A couple weeks ago I received a heartbreaking email similar to what’s below.
I chatted with the author via email a bit and we agreed to ask ESI Money readers for advice.
He provided an updated, more-detailed explanation of his situation and I’m posting it below.
Please read this and respond with your best suggestions for the author and his wife to consider.
He’ll be monitoring the comments, so if you have any clarifying questions, ask and he’ll provide answers.
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The Short
I am 27 years old and have late stage IV sarcoma cancer. I am likely looking at dying in the next few months.
Here’s my situation: I have been married for almost four years now and we have no kids. Our two cats and puppy are enough!
I am active-duty Air Force, so finances haven’t been a concern when it comes to medical bills.
Due to my active duty status, I have life insurance worth $500K and have elected to leave it all to my wife.
I am writing this message for advice. My goal isn’t for anyone to tell us what to do but rather open our eyes and allow us to consider options we otherwise may not see.
So, you’re 26 (my wife’s age) and you’re handed $500K—what are some smart money strategies?
The Long
Here’s where I would like to give you some insights as to our personalities and our thoughts so far.
We met at FSU and both have our bachelor’s degree. Through scholarships and consistent employment through college, we were fortunate and graduated debt-free.
From there we both considered more education, but decided one of us needed to start earning income. I joined the Air Force to help defray the cost of portfolio school for her (advertising major in undergrad, went to portfolio school for art direction).
The idea was, four years later (Oct. 2019), I would exit the Air Force with GI Bill in hand. She would become the sole income earner of the house as I returned to graduate school (with GI Bill to offset costs and provide allowance for housing).
Needless to say, the plan changed significantly when I was diagnosed with cancer January of 2018. She had graduated portfolio school and gotten a job as an art director. She worked for about six months before quitting to take care of me and spend time together.
The goal was for me to go to school for my MBA and within five years the two of us hoped to open a bouldering/coworking space. Through this time, it’s become clear to us that we would love to work for ourselves.
We were going to spend time deciding what locale would best support this, as we have no roots holding us down. We’ve constantly been on the move throughout our relationship.
For the business, seed money was going to have to be raised with a solid business plan and loans. (Keep in mind as you read this that if parts of “the big plan” don’t seem to make sense, it is because our plan changed over time as we grew up and our priorities shifted.)
Now, my wife is scrambling to piece together an uncertain future. We have talked and she anticipates spending about a year after my death living with her parents and figuring out her next moves.
It’s impossible to tell where life will take her, but the core of what we have talked about includes two things: purchasing a home and starting a business.
We both realize $500,000 goes fast in this day and age, especially when it comes to home ownership and starting a small business. I would love to know that she can pay off a significant portion of a modest home and would be elated if the rest of the money allowed her to work for herself.
Different types of businesses have different start-up costs and we’ve talked about both a design firm (low overhead) and the original bouldering/coworking space (major start-up costs and overhead). I have no doubt she will find her way.
How should we go about deciding how much money goes toward a house vs the business?
I tell you all this to hopefully reveal we do our best to think things through. You should know too that my wife is unstoppable when she decides to move forward with an idea.
More than anything, I am wondering if there are smart financial decisions we haven’t considered. I realize our current plan is fast and loose; it definitely is not a conservative way to go about stretching $500K.
I believe that she will be successful in whatever she chooses to do, so the idea of a small business generating life fulfillment and income for her appeals to me. Neither one of us come from money, so when we talk to our parents they generally advise to “Buy a house so you don’t have a mortgage, put the rest in a retirement account, and go to work for an ad agency.”
We realize that is an alternative. We are hesitant, for obvious reasons, to go the “retirement” route, or other options that have returns after 40 years. While “Put $250,000 in a Roth IRA,” may be wise, my wife and I are thinking more about 5 and 10 year plans. Feel free to disagree and explain why!
Are there any other ideas you would propose? Looking to bounce ideas off of others as it is hard to think about this with anyone else due to the emotions involved.
Also, I desire to be cremated and the military offsets almost all of the cost of a burial. Plus we have around $15K in savings. I include this to illustrate that hopefully she will actually have the $500K and not lose a large chunk to funeral costs.
Last year, while I was going through the worst chemotherapy sessions of my life, I came across this blog. I liked the voice and writing style and read through many of the ESI articles. I also typically scrolled through the comments, and it seems this community is both smart and supportive.
Thanks to everyone ahead of time!
My heart goes out to you and your wife. I wish you the best with the time that you have together.
If she purchases a house she can use the equity to get a HELOC that can be used to fund a business startup at a reasonable rate of interest. A straight business loan would have a significantly higher interest rate.
Also, she may wish to consider working at an as agency for a few years to obtain business contacts and learn from others before stepping out on her own. I am an engineering consultant working in a large firm but I am confident now that I would step out on my own and make a living with my own business if I chose to do that with the knowledge and contacts I have gotten through working in a large firm.
