Plan the Life You Want!

Increase insurance protection. Nia has $160,000 in insurance and Michael has $240,000 in a term life policy. Michael’s coverage represents 2.7 times his income and Nia’s coverage represents 2.9 times her income. According to Austin, “To provide the minimum recommended level of protection for the care and educational needs of their 2-year-old daughter and spousal income needs, combined with mortgage protection, no less than 20 times their annual income is advised.” Therefore Austin suggests that the McElroys as a couple have no less than $3.3 million in combined life insurance coverage. Austin also recommends that the McElroys consider a combination of both term and permanent insurance, which would contain a cash buildup component that can supplement their emergency fund and their daughter’s education. Austin estimates that “a monthly allocation of roughly $800 will not only provide an adequate amount of coverage, but also generate an additional $230,000 of monies that can be used to supplement their retirement income.”

Diversify college options. According to the College Board report Trends in College Pricing 2011, private school tuition, fees, and housing are presently more than $40,000 and are projected to be more than $100,000 by the time their daughter attends college in 2028. Austin recommends “the McElroys seek diversification among various college funding vehicles to include a 529 college savings plan, a Coverdell [education savings] account, a Uniform Gift to Minors Act custodial account, and a life insurance policy.”