When partners have wildly different salaries – strategies to protect income

By Morgia Wealth Management on July 10, 2024

My spouse makes a lot more money than I do, what happens to me and my young family if something terrible happens to her?  How do I provide for my family and plan for the future?  I have kids and a mortgage – what should we do?

We get this question all the time, especially from couples who are earlier in their careers and who have just started to save in their investment accounts and their employer’s 401k.  Since they are just starting to accumulate assets, they typically haven’t saved enough to meet their lifestyle needs if something drastic happens to the higher earning spouse.

One of our recommendations is to consider Term Life Insurance.  What is Term Life Insurance?

It is life insurance that lasts for a particular amount of time (that’s the Term part).  The term is typically 10, 15, maybe 20 years.  That means the insurance policy will pay out a set amount during that term period of 10, 15 or 20 years when a qualifying event happens, like an early death.

You purchase a policy with a set payout.  You could buy a policy that has a value of $500,000 or several million.  The cost of the policy depends on how much insurance you are buying, the age and health of the insured person and the term length of the policy.  The cost of the policy, or premium, is usually the same every year for the life of the insurance.  At the end of the term of the insurance, the policy expires.  At that point, you might be self-insured meaning your investment assets have accumulated and grown to the point where you can meet your obligations if the higher earning spouse were to unexpectedly pass away. 

How do you know how much insurance to purchase and how long should the term be?  To answer this question, you should consult with your wealth advisor.  Typically, your wealth advisor will work with you on building a long-term financial plan.  Part of that financial plan work is to consider an early death of the higher wage earner.  Your advisor can work with you on different scenarios to model the right amount of term insurance to meet your lifestyle needs while still building wealth for retirement.

Here is a good, indepth article about Life Insurance. 

You can also make an appointment to talk with one our advisors at morgiawm.com.  They can help you better understand your situation and help you begin to protect your lifestyle in the case of an early death.