If she decides to take a majority of the $500k and start out in her own business don’t skimp on putting some of that money aside for living expenses – as much as 2 years worth! Most small businesses fail due to a lack of operating expenses in their first 2 years. If she choses to live with her parents for the first couple of years while starting her new business the amount of money she has to set aside, of course would be less.
Good luck to you both.
Thanks, Mark. The HELOC is a great example of why we reached out. It’s something neither of us knew about. Living expenses through the business start-up period is another excellent consideration. Thank you for the insights!
I’m sorry to disagree, but debt in any form is not the path to financial freedom. I want to say “thank you” for your service and I’m so sorry to hear about your situation. You are being very thoughtful and a caring husband at this difficult time. In my experience most young people have the dream of owning a business, but a successful business takes years of experience at that business before you can become successful. This is why most businesses fail, people get into an area where they are not an expert and 2/3 fail. The money you are leaving your wife is a blessing and a tool. Protect it, invest it wisely and don’t gamble with it on anything that she doesn’t have several years of experience dealing with or it will disappear. Any type of mortgage is a terrible idea. She has the ability to never be in debt, don’t let that opportunity disappear. Good luck and God Bless.
Mark, my heart breaks a bit at you and your wife’s courage. As an financial planning professional and army wife, please look into the survivor benefit and annuity benefit issues. There is a stipend paid but if your wife receives the annuity, it reduces the benefit almost $-$. The annuity is taxed like an estate- at the highest rate. Also, many anticipate using the initial $100k as funeral costs with family, arrangements, different services in different locations with the $400k being true SGLI. I’m happy to provide any and all research that I can.
So very sorry to hear of your situation, but I applaud you for making plans and seeking advice.
I will echo Mark’s suggestion to work at an agency for a few years before stepping out. Like Mark, I am an engineering consultant, who stepped out 30+ years ago at age 40. This after almost 20 years of industry experience and 10 years of moonlighting. Similar story about the daughter of my late business partner – now a successful marketing consultant of 10 years after 20 years in the medical industry.
Starting any business is risky, but having even a few years experience gives one both “credibility and visibility,” along with valuable industry contacts. Besides, the older one gets the more perceived value as consultant. Most clients are buying experience. Not saying you need to wait until age 40, but no need to jump in too soon.
Best wishes to both of you in this trying time.
I would follow the parental advice: “Buy a house so you don’t have a mortgage, put the rest in a retirement account, and go to work for an ad agency.”
I disagree with getting a HELOC to start a business. That’s debt, no matter how it’s colored. And since most businesses fail, that’s a bad plan. She could lose the house if the business doesn’t work.
I would stick with a “safety first” mindset. There’s no downside to the parental advice. With no house payment, your wife should be able to save and continue “adding to the pile”. In 20 years, she’ll have 2, 3, or 4 million dollars. She can pull a bit from that and start a business at that time debt-free. And 20 years isn’t that long.
My heart goes out to your situation. I don’t know what to say. I’m so sorry.
In 1996 my son was in the Air Force when we were notified that he died. He was married, leaving a wife and a three month old daughter. Things became confusing and very hectic immediately. So i can imagine your situation.
My suggestion to you and your spouse, plan for her to take at least one year to think things through. Do not make major life decisions until she can adjust to the circumstances of separation. Use all available support groups, such as family, friends and professional individuals to overcome obstacles in daily life. Afterwards she may have a better understanding of where she stands, a clearer picture of her future and the strengths that she will need to lead her to a successful life, whatever that shall be and whatever she wants.
My sincerest best wishes for the both of you.
I would like to second this. I think your wife should wait at least a year before making any life decisions.
My husband died when I was in my early thirties. I tried to follow the life plan we made together. It didn’t make any sense for me on my own.
I am so very sorry.
I agree with Lizzy and Bernd,
Put the money in a CD (3 of them so she is under the $250k FDIC limit, [maybe $200k, $200k and $100k) at three different banks and see what happens after a year. Her perspective may be very diffrent after some time adjusting.
I wish you and your wife the best. God bless.
Hello,
I was widowed at age 39 (he was retired USAF) and hope my advice from this school of hard knocks helps.
1. Affirming the advice of others to not make any major decisions/transitions for roughly one year. Agree with suggestions to stash the cash in high-yield CDs (e.g. Ally) until ready to deploy those funds.
2. Leverage the funds ($500k is a relatively small amlount in the big picture) toward security (paid off home and minimal full 6 months of expenses in an emergency fund). Don’t worry about growth until the foundation is set.
3. Start a small business only after you’ve gained experience, fostered contacts and built a brand in the field.
4. Leverage any and al of the resources available to you through the US DoD. This includes the military community, who will rally around those who have experienced loss.
