The advent of the 21st century has brought more than a new millennium to worry
about. Over the last two decades, inflation has outpaced wage increases, creating
a decline in the purchasing power of your dollars. As a result, you need more
dollars each year to purchase the same items. If inflationary trends continue,
your financial and estate plan probably needs to take into consideration that
some of your priorities may be subject to inflationary pressures. Here's a closer
look at three estate-planning needs commonly affected by inflation:
1) Spousal income replacement. In recent decades, dual income households seem
to dot the landscape. For some, higher levels of household income have permitted
better lifestyles. For others, two incomes are required just to make ends meet.
If your budget and lifestyle are dependent on two incomes, you should review your
life insurance coverage. You, your spouse, and your family may be in financial
jeopardy if your insurance plan has not been recently updated.
2) Purchasing a new home with a mortgage. From 1970 to 1995, the median sales
price of new, privately-owned, one-family houses sold in the United States increased
almost 475 percent. In fact, according to the National Association of Realtors,
in 1996 the median price of an existing single-family home was $118,000.
Today, many homes are often purchased with a substantial mortgage. If you or your
spouse suffered an untimely death, would your current life insurance be able to
cover your mortgage indebtedness? It's important to make sure your life insurance
policy's death benefit provides sufficient funds to accomplish your goals-protecting
your family's lifestyle.
3) College education costs. If you have college education plans for your children,
you may be concerned about the rising costs of higher education. In 1977, the
annual cost at Harvard University was $7,060. Twenty years later, you would have
to pay $30,074-an increase of approximately 325 percent (Figures from Forbes,
Nov. 1, 1977, compared to the Harvard Admissions Office, 1998). Putting money
aside for your child's education requires a long-term financial commitment and
a disciplined approach to saving. However, it also requires a contingency plan
in the event of an untimely death. For this reason, you may want to include all
or part of the projected education costs in your insurance plan.
Keep in mind that life insurance planning doesn't end with these three scenarios.
In fact, you may have additional goals you want to cover in the event you or your
spouse suffers an untimely death. It is therefore important that your life insurance
coverage is adjusted for inflation to ensure your wishes will be fulfilled in