How to Protect Your Finances If You Have a Seven-Figure Income
Making a seven-figure income year in year out is the dream of many workers across the country and around the world. Only 1% of American workers can claim that level of a salary. So, if you make more than a million dollars a year, then you belong in this 1%. While the income is indeed substantial, it requires adequate planning to protect it and make judicious use of it. With a 3.26% average annual inflation rate, just the passage of time alone will eat away at your seven-figure income. Also, being a high earner has a time frame because you are likely planning to retire someday. In addition, taxes gulp a significant portion of the money, and there are family expenses like children’s college fees and mortgages that may take a sizeable part of the income.
This presents a problem that every seven-figure earner deals with: how to protect their finances.
Financial Plans for Seven-Figure Income Earners
There are several ways you can protect your seven-figure income depending on what you’re interested in financially. For some, it is investing in a lucrative business that guarantees a high ROI. For others, it’s all about acquiring assets. However, whichever options you choose, two vital financial plans are indispensable in your income management: life insurance, which guarantees both living and death benefits and disability insurance, which protects your income.
For Funeral Expenses
This is considered as one of the top reasons why people buy life insurance. As a high-income earner, you might think paying for your funeral expenses shouldn’t be difficult for your loved ones. Of course, it shouldn’t.
However, considering the rate at which funeral costs have been rising in the past few decades, it is worth making preparation for it while you are still alive. According to the Federal Trade Commission, bronze or copper caskets today sell for as high as $10,000. Having a policy for this specific purpose will eliminate the need for your heirs to take out of the inheritance you left for them to bear the funeral cost.
Why Do Seven-Figure Income Earners Need Life Insurance?
Your Children’s Needs
One of the major concerns of many American parents is college fees payment. You can buy life insurance to cover student loans and other college expenses easily. Apart from college needs, life insurance can be used to provide child support and alimony as well as covering expenses for special needs children.
Life insurance can be used to protect your business either as a sole owner or a partner in a jointly-owned enterprise. This coverage can help your business in different ways, including allowing you to borrow against the cash value of your policy for your business needs. You may also have a “key man life insurance policy” (also known as a business life insurance policy) which protects your interest in a partnership business.
For Estate Taxes
The bigger your estate, the higher the taxes you’ll pay. At the federal level, for instance, you are expected to pay an estate tax on any estate that is worth more than $5.25 million when it changes hands. Sometimes, the tax could be as high as 40%. To combat this, you can have a life insurance policy to covers the charges. This will protect your assets and ensure your estate is transferred to your beneficiaries while maintaining its value.
Why Do Seven-Figure Earners Need Disability Insurance?
These days, there are two major ways through which people voluntarily leave their high-paying jobs. It is either by quitting at the retirement age or by being forced out at the peak of their career because of a disability. According to the Council for Disability Awareness, every 7 seconds, an American worker experiences a disabling injury or illness. The National Health Council also revealed that around 133 million (or 40%) Americans are suffering from a chronic disease. By 2020, the Council forecasted that the figure will rise to 157 million. All the statistics are pointing to one fact, the need for disability insurance.
Having a seven-figure income is great, but only if it lasts. Keeping that income is much more important. Whether you are an entrepreneur or a salary income seven-figure earner, the ability to keep making the same or higher income is your greatest asset. And as such, it should be protected with a disability insurance policy which gives you financial coverage if you become disabled. Here are some of the main reasons you will need disability insurance as a high-income earner:
Protect Your Income
This is the principal purpose of having disability insurance. The policy will pay you a certain percentage of your current income to keep you financially buoyant if you can no longer earn a living.
Pay Medical Bills
Treating disability conditions can be very costly. Most of the life-threatening and disabling illnesses like cancer, diabetes, and arthritis are responsible for 7 out of 10 deaths recorded in the U.S. Additionally, 75% of the country’s health expenses are spent on these diseases. Disability insurance benefit payments will help you take care of your medical bills.
Maintain Your Family’s Welfare
Disability is one of the fastest routes to poverty. When people lose their sources of income, providing for their families becomes very difficult. As a seven-figure income earner, having sustainable disability coverage will help you provide for your dependent family members and also maintain your standard of living pre-disability.
How Much Insurance Coverage Do Seven-Figure Earners Need?
As you can see, the needs of individuals vary widely when it comes to life or disability insurance. However, the following tips will help you decide the amount of coverage to purchase:
How Much Is Your Income?
Your income is very essential in determining the amount of life or disability insurance you are going to get from an insurance career. With a seven-figure income, you will need to purchase coverage in proportion with your income, so as to guarantee adequate protection for you and your loved ones.
Your Business Interest
If you are getting coverage for business purposes, you will need to consider the percentage of your shares in the enterprise and buy your insurance policy accordingly.
Age is another determinant in the insurance market. The younger you are, the lower your chances of death or disability and the lower your premiums.
Your Family size
You need to consider the number of your dependents and the type of coverage you think will be enough for them both in the event of disability or if you pass away.
Your Medical Condition
Insurance companies are very interested in your health status. If you are considered a high-risk applicant or have a pre-existing condition, you may need to pay higher for your policy. You may not even be eligible with some insurance providers.
Talk to an Insurance Agent
Speak with your insurance agent or financial advisor for more details on how you can protect your finances with a seven-figure income. Seeking professional advice will help in determining the amount of coverage you’ll need. Your agent is also in the best position to advise you on the right company to deal with.
Retirement Plan Contributions
Many financially successful individuals find themselves in a position where they don’t need some or all of the retirement assets that they have accumulated. If you were to leave your retirement plan assets to individual beneficiaries at your death, these assets could be depleted by as much as 75% by income and estate taxes, if you have a taxable estate, leaving very little inheritance for your heirs.
Using retirement assets and IRAs for testamentary charitable giving avoids this erosion, making them the most tax-efficient assets to donate to charity at death because of the charitable estate tax deductions that may be available.
• For married couples, spousal consent is required to change the beneficiary designation of a qualified retirement plan (e.g., profit sharing/401(k) plans, defined benefit plans, and defined contribution plans) to someone other than the spouse. That rule does not apply to IRAs.
How MyTermLifeGuy Can Help?
As a seven-figure income earner, you don’t just need an insurance policy, you need customizable coverage that perfectly meets your needs. This is where Gold Coast Life Insurance comes in.
We will help you get the best coverage for you and your family. At Gold Coast, your health condition or age isn’t a barrier as we accept high-risk applicants and those with pre-existing conditions. You can get a free quote today for an affordable and quality insurance policy that requires no medical exam.