5. Don’t be ashamed to accept any and all help from family and friends and even to seek professional counseling.
All my best to you and your wife.
I agree with Lizzy and Bernd,
Put the money in a CD (3 of them so she is under the $250k FDIC limit, [maybe $200k, $200k and $100k]) at three different banks and see what happens after a year or so.
I wish you and your wife the best. God bless.
Bernd, Lizzy, and David,
Thank you for the heartfelt replies. Bernd and Lizzy, thank you for sharing such personal anecdotes. We know she is going to need time to adapt to new circumstances, and plan for her to be near a strong support structure. No decisions will be made in haste. While we can, we both feel better working together to explore options. However, we have talked and I know her life plan will eventually be an independent venture.
Mine will not be a financial advice…rather to say you, sir, are a noble person indeed. You made my morning a reflective one. Thanks. If your wife were my daughter, I would tell her to do nothing with the funds for about 6 months to a year. Leave it in a CD which now are yielding aprox. 2.75%, sit, reminisce, mourn, stay close to her family for a while. Then, after that time, she can make the financial decisions. Hey, me here extending open arms bro to you and wife. Kind regards ….and hoping your journey takes you to a good place.
Van,
Thanks for your thoughtful comment. The CD idea suggested by both you and David seems like a good option, one we will definitely consider.
So sorry to hear about your situation. If I were your wife, this is what I would do over the next 2-3 years.
1. Park the $500,000 in a super safe account and forget it exists for a while.
2. Get a good paying job.
3. Move in with parents.
4. Start saving for a down payment on a modest home.
5. Lay the groundwork for the future business.(licenses, insurance, website, etc.)
6. Start the business on a part time basis. My own experience with starting a business from scratch is that it took every bit of two years to really get some momentum going. Be patient.
7. Periodically review the progress of the business. Does the business still seem to be a viable idea and have a good prospect for long term success? Must be totally honest with oneself.
8. Quit the full time job when the business has grown enough to sustain a modest lifestyle.
9. Use the $500,000 for retirement.
I hope this is helpful to you both. Both of you are in my prayers.
RJF,
We appreciate your comment. Definitely easier said than done–2 and 3 can be difficult to accomplish together! Starting the business as a part-time venture is definitely an idea we had considered even prior to the diagnosis. Thank you for your thoughts.
I’m also very sorry to hear about your situation. You are approaching this very rationally and that is just wonderful. I hope that the remaining time that you have will be spent as mindfully and productively as possible.
I agree with the comments to invest the money conservatively and a CD would serve that objective until better opportunities present themselves.
For her career I would recommend to work full or part time and try and start her business while pursuing her career as a side hustle until it starts taking off. It buys a lot more breathing room from a cash flow perspective.
Will your wife get survivor benefits from the military and what all does this cover (monthly payments, insurance)?
Wishing you both all the best. Thank you for your service to the country.
Mike
My heartfelt sympathies to you and your wife on your diagnosis. As a caregiver to a stage 3 breast cancer survivor (my wife), I can empathize with the emotions you might be feeling. I must commend you also on taking out life insurance at such an early age; so many young folks feel infallible and do not take care of this necessary provision. Life is indeed frail and we never know when we might get hit with a curve ball. Do make the best of your remaining time together.
As for advice for our young 26 year Art Director, I would suggest her the following:
1. Yes, go home and stay with parental support for a year or longer if need be, till you figure your way
2. Resume work and keep building your own financial portfolio (exclusive of the $500K). Your highest earning years are ahead of you. Consider an international career move, if so inclined.
3. Losing a loved one so early makes one wonder about the logic of making long term plans, but the average life span is over 70, so one must plan long term towards a fun life and a fulfilling retirement. 26 years is also too young to consider spending the rest of ones life alone.
4. A home (along with good health insurance) is a necessary security. If you must spend out of the $500K, use say 20% ($100K) towards a down payment. Use employment income / savings to pay down the rest.
5. Identify a certified financial planner who can guide you to invest the balance funds in equities/bonds/other assets that would grow your wealth at circa 7-8% per year over the long term.
6. Meanwhile, keep gaining work experience. Building a business on your own at age 26 is not as easy as it sounds. Keep building your business idea and once you gain sufficient (10+ years?) experience in the field you seek to start your business, then use the earnings you’ve generated from your $400K to invest in your start up. If your investments have performed well, you’d be able to access around $300K+ in interest earnings without touching the $400K capital which you can leave secure. Sell the idea on to others to gain additional seed money, intellectual support etc. Find a partner if need be, so all the pressure is not on you alone.
Peter,
Caregiving spouses are truly incredible. Glad to hear your wife is doing well. I appreciate the logic behind your outline and love the idea of using interest earnings without touching the capital. Making $300K in a decade sounds too good to be true. I guess it’s a matter of finding the right certified financial planner. Also, for anyone wondering, my wife is busy taking care of some things today but we’re going to review all the comments again together tomorrow.
