjoy talking about. That’s probably why 56% of American’s don’t have wills. Admittedly, until last year, I fell into that category due to pure laziness on my part.
I mentally went through the figures in my head to see if my wife would be taken care of. It then dawned on me that I was thinking about how she would do without me and didn’t even think for a second how I would do without her. Let me just say I shuddered at the thought.
With all that said, it weighed enough on my mind that I asked my wife, during our regular afternoon walk, what her thoughts were. The question definitely caught her off guard. I had to explain why it was on my mind to put her mind at ease.
Quick sidebar, we normally don’t talk about such heavy stuff on these walks. Thus, unsurprisingly, the question stunned her. Typically, on these walks, we simply recap our days.
After my wife was relieved that I wasn’t going to die immediately, she told me that she thought both of us would be fine if one of us passed. Feeling confident with the way we currently handle our money, she didn’t give it a whole lot of thought. I also think she was ready to move on to another topic.
Digging Deeper
Unfortunately, her quick response was not good enough for me, so I decided to dig deeper for her. I walked her through all of our potential assets down the line and specifically why I thought that she would be fine.
I first reiterated how much life insurance we had. Plus, based on our savings over the years and being about 3 years away from FIRE, we should have more than enough to help cover financial expenses in the future.
Certainly nobody wants to leave their family in a precarious position if something were to happen to them. However, we see it everyday when spouses unexpectedly pass away. Some families scramble to find wills, bank accounts, or even money to cover funeral costs.
The last thing that I want to do is leave my wife in a situation where she would need to make drastic changes. Loss is already so hard to deal with. I have heard of widows who have needed sell their homes and go back to work just to barely make ends meet.
Life Insurance
One of the first things that I did after my wife and I got married was ensure that I had enough life insurance.
A good rule of thumb is to have 10 times your salary for life insurance. That means that if you make $50,000 per year that you should have a $500,000 policy. If you make $100,000, you should have $1,000,000 in life insurance. You get the point.
I would take it a step further though. If you are the main breadwinner, you should assess what your FIRE number is. From there, you should subtract out your assets to determine the number that you really need to cover your spouse.
That means that if you have determined that you and your wife need $1,000,000 in retirement and have currently saved $100,000 for retirement, that you should be shooting to receive a $900,000 life insurance policy.
In other words, if I were to die tomorrow, my wife would be totally taken care of and would reach financial independence.
The Flip Side
Let’s consider a different scenario. What if you, as the main breadwinner, lost a stay-at-home spouse, but as a result, would be able to reach FIRE?
Would you retire immediately, or would you continue working to give some semblance of continuity in your life?
This is where I really began to internalize the scenario on my end.
Since my wife stays at home with our children and I work, I could quit work and stay at home with our children. However, let’s say that the kiddos attended school during the day.
Would I still feel the same way?
Honestly, if my wife passed away, I would probably still continue to work. It might be a crucial way to stay social with my coworkers and remain mentally stimulated. Plus, I wouldn’t want to set a “quitting” example for my kids. If I quit my job, would they want to quit school so that they could stay at home with me?
These are all really tough questions for me to think about. However, I thought it was an interesting topic to ponder over and wanted to learn what my readers thought.
Holy moly reading this at 1 am adds an effect…;)
We talked about this last week but it wasn’t about FIRE specifically. He was very happy to let me know I’ll be fully covered and taken care of if he died. I didn’t like that….I don’t want him to go. He’s my favorite thing in the universe.
He was just worried if I could handle the emotional stress. Such caring thoughtful kinds of men me and Mrs. MSM married 😉
Lily | The Frugal Gene recently posted…Saving Money For College Does More Than Pay Tuition #FinHealthMatters
Sorry to get you riled up on the West Coast before bed 🙁 Hopefully it didn’t result in any nightmares 🙂
I think if my spouse passed I would continue to teach part time as I do today. A huge life void would be created that would be hard to fill. Working would be just one small way to start to fill it. Tom
Tom @ Dividends Diversify recently posted…The New Millionaires | Demographics | Part 3
Thanks for sharing Tom!!! If my wife passed I would be distraught. I can’t imagine living without her and it’s incredibly painful to think about.
Death is such a difficult topic to talk about and to plan for. I started buying life insurance once I was in the work force. I didn’t want my family to be burdened with unexpected expenses if I suddenly passes away.
Once I have a family of my own, I didn’t think that my wife would need life insurance until we have our first child. Now everyone in my household has life insurance.
If either spouses passes away, the other spouse will be quite close to FIRE. If our investments do well, we’ll be able to reach that position in a couple of years.
Leo T. Ly @ isaved5k.com recently posted…How Do You Deal With Retirement Fears?
