Death and Money
By Keith Bunn Jr.
July 8, 2012
Years ago, my grandma prepaid her funeral at the age of 90 for $2,000. Even though her funeral cost were about $6,000, everything was paid for. Doesn’t sound like a bad plan until you think of how much she could have had if she would have invested that money in mutual funds for her funeral instead of prepaying for it.
Prepaying is not a good idea
Prepaying for anything doesn’t do anything more than offset the cost increase of the item or service due to the increase of inflation. In other words, the rate of return on your prepaid item or service is only what the inflation increase is from the time you prepaid to the time you actually use the item or service. Nationally, the average rate of inflation on funerals is about 4%. That is a horrible rate of return for anything!
Statistically, if you have reached the age of 40 years old, you are more than likely going to reach 80. So if you took $3,000. and invested it at a 10% rate of return, and didn’t add a single penny more to it for 40 years, you would have just over $161,000. I think you could be buried for that. Now if you got 12% instead 10%, you would have just under $356,000. I don’t know why you couldn’t have an outstanding funeral for that.
Fear of the stock market
After the past few years of the stock market going up and down like a rollercoaster, a lot of people today are afraid to put any of their hard earned money into the stock market and I don’t blame them.
But if people knew that in any rolling 5 year periods of the stock market’s history, 97% of the mutual funds have made some money, and in any rolling 15 year period, 100% of the mutual funds have made money. In fact, including the time of the Great Depression, there has never been a time in the market’s history that a mutual fund was worth zero. But you have to leave that money in that investment alone for a minimum of 5 years. If you are still skittish about the stock market, I would suggest that you find an investment broker that will take the time to sit down with you and teach you how all these investments work
What I would do is invest in a mutual fund that you are comfortable with and just forget about it. I would put the investment paperwork, with a note attached to it saying, “Cash in to pay for funeral!!” and put it with all your other important paperwork like any insurance policies, deeds, bank account information, WILLS, etc…
Pre-arrange your funeral
If you want to take more stress off your family at the time of your death, you could always pre-arrange everything. You can pre-select your casket or urn, tombstone, and even where you want to be buried, etc… and just leave a list of everything you want done
Anything you can do now will take the stress off your family and it will be another way to show how much you love them.
I would love to hear some stories of how your passing love one pre-arranged their funeral, both financially and in other ways that took the stress off your family. Or if there is something I missed that you’d like to add I’d love to hear that too!!
I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!