You are in an incredibly tough situation, but you are facing it head on by planning for your wife’s future and that is very inspiring. I am also active duty Air Force so if you have any questions or need any help AF-related please reach out to me.
I’d suggest your wife find a job working in the same field when she moves to her parents house for at least the first year when she is figuring things out. Then she can start a side hustle doing what she wants to do long-term in her small business. When she feels like she has enough money from the side hustle to live on, she can jump to that full-time and in theory shouldn’t have to have put in much money to get it off the ground. Obviously I would think she probably wouldn’t want to start any of this until a reasonable amount of time so she can grieve, but that timeline should be up to her.
For the $500K, I would say a house is a good idea in an area she wants to have her start up business. Paying for a house in full would free up expenses to get her small business off the ground for cheap, but that depends on what part of the country she’s going to live in. She’ll probably want to set some of that money aside for unknown expenses when she’s going through all these changes, but after she’s settled in, can start investing with the remaining. Putting in at least the $6K each year for a Roth IRA would be wise and possibly an 401K whenever she works.
Best of wishes to you and your wife.
There are two great pieces of advice that I’ve heard:
Hold on to the money for 6 months to a year (or more) in a low risk, non-retirement account.
Buying a house with cash is a great idea. Put in the effort to find a good deal. Look at foreclosure auctions, which usually require cash on hand. When you’re ready for some seed capital for your business, get a HELOC with flexible terms and a good rate, take your time and shop around.
Alternatively, consider buying a block of townhomes or small apartment building where it can generate revenue for you and provide you a home. Use the money to pay off a big chunk of the balance, but do financing as well. Pick good neighbors that you can count on to pay rent (which should cover your mortgage). It makes a lot of sense to do this and work for an ad agency and build up your skills.
I worked in a specialized IT industry for about 18 years before I started doing work on the side (I just turned 40). I’ve been doing work on upwork.com and I recently started making more money on Upwork than I do in my full time job. I’m going to keep doing both as long as I can.
My professional advice is to spend the 10 – 15 years with a good agency (or series of agencies) to learn the business. Be nice to everyone and listen to people’s advice and stories. Get to know the business decision makers in your agency and try to really understand what they are doing to be successful. Understand the customers and what they are really looking for.
When it’s time to start doing work on the side, don’t steal you agencies customers, find your own. You may be surprised that your previous employers may be interested in subcontracting work to you, since they’ll know what you can do.
After 10 – 15 years you may have paid off the rental property mortgage (well, actually your tenants did) and now you have a more valuable property to continue renting or can sell.
One more thing that I hate to mention, but the $500,000 may end up being more like $250,000 after Uncle Sam and your state gov gets finished with you. I don’t know if there are special exceptions due to active military service (There should be! Thank you for your service!), if there are not, become residents of a state with no income tax, like FL in the next 6 months. Talk to a tax advisor (accountant or financial advisor) to figure out how to keep as much as you can.
As a death benefit paid directly to a surviving spouse, there are no tax implications as this is not required reported income. If the benefit were paid into an estate there could be potential estate taxes due but that does not sound like the case here.
My heart goes out to you and your wife. I also applaud both of you for trying to think things through before making any big decisions. To that end, here’s what experience tells me you should consider.
First things first. Losing a spouse, especially at a young age, will be devastating. Your life plans just got totally turned upside down. Grief is a difficult thing, to say the least. Moving back with her parents is a good decision. I wouldn’t put a time limit on that or be in a hurry to make a long term decision.
I’d recommend she find a job in her field (if possible) and continue to think about what she wants to do and where she wants to do it. Don’t underestimate how hard this will be for her. She will need time to work through the loss.
I wouldn’t be in a hurry to buy a house or invest the money into anything long term. She has a lifetime to put that money to work. There are online banks paying reasonable interest rates. Keep the cash liquid and safe until she sorts out what she wants to do.
When she has that figured out (at least a direction) she can make decisions on buying a house, setting money aside for a business or side hustle and all the other things that help her start out her new life.
I’ve seen too many people make big decisions in the midst of loss that they later regret. She should take her time and allow herself to get through the grieving process.
I know that’s not concrete advice on investing, buying a house or starting a business. To me, these things should be delayed. I’ve seen people regret decisions after making them too hastily. My niece is one of those people.
God bless you as you navigate this incredibly difficult situation.
I would agree with most, to wait before making any decisions financially. When she feels up to it, she may want to use some of that money to create a legacy for you to give her some closure – a donation to a university or business community would seem to match with your ideals and help her to network into a possible future business venture. Having this much money can often be a reminder of the pain of losing you, so planning ahead will help her to reduce future stress and “guessing” how to spend it to honour you; so let her know what’s important to you.
