Читать книгу Personal Finance After 50 For Dummies - Eric Tyson - Страница 35

Each person’s circumstances vary tremendously, so in this section we don’t tell you specifically how much life insurance to get. Instead, we show you the factors you should consider to determine that amount. We’re not fans of general rules like getting ten times your annual income in coverage, especially for those approaching or already in their senior years. The reason? Each person’s circumstances can vary tremendously among many factors, such as:

 Your assets: Generally speaking, the more you have relative to your income, spending, and obligations, the less life insurance you need.

 Your debts: Of course, not all debts are created equal. Debts on real estate or small businesses tend to have lower interest rates, and the interest is often tax-deductible. On the other hand, consumer debt — such as credit card and auto loan debt — tends to be at higher interest rates, and the interest generally isn’t tax-deductible. Overall, the more total debt you have, the more life insurance you’re likely to need.

 Your health and the health of your family members: If you have major medical problems or have a family member who’s ill or who has special needs, you may need more coverage.

 The number of children you desire to put through college: A four-year college education, especially at private schools, is a major expense. So, if you have kids to put through school — and they may attend costly schools — you could be talking some really big bucks. And you face even bigger bucks if you want to help them through graduate or professional school after college.

 Whether you’ll have elderly parents to assist: Of course, this factor is difficult to predict, but you should have some sense of your parents’ physical and financial health. If you don’t, try to broach the topic in a sensitive fashion with them.

After completing your retirement planning (see Chapter 3), you should have the current financial information you need to begin your calculations for how much life insurance you need. Here’s a quick and simple way to determine how much life insurance to consider buying:

1 Determine your annual after-tax income (from working, not investments).You can find this number on your tax return or W-2 form from the past year. (The reason you work with after-tax income is because life insurance death benefit payouts aren’t taxed.)

2 Determine the amount of money you need in order to replace your income for the appropriate number of years.You can find this amount by simply using the information in Table 2-1.

3 Consider your overall financial situation and whether you need to replace all your income over the time period you chose in Step 2.High income earners who live well beneath their means may not want or need to replace all their income. If you’re in this category and determine that you don’t need to replace all your income, apply an appropriate percentage.

TABLE 2-1 Calculating Your Life Insurance Needs

To Replace Your Income for This Many Years	Multiply Your Annual After-Tax Income by
5 years	5
10 years	9
15 years	12
20 years	15
25 years	17
30 years	19