The concept of the “traditional” American family is continually changing. The dual income family—with both spouses maintaining separate careers and contributing to the financial success of the household—has now become commonplace.
The economic challenges and opportunities of this century may often require two incomes to meet overall family expenses. Many families ask themselves, “How will we be able to plan for our retirement, save for our children’s education, and perhaps help our aging parents deal with some of their financial burdens?” These concerns may be especially pressing given today’s high cost of living and the current economic climate.
The Cost of Working
Although it may seem that dual income families will have more disposable income to afford life’s necessities, this may not always be the case. Families with both spouses working often lose some portion of the second paycheck to extra expenses, such as unreimbursed childcare, domestic help, job-related transportation, business attire and dry cleaning, lunches and dinners at restaurants, and take-out meals. These additional, daily expenses all eat away at that second income.
When both parents work outside the home, childcare concerns are especially critical. Quality childcare is a major expense for many families with working parents—after housing, food, and taxes. It is this cost that often reduces the income that could be used to help fund education or retirement.
As American businesses continue to restructure and downsize, some dual income families may face the possibility of living on a single or reduced income for an unspecified period of time. For those who need the additional income to help pay for basic expenses, a loss or reduction of one income could have a serious impact on the family finances.
Protecting Your Family’s Future
How would your family protect its income if either working parent should die or become disabled? One solution may be to purchase a permanent life insurance policy that will pay a death benefit upon the death of the insured spouse. There are several advantages to life insurance plans: For example, policies bought at a younger age may have lower premiums, and some policies maintain level premiums and build cash value.
Generally, the cost for life insurance policies is lower when purchased relatively early in life. However, it is important to re-evaluate insurance coverage as time goes on and circumstances change. The protection that life insurance policies provide for dual income families can best be calculated by periodically analyzing all life insurance needs in order to determine the best plan for your family.
Now, what about loss of family income due to disability? This possibility is not as unlikely as you might think. According to the Social Security Administration*, studies show that just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67.
A debilitating illness or injury that eliminates or reduces your family’s primary source of income can be financially devastating. An individual disability income insurance policy to help replace a portion of those lost dollars would be a worthwhile consideration.
Dual income families have become a fixture in today’s society. Although individuals may have different motives for working, most families come to depend upon that second income, whether it is used to meet current or future needs. Thus, it is important to ensure that both spousal incomes are protected from loss with life and disability income insurance.
* Source: Social Security Administration, 2018. http://www.ssa.gov/dibplan/