Lastly, something that often occurs in households that lose their income earner is credit. Making regular payments towards something like a house or car will help her to build credit if it’s hasn’t already been built up. This is important if she ever needs to apply for a business loan. And while the cost of borrowing is relatively low, taking on a small mortgage, car loan or student loan might be more beneficial than paying for these things up front.
My deepest sympathies, I hope that your remaining time is filled with peace and joy.
My sympathy to the entire families.
It sounds as if you found your soul mate, and obviously are more concerned for her than yourself. With not knowing what direction her future will take , you may want to see if she is interested in possibly having you generate and preserve a piece of yourself. In case she isn’t fortunate enough to find someone as caring as yourself in the future and decides she still wants a family years from now. This may be priceless. Whether we are in our 20’s or 60’s, we all have regrets and wish we had done something differently . It will not be easy to find another who cares more about their spouse and country than you do.
I am very sorry to hear about your health situation. It’s a terrible misfortune that has been dealt to you and your wife.
No one would expect you both to be planning what happens to the life insurance (live the best life you can live now). But since you are considering what’s next, I’d like to share some of my experience as a young widow with you with the hopes that there could be a lesson or two learned from in my experience.
I was 32 years old when my husband died suddenly from an accident. I received an insurance payment of $200k. I took 2/3 of the proceeds to move and make a down payment on a new house and to invest in the stock market. I am not sure how I spent the rest of it, probably on a car, self care, travel visiting family and friends, and dining out.
I was a little confused with what to do. I missed my spouse and my whole life plan was upended. I was just beginning the five stages of grief. It took me a few years to get through the emotional, physical and mental flux and feel settled again.
In many ways, I changed. I had to learn to stand on my own two feet. Some of my friend and family networks changed. I had to filter the constant advice I was given and make my own choices. For example, my banker directed me to funds with higher MERs. I signed up for these and later regretted it, so I sold the funds to buy lower cost ETFs.
Thank goodness I stayed in my old job because having that certainty when so much else was changing gave me comfort, along with knowing that a good portion of my funds were in low fuss investments.
It may be difficult for your wife to start a business and manage the stages of grief. It may be easier for her to pay down debts, make conservative investments and find a stable job in the near term. Doing this will give her time to grieve your loss appropriately and to renew herself.
My heart goes out to you both.
Thank you for your service. I am very sorry for your pain and suffering. I admire your thoughtfulness for your wife’s future. As a wife myself I am thinking about what I would I might want/need in the same situation. My husband also has a large life insurance policy. I would be grateful if did the same as you by seeking out sound financial advice for me.
The common advice to wait a year on big decisions sounds wisest to me. I’d wait to see if I still wanted to buy a house or start a business. I’d assume my dreams and ideas could change over time. I would want my husband’s blessing to take as much time as needed to figure out my new path. I’d want him to tell me he’s proud of me and confident that I’ll find my way. I would imagine him there always rooting me on.
Our remaining time we would hopefully focus on his comfort so we could enjoy each other as much as possible. Recalling memories, recording wishes and asking each other questions would be important to us. Deciding how to handle end of life care is also essential. I recently read an article you may find helpful:
https://www.newyorker.com/magazine/2010/08/02/letting-go-2
I wish you and your wife wisdom and peace on this difficult journey. I hope your love for each other is great comfort now and always.
Dear Heartbreaking,
I am deeply saddened by your news. Thanks for serving your country in the Air Force. I’ll pray for a miracle recovery for you. I have no money advice but an eternal perspective to offer. Are you a Christian? Have you accepted Jesus Christ as your Lord and Savior? You may be angry at God right now, but I hope you’ll ask him to reveal himself, if you don’t already know him. I hope you and your wife still have decades together this side of eternity. Heaven awaits for all who recognize their sin and their need for a Savior. Call on the name of the Lord Jesus, put your trust in him (whatever amount of faith you can muster) and be saved.
God Bless you and your wife.
-John 3:16
My heart goes out to you and your family. I can’t imagine what this is like for you. Here are my recommendations.
1. I agree with most here, put the 500K away for a bit. Your wife likely can get pretty far on interest from CDs and government bonds, depending upon where she lives.
2. Starting a business takes on a fair amount of risk.
3. As an Art Director, she has the opportunity to freelance across ad agencies or directly for end user clients. This labor market is thirsty for talent. As a freelancer, she gets a bit of a premium over a salaried employee and has a lot of flexibility.
4. She can freelance for quite awhile across clients, industries, agencies and identify what area she likes, what the unmet opportunity may be to service a client and strategize from there on how to grow a firm that is differentiated from all the many many others out there. I assume she has been freelancing to some extent, but there’s a difference between viewing her assignments as a job to earn income vs. a form of market research to inform a business strategy and hone in on the area that excites her most and where clients have unmet needs.
