Do You Need Umbrella Liability Insurance?

You buckle up because you know the 0.5 seconds it takes to put on your seatbelt can save you from dying in a car accident.  Or worse… not dying. 

 But how many of us have been - or will ever be - in an accident so bad that your seatbelt saves your life?  Probably not many.  And yet we all buckle up anyways. 

 The chance is small, but the result can be catastrophic.  So we spend 0.5 seconds to reduce that risk to almost zero.

 Similar low percentage events with catastrophic outcomes - your husband drives into a C-level executive walking to work.  Your friend's friend trips and cracks his head on your coffee table during your Super Bowl party.  Your dog gets too aggressive in the dog park and accidentally bites your neighbor while she's trying to break it up.

 Are these experiences we've all had?   Certainly not.  But it's easy to imagine the possibility of any of those happening.

 The catastrophic result for you is not the guilt of running over a CEO, your friend's concussion or your neighbor's lacerated eyeball.

 The catastrophic event is the medical bills and lost wages while they recover.   Who do you think will pay for those?  That's right.  You.  The driver/host/dog owner.

 They could sue you (and win) for everything you have and even future paychecks you haven't been paid yet.   One of those small chance/catastrophic result accidents could change your life forever.

 So put on your seatbelt.  Invest $200 per year for a $1 million umbrella liability policy.  Just call whoever does your home and auto insurance.   It's in addition to the smaller portion of liability insurance included in those policies.

 The rule of thumb is to get as much coverage as you have money in your brokerage, bank and retirement accounts (and at a minimum $1 million).

 Small chance / catastrophic events happen.   That's why you buckle up.  Make sure to also buckle up your financial future. 

Do You Have Enough Life Insurance?

Unless your kids are out of the house, then no.  Probably not. 

PLEASE NOTE: I do not sell life insurance.  I dropped my insurance license when I left Wells Fargo. I do not make a single, red cent from clients who buy life insurance.   

So what I'm about to tell you is conflict-free and completely objective. 

Life insurance replaces your income if you're gone.  It's that simple.  If you kick the bucket today, your spouse and kids will miss you.  But they'll really miss your income.

So how much life insurance do you need?  Let's use an example to find out.

Assume your living expenses are $10,000 per month, not including your mortgage payment which has a balance of $1,000,000.    You and your spouse both work and contribute equally to your monthly expenses.   And you want to pay for your two kids’ college educations, which will be about $250,000 each in 15 years.

If that describes you, then you would need a $2,000,000 life insurance policy today.   

  1. $2,000,000 is enough to:
  2. pay off the mortgage,
  3. send the kids to college and
  4. make up for the lost $5,000 of monthly living expenses.  

Now ask yourself  - Do I have enough life insurance?  Even if you’re paying for the "3x your salary" option at work, I bet you're still underinsured.

Clearly, I've drastically over-simplified things to make the point easy to understand.  

How much life insurance you need is very specific to you and your family.  Things to consider include - but aren't limited to: 

  • income
  • spending rate
  • savings rate
  • current savings
  • college goals
  • home ownership
  • risk tolerance
  • other financial goals…
  • and on and on and on 

As part of the financial planning process, a good Certified Financial Planner will complete a Life Insurance Needs Analysis to determine how much life insurance you actually need. 

Now if only you knew a good Certified Financial Planner… hmmm.   Oh wait… I've got a guy!

Check him out here - www.financialzen.com and schedule a free consultation here – www.calendly.com/financialzen   

Should You Get a High-Deductible Healthcare Plan?

It's that time of year again.  The weather's getting cooler, the leaves are changing color and we're glued to our TV's every Sunday watching grown men chase a leather ball. 

Tis also the season for open enrollment - that time of year when your eyes glaze over trying to decipher your healthcare options for next year. 

If you're like a lot of people, you just want to feel like you spent enough time "researching" it to make a "smart" decision, which is "deciding" to keep whatever you had last year. 