Thanks for sharing Leo!!! It really got me thinking this week and I wanted to ensure that my wife was taken care of. It’s clear we have enough life insurance that she would be fine in the untimely passing of myself but hopefully that doesn’t happen 🙂
I’ve thought about this. Hubby brought up at one point when he was sick for three weeks. It was just a cold, but I think he thought he was dying or something.
I already told him what I want him to do with my life insurance money. I read that of your spouse works for Google and dies all of a sudden, you will receive 50% of their pay for the next 10 years, and Google will pay for your kids tuition until they are 18.
Ms. Frugal Asian Finance recently posted…The Benefits & Challenges Of Raising Multilingual Children
Wow I had no idea that Google paid 50% of your pay for the next 10 years. That’s an incredible benefit. I definitely wish the government did that 🙂
For my husband and I, the more important question is would our children be financially stable if we both died? Would their guardians be provided with enough to ensure that 2 children (and a golden retriever!) wouldn’t be a financial strain? The knowledge that the value of our estate + life insurance is more than enough to provide for their care and beyond is something we take comfort in. That being said, we would each still be on track to reach financial goals if something tragic happened to one of us, though I think our priorities would change.
Thanks for sharing Katie!!! Based on what we know today, if something were to happen to my wife and I as well,the way things stand currently our children would be taken care of as long as our would be guardians don’t do anything too crazy. We’ve had convos with their would be guardians and we’re all on the same page…hopefully it stays that way 🙂
I was just thinking about this recently and I know a few people that have created plans for if they were to die before FI.
Probably a good exercise to make sure you have enough assets/insurance in place for if you were to go.
Budget On A Stick recently posted…The Frugal Gene – BoaS Question Series Episode 4
Thanks for stopping by Budget on a Stick!!! I definitely agree it’s a great exercise to ensure you have the right coverages. I’ve heard some people have lowered their coverages as they would be over insured plus they can use the savings to enjoy life now 🙂
If I died tomorrow my wife could retire the day after between my insurance and work incentives that pay in case of death. If my wife passed the payout would be enough to pay for child care while I still work. It wouldn’t be enough for me to retire but that’s not my goal. Keep in mind though my wife technically is more then capable of earning her own income and I am not perusing early retirement just fi.
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Thanks for sharing Full Time Finance!!! Sounds like you and your wife have things laid out very nicely.
Hmm definitely not a thing I think about… we live on less than the lesser of one of our salaries, so I don’t think it would change too much drastically in terms of spending day to day… honestly though I’d be devastated and am not sure how soon or if I could go back to working after such a loss… I know I have life insurance through my work place as well as short term and long term disability, but unclear how much. Perhaps something we should look into more closely.
Thanks for sharing!!! It’s definitely not a pleasant thing to think about but I figure I’d share my thinking process and see what sparked in others 🙂 That’s amazing that you are living off one salary. I wish more people were taking your lead!!!
It was asking myself questions like this that made me get life insurance. We won’t hold a policy once we’re FIRE, since the point of FIRE is to not need money if things go south. But while we have debt and are working towards FIRE? Yes, life insurance is super important.
Yeah I don’t think people realize how vital life insurance is too their future. If they only knew, I think it would help a lot of people sleep better at night 🙂
Life insurance is one of those things that people buy and forget about; meaning they keep making periodic payments. Your example also shows the flip side of the issue. Once you reach FIRE as a couple, you don’t need life insurance or at least not as much. When my parents were alive, they kept a small $10,000 per person policy to cover funeral expenses. After my mother died, my father dropped that down to $5,000 and left me strict instructions to buy the cheapest casket I could find and spend the least amount of money on his funeral that I could. My father had more than enough assets that the cost of his funeral could have been easily absorbed by the estate but the life insurance was discounted because he was a military retiree so he thought it was a good investment given his premiums and life expectancy.
Thanks for sharing Dan!!! You are absolutely right. Once you reach FI it doesn’t make much sense to still have life insurance. It’s suppose to fill in the gaps otherwise you’re paying for something you really don’t need.
It’s surprising to me how many people have no life insurance at all. Even more don’t have enough, but those that have none – wow. Especially with term rates so reasonable, everyone should at least consider whether they need insurance and quote it (if so).
Brad – Financial Life Planning recently posted…How 8 Key Investing Indexes Performed In The Past 10 Years
Yeah having life insurance is a no brainer. It makes too much and everyone should have it taken out of their paycheck unless you opt out 🙂
I have life insurance and that should hopefully help. But, I think my spouse should be set. But, she might still have to work for sometime. We have had this discussion before.
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Thanks for sharing!!! It’s amazing how many people have never had the conversation and hope things just turn out alright. I’m glad to hear most in the PF community are having those convos 🙂
My wife and I are comfortably FI and have cancelled our life insurance. I like to think of myself as the breadwinner but, in fact, my wife is a 401k millionaire. So I guess she would do fine without me!
Wow a 401k millionaire is amazing. That is an incredible feat based on the limits. Congrats to you and your wife!!!