5. During this time she would develop a network of clients that later can become the clients of her design firm as she scales up with appropriate staff.
6. Design is largely people based, so not incredibly capital intensive. All of the costs associated with her growing team are paid by client work.
7. So if this were to be the path, the $500K would be insurance against failure, unforeseen challenges or it would be available should an opportunity present itself. Maybe she would need it for working capital in her firm one day, or some equipment purchases. But all the while, it is earning income for her.
8. I’d be less likely to buy a house as that is illiquid and restricts her flexibility significantly in the years that follow.
I work with the global ad agency networks. If she requires assistance finding a job – freelance or otherwise, we can connect offline and I can assist. My best wishes for you. BK
Amen!
For the faithful, that’s the advice that counts infinitely more than any other. Beyond anything else, God’s oversight will elevate this good man’s perception of life beyond the physical body to the eternal spirit. He will provide comfort to him, his wife and his family, and make sure that his wife is blessed with peace, wisdom and the safe investment of the $500K.
I seek to advance my understanding of Jesus’ teachings on a daily basis, and have been blessed beyond anything I could have accomplished on my own. I hope you have sought him out, or will do so – the darkness will become light, death will be nothing more than passage into a better life. Prayers for a miracle and God’s hand in guiding your doctors.
I agree on the $500k with guaranteed CD rates (12-24 months) at roughly 3% in these already lofty markets and given the volatility of the China trade war, upcoming US elections. That will give you about $1250/month or 15K/year in returns. Perhaps after a significant market correction (>30%) you can take on a little more risk for better returns. Starting a business has more costs than you anticipate, she is probably better off employed in the career she wants for several years to learn what she needs to and then start the business or start it as a side gig while working until leaving full time employment. It takes about 3 years for a business to generate “comfortable” income but can be great over the long term. Houses are not very good investments and can be financial drains so buy the house that makes you comfortable to meet your needs but no more. In my opinion, your money is better spent on other appreciating investments or the business. Rent if you think you may have to move to start the business.
So sorry to hear of your situation. You sound amazing. You have probably already done the following, but just in case:
1) Investigate Dependency and Indemnity Compensation (DIC) – a tax free monetary benefit paid to eligible survivors of military Servicemembers who died in the line of duty https://www.benefits.va.gov/compensation/types-dependency_and_indemnity.asp
This may create a backstop to allow your wife more time to sort things out.
2) Get all your passwords for dfas, mypay, etc to your wife now.
3) Double check that she is your beneficiary for your TSP and any IRA’s, prior 401k’s, etc.
4) Make sure all your banking and investment accounts are Joint With Rights of Survivorship or Joint Tenancy by Entirety, or similar in your state.
5) Have the hard, terrible talks about what you want at the end. Nail down your will (I don’t care if you have little – get your will done right away.) Nail down your Powers of Attorney, Living will, etc and have the talks with both your wife and parents if not done already so they are not fighting over whether you would want to be kept alive in various situations.
6) My best advice is not to get pregnant in these circumstances, but if you find that a little accidental miracle is on the way, then make sure your wife knows she can apply for Social Security benefits until your child is 16. Remember the “Length of Marriage” requirement is waived for military, and if there are no kids she is too young to apply.
You have been blessed with some good advice from the people here that really care about you and your young wife. Please also consider where you will spend eternity. You may have already done this, but here are some Bible verses that may help. Praying for your journey as you and your wife make some tough decisions.
The Romans Road Verses
We are all sinners (Rom. 3:10,23).
The wages of our sins is death (Rom. 6:23).
Jesus paid our sin debt on the cross (Rom. 5:8).
Salvation comes by faith, that is, by confessing with our mouths and believing in our hearts (Rom…
Call on the Lord for salvation and get saved (Rom. 10:13).
Hello Kyle, so sorry to hear about your health situation and also your wife and loved ones having to go through this difficult period.
It appears you and your wife are already doing a great job regarding dealing with this situation and keeping busy with planning for tomorrow is more important for both of you, but
don’t forget to enjoy your times together!
I have read most of the comments, I would advise you guys to update these in a spreadsheet, so you have all of them to review in one place. Delete duplicates, maybe give it a score from 1 to 5; 1 would be least likely idea.
If you and/or wife have earnings which can be applied to an an IRA, most likely you should apply to a ROTH, because your tax bracket will be low. If you have some money in a Traditional IRA, it would be a good idea to convert to a ROTH, taking advantage of the lower tax bracket.
I’m not quite sure what kind of business is “Bouldering/Coworking Space” is, so I can’t comment on it.
I would not recommend your wife to go into a partnership, it appears she has strength to go it alone.
She is young enough for her to find another partner in her life, but I would strongly advise her not get married for at least 3 years, she needs this time regroup.