But before you mindlessly check that box again, there are a few things to consider - regardless if you're still working or on Medicare. 

If you're still working consider enrolling in a High Deductible Health Plan (HDHP).  As I've written before, if you enroll in an HDHP you can put money into a Health Savings Account, which has 3 very unique advantages:

  1. The money you put in pre-tax which will lower your current tax bill (like a 401k).

  2. The money you take out - if used for qualified medical expenses - is tax-free (like a Roth IRA).

  3. Lastly (as if you need more), you can invest the money you put into an HSA.

So you put pre-tax money in - grow it - and then take it out tax-free in retirement. It's the only way to never pay taxes.  

The catch is you need to pay for your current medical expenses out-of-pocket.   If you know you're going to need a lot of expensive procedures next year, then hold off on the HDHP/HSA combo.  But if your only medical plans for next year is your annual physical, then you should strongly consider enrolling in an HDHP so you can invest in an HSA.

If you're retired….take a look at your Part D plan (D stands for drugs).   Healthcare companies change their formularies (a fancy word for their covered drugs) every year.  So the Part D plan you had this year might not be the best one next year.   It pays to log into www.medicare.gov, enter your current prescriptions and review the list of providers. 

As I announced Tuesday, as part of my ever-expanding service offering, I would be happy to schedule time with you to review your healthcare options for 2018. 

Just click here to put some time on my calendar.

Disclaimer: This blog is for informational purposes only.  It is not intended to be actionable financial or investment advice. To determine if it's right for

How Does a Health Savings Account Work?

Everyone hates taxes.  If you don't, then don't tell anyone.  They'll just think you're weird. 

And yet you probably don't take advantage of the ONLY way to (legally) never, ever pay taxes on the money you make.  No income taxes.  No capital gains taxes.   Uncle Sam doesn't get a single, red cent.

Do I have your attention?

Ever heard of a Health Savings Account? 

No?  That might be because they're relatively new.  Dubya started them back in 2003. 

Here's how they work.  You put in pre-tax money (just like your 401k).  Invest the money.  Then take the money out tax-free in retirement (like a Roth IRA). 

Too good to be true, right?  Well, yes and no.   Here's the not-so-fine print:

  1. Withdrawals are only tax-free if you take the money out to pay for qualified medical expenses

  2. You can only open and put money into an HSA if you are enrolled in a high-deductible healthcare plan

So what's a high deductible healthcare plan?  It's just like a regular plan except the deductibles are bigger (it's all in the name, innit?).   The minimum annual deductible if it's just you is $1300, and if it's you and your family it's $2600 annually. 

Now the real catch is that for this to work as the world's best retirement savings vehicle, you have to use it as a retirement account.   To be clear, this is not what it was originally intended for.  It was created to pay for CURRENT medical expenses.  But because the money rolls over year-after-year AND you can invest it, some very smart financial planners realized it could be an extremely valuable retirement asset. (I like to think I'm smart financial planner, but I can't claim credit for this one.) 

For this to work, you have to pay for your medical expenses TODAY out-of-pocket and not from your HSA.  So you have to be able to afford to pay your annual medical costs from your checking account.  And be warned - the medical costs will be more than you're used to, especially if you go to the doctor a lot. 

The most you can put in an HSA each year is $3,350 if your single, or $6,750 if you’re married.  (And if you're over 55, you can save an extra $1,000 on top of that.)

That might not sound like much, but it adds up over time.

If you save $6,750 each year for 20 years in an HSA and it grows at 8% per year, you'll have $309,000 at the end (you would have put in only $135,000).

If you use the same numbers, but in a regular taxable brokerage account, you would only end up with $170,000 after you pay all the taxes.  

I don't know about you, but I'd rather have $310k than $170k. 

All of this being said, whether an HSA is right for you depends on your financial situation.  This is NOT A RECOMMENDATION because I know nothing about your situation and therefore can't possibly know if it makes sense for you and your family.  

But I DO recommend you look into it.  Talk to your financial planner to determine if it's right for you.