Ultimate Life Insurance Strategy for Wealth Building 2019

  • Generally, for all young people level term or annual renewable term will be your best life insurance option. This is because you have 20, 30+ years to get your finances straight and become self-insured.
  • Remember, the goal is always financial independence NOT financial dependence. Save, invest and stay away from debt.
  • Understand Estate Tax
  • In 2019, estates with a value equal to or less than $11.4 million do not have to pay the federal estate tax. This number is usually changing as it is adjusted for inflation. Any value above this amount is taxed at 40%.
  • There are strategies out there like keeping your assets in irrevocable trusts or an LLC to minimize the tax impact of your estate when you die.
  • Personally, I like the idea of setting up an LLC or a trust where I can minimize the impact of taxes and possibly even avoid that impact all together.
  • Even if your assets never go above the $11.4 million mark or whatever it is, having a trust is always a good bet so that probate is avoided.
  • Having a will and a living trust are basic, essential tools you can greatly benefit from having.
  • The average of all the 40-year periods for the S&P 500 since 1928 has yielded about an 11.8% with dividends reinvested.
  • The strategy for young people with life insurance is to save and invest as much as possible. Get a low-cost annual renewable term life product if you want life insurance until your 60 or 80.
  • Low-cost index funds are the way to go in taxable and nontaxable savings accounts.
  • If you absolutely want a permanent life insurance product, make sure you understand the fees, charges, pros and cons before you sign up.
  • The amount of life insurance is going to vary from person to person.
  • Make sure the amount of life insurance in your policy is at least 10 times your income and covers all the liabilities for you and your family. 
  • Life insurance for stay-at-home-parents is needed and that amount will vary from family to family. $250,000 to $500,000 should cover most stay-at-homes.
  • Another strategy of looking at how much term life insurance to sign up for is by analyzing how much your family needs yearly to survive and multiplying that amount by 25.
  • For example, let’s say you want your family to have $50,000/year to live off using the 4% rule. You would need a life insurance policy for about $1,250,000. A 35-year old male with good health in the state of Georgia would pay about $83/mo for a 30-year level term policy.
  • The need for life insurance should slowly decrease as you age and build wealth.
  • Do not think having life insurance through your employer is enough. You do not know how long your role at your job will remain. You need to have a separate policy outside of work.
  • Fellow parents and providers, let us be more responsible to our loved ones.
  • If you’re interested in getting life insurance I recommend checking out Haven Life or Health IQ and they will help you get some of the best life insurance quotes online. I received my Mass Mutual policy via Haven Life and so far I’ve been very pleased.
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Matt

Hi! I'm Matt, an engineer on the path to financial independence and early retirement. One of my greatest passions is to teach and give people the tools and knowledge to reach their full potential in life. Subscribe to the Habesha Finance newsletter and get your FREE financial checklist today!