She can invest maybe 10 to 30 percent of the $500K, and the rest in a liquid high interest account like money market and/CDs.
Moving in with her parents is a great idea.
I would not buy a home before she opens her business unless she chooses another career path. A home is costly and she may want to move within 5 years to another location which maybe far from her job/business.
Getting a job is not such a bad idea, she can have this income to afford day to day living and apply some of it to research her business. Everything you do in life is a calculated risk, but with researching hopefully you reduce your risk.
I’m not a doctor or know anything about this cancer you have, but I would invest some of your time to look to see if it can be cured, I know of 2 people with cancer who had months to live and they were able to find a doctor to cure it.
Best wishes to Both!
I am assuming your life insurance is SGLI through the military. As a service member your life insurance proceeds can in part or all be rolled into a Roth IRA for your spouse up to $500,000.
My recommendation is you have her roll most of the proceeds into her Roth IRA because five years after the money has been added to the Roth IRA she has the ability to take out what she added at any time without penalty. That could be up to $500,000 if she contributes the full amount. The growth would have to stay in till she is 59.5 years old. This will give her the flexibility to open a business or buy a home in the future, if at that time those are still her goals. If not, she has the money compounding in the Roth IRA tax-free.
After reading all of the comments, this is the play that I bet many would have recommended if they knew about this benefit that is only available to service members. Roth tax protection is very valuable, and having such a nest egg will ultimately serve as a backstop for her willingness and ability to take future risks as a business owner. Roth IRAs are also protected from bankruptcy losses and many states also shield them from creditors. Homeownership, on the other hand, is both limiting for future relocation opportunities and really quite expensive beyond mortgage payments (think real estate taxes, maintenance, landscaping, etc.), so I would recommend against buying a house in the near future as well.
Looks like the community has your back and so do I
The one idea I have not seen yet is after a one year readjustment your wife could invest in a duplex with little to no mortgage, depending what part of the county you are in.
This would provide a steady income in addition to working in her field gaing experience before starting her buisness. The duplex you also serve as a wealth builder for retirement as the value increases over time.
Hope this helps god bless
I also suggest to open a Roth IRA using the heart act for up to 500,000. It will give the survivor time to think on the next step and the money can be taken out at any time when needed without penalty. My husband passed away 6 months ago and it is what I chose to do…. I needed time to deal with his death without wasting the money.
Kyle- Thanks for your service to our great country and I’ll be praying for a miracle.
I agree with Alice and Kmoney – use the Roth option if available (for a decent portion of the proceeds for sure).
I think your wife’s plan to move in with family is smart. I also believe not rushing into anything for 6 months to a year makes a lot of sense. If her goal is to start a business then I’m guessing your wife is quite energetic, bold and daring. Given this, and her young age, then I would suggest house hacking may be a viable option. If she does it right (duplex, triplex, fourplex), then she can eliminate or severely curtail her housing costs. If she wants to bootstrap a business on her own, then she’ll need to focus on keeping the big 4 low (housing, transportation, food and taxes). If she obtains the right tenant, they may even be able to perform some maintenance/landscaping items, or if rent is enough it may allow her to hire that out so that she can focus on the business. The other advantage to this route is over time if its doing well with her renting some space to others, then it would likely also work well as a full rental if she ever moved again. One thing to consider is it may make sense to pay cash to get the beat down house or a foreclosure, etc., fix it up, and then refinance to get the money back out. If your wife can get housing down to $300 a month or less (with house hack), and keep food / car costs low, then the $500K net of the house down payment, may be enough to sustain her lifestyle while building the business ($450K invested in index funds and using 4% rule should generate $18K per yr that could theoretically be taken out if necessary to support her as she builds the business).
I am so very sorry to hear about your situation.
There are lots of good suggestions here and I wish you the best in coming up with a strategy that works best for you.
Here’s just my 2 cents on how I would invest the 500K –
1. To me the first thing would be to start getting monthly income out of part of the funds so part of your expenses are taken care of. There are several municipal trust funds that give ~5% tax-free income. You might have to find something that is also tax-free for your state. BFZ is an example which provides ~5% federal and state tax free return for California. Putting a 100K in this category can start generating ~500$ every month.
2. I don’t know which state / city you are located. In so many locations nice houses are available in the 50-100K range. In that case, I would suggest buying a house for 50-70K which could partially be rented out. Maybe a room on AirBnB or rent a room or two out for another ~$200-500 every month.
If the house was bought outright then your wife wouldn’t have mortgage payments.
3. I believe a rental real estate is a good long term investment. So again, depending on your location, i would suggest investing another $100K in a rental property that can start generating additional income.
4. I would suggest leaving 6-10 months of living expense in a checking account. Mortgages tend to be a big piece of monthly expense – and if the house was paid for then $40-50K in checking account could provide emergency funds for a decent period of time.
5. I would also suggest putting just as much in a bank CD which would be a very safe investment.
And then I would suggest investing $50-100K in dividend yielding high-market-cap stocks.
To summarize my 2 cents –
1. 100K house that can be partially rented out.
2. 100K rental property
3. 100K in municipal tax free trust fund
4. 50K checking + 50K CD
5. 100K in dividend yielding stocks.
And as the so many other contributors have suggested, I would second the suggestion of taking on a job and building enough experience before starting to own a business.
Build enough cash flow and experience before jumping into owning a business.
Every bit of money saved while working should be reinvested in a disciplined manner – partially in Roth IRA/Roth 401K and also partially in post tax accounts. (Some should be in post tax account – so it could be used as the business startup cost when she is ready to start her business).
My very best wishes to you both!
Wow my prayers got to you and your wife! Very cool to try to help her find some focus through ESI.
There are some really excellent comments. Just keep in mind that many businesses do fail and she will need backup plan. I am risk averse and never took the leap even though I think I would love to own my own business. My in-laws did own their own business, made a living but always thought they could sell for a windfall. They didn’t and couldn’t. They were completely unprepared for retirement and now live in a condo that I own.
I think the parental advice, save the money and get a job is pretty darn good. She needs to make sure she is building skills, contacts and knowledge of her industry. She should have a solid plan for a business and stick to it but I think there is a lot more than having seed money needed for success.
Encourage her to take time to grieve and to adjust to her new life, no need to rush anything, she can have drive, commitment and purpose but it doesn’t all need to happen over night.
So sorry to hear about your situation. My thoughts and prayers to you and your wife.
A lot of sage advice has already been given. Specifically, wait some time before making any major decisions; and get established in your career before striking out on your own.
I’m going to suggest something a bit more radical with just a small portion of the proceeds. Assuming that you’re still able to, is there something/some place you and your wife would love to do/visit? Maybe watching the sunrise over the Grand Canyon, or the sunset upon a white sandy beach, or…..
It doesn’t have to cost a fortune, but I would argue that even if you spent $15,000 on an experience that you can enjoy every single day for the rest of your life will pay you infinite dividends.
Good luck and God Bless!
I am so sorry for what the two of you are going through, and I wish you all the love and support in the world going forward.
When my dad died about 10 years ago (my mom was in her 50s), she was in a fog for the first year. I echo what many people have already said in suggesting that your wife put as much money as possible into a guaranteed investment and take the first year to adjust. Grieve. Find a “new normal”, as much as it is possible to do. After that, she can figure out what direction she most wants to pursue going forward.
I, like so many others here, am so sorry that the two of you are facing this, and I applaud your pragmatic and proactive approach to figuring out your wife’s financial future. There’s one part of your wife’s plan that really jumped out at me and it’s that she’s planning to spend a year grieving and figuring out how she wants to move forward. It’s really smart of her to do that, but as a widowed person, I think she should be prepared for it to take much longer than a year for her to get her feet under her again. Everyone grieves on their own timeline, so if she’s ready to move forward after a year, more power to her, but for many, many of us in the widowed community, we’re still a mess two and three years in. Just make sure she gives herself permission to hold off if she’s not ready to take those steps forward after that first year is up.
First of all thank you for your service. I am currently serving as well and went through what in the Navy we call Casualty Assistance Calls Officer (CACO) and the Air Force has something similar. This individual generally from your command or local area should be able to walk you and your wife through various decisions and benefits as it pertains to your time left, final wishes, and benefits for your wife and family. Your wife should have access to your GI Bill . This might be perfect to use during her transition period of a year or more with her parents to still provide her with a housing allowance and money towards a MBA or other business type degree that may benefit her in wanting to go out on her own. I highly recommend what others have said about waiting on what do with the money. Also enjoy your time together even if it means spending down your savings now. The first 100k will be received within a few days by your wife and the other 400k takes a bit longer. I also recommend she has a plan on how to grieve and get support whether from the military community, widow community, family, etc.
I am late reading this, but heres my advice:
I am at the “other end” of the retirement spectrum, and considering retiring VERY soon. I have built up a sizeable amount for my wife and I, and if COVID hadnt hit last year, I would have retired in April/May of 2020. Traveling though become pretty much impossible, so I worked another year. If work hadnt become so stressful, I likely would have worked thru this year as well.
I am a finance guy, and have been successful in the market with mutual funds (not so much individual stocks), however, I cashed out in Nov and January from the market, as the fundamentals to me are irrational now. I see three sectors at huge risk (travel/real estate/entertainment/media), and further believe the direction of the country with this administration will further put downward pressure on the market (but likely will increase interest rates). I tell you this so you can see my advice has change since a while ago. I would advise your wife live cheaply, forgo the house, and put the money into making the business successful – if it is she will be able to get a much bigger house down the road.