If I’m hit by a bus: A letter to my wife

Frugal Wife,

Please reread upon me getting hit by a bus. I’ll keep the sentimental stuff out of this letter. Here’s what you need to know about how our finances work and how to not run out of money.


Overview of How our Money Works

All of our recurring bills (i.e. utilities, ymca, etc) are paid automatically with credit card when the option is available and automatically debited from our checking account when paying by credit card is not available (i.e. our mortgage and our credit card bills). There are two exceptions. 1.) our water bill (pay every other month by CC on the website), and 2.) our property taxes. With property taxes, you owe half by the end of March and half by the end of August. Don’t pay early. Pay in full on the day it’s due. I do this through bill pay through our bank. It’s super easy to set up.

Given the above, all you have to worry about is having enough money in our checking account to cover our credit card bills on the first of every month and our mortgage on the 15th of every month. $8k should more than suffice, but you’ll get better at this over time. Before I kicked the bucket, I’d try to have no more than $1k in idle cash in a checking account at a given time. Eventually you’ll get comfortable enough with cash management where you’ll be comfortable holding no more than $1k in cash at any point in time.


How our Passwords Work

Every password is managed in our password manager, so if you remember that password you’re golden.


How to Not Run Out of Money:

You’ll be tempted to shove your money under your mattress. Inflation will erode the value of that cash, so don’t do it. You need to invest it to not run out of money. Follow these steps to not run out of money.

  • Ensure any usable organs are harvested from me, then cremate what is left in a cardboard pizza box (preferably a soiled one from Costco).
    • Flush ashes down toilet, put in dumpster, or spread on top of Mt Timpanogos or Angel’s Landing. I’ll let you decide.
      • If you want to have a ceremony, have a picnic with friends/family at a national park.
    • The above will help you to not run out of money. Funeral costs are absurd and a complete waste. Don’t let anyone guilt you into spending money into honoring me. That’s nonsense. Honor me with the most frugal funeral in recent history, with refreshments purchased in bulk at Costco, of course.
  • Report death to life insurance company, Fidelity, Vanguard, and other institutions (Saturna, credit card companies?).
  • Collect $1M life insurance money.
  • Roll all my Fidelity assets into a Vanguard Traditional (roll-over) IRA.
    • Should take less than a month to do so. These rollovers are a bit annoying, but it will be nice having all of your investments at Vanguard.
  • You now have a net worth of $1.6M.
    • $1M cash
    • $450k investments
      • Traditional IRA: $300k
      • Roth IRA: $100k
      • Taxable brokerage: $50k
    • $150k home equity
  • Keep $10k cash, then invest the rest of the $1M for a total portfolio size of 1.45M.
    • Your “target asset allocation” is as follows:
      • Total Stock Market Index (VTSAX): 40%
        • You want 40%*$1.45M=$580k in domestic stocks
      • Total International Stock Index (VTIAX): 20%
        • You want 40%*$1.45M=$290k in international stocks
      • Total Bond Market Index (VBTLX): 40%
        • You want 40%*$1.45M=$580k in domestic bonds
    • Bonds are tax inefficient, so you want as much as you can fit of that $580k to be within the two IRAs you have. The current balance of the IRAs is $400k, so that leaves $180k of bonds to buy in a taxable brokerage account. The stock funds you’ll put in your taxable brokerage account as well.
  • After doing the above, your portfolio will look like this:
    • Portfolio size: $1.45M
      • Trad IRA: $300k of VBTLX
      • Roth IRA: $100k of VBTLX
      • Taxable brokerage:
        • $180k of VBTLX
        • $580k of VTSAX
        • $290k of VTIAX
    • You might wonder why I don’t recommend a 529 account here. It’s because the tax code treats taxable brokerage accounts very favorably if you have no labor income. You’ll be paying 0% on dividends & 0% on capital gains while you’re not working. As a result, the 529 has no added benefit to you relative to holding the investments in a brokerage account.
  • You should turn on dividend reinvestment within your IRAs because you want them to grow automatically.
  • You should turn off dividend reinvestment within your taxable brokerage account and eat these dividends.
    • Your taxable brokerage balance of $1.05M should produce annual dividends of around $30k, which you will eat.
  • While the kids are still youngish, the government will give you $7k for free in tax credits. Eat this.
  • After eating the dividends from your taxable brokerage account & tax money from the government, you’ll have a fairly small shortfall to make up now of around $20k/year. To produce this cash, simply sell funds in your taxable brokerage account.
    • Which of these three funds will you sell?
    • Your desired asset allocation is 40% domestic stocks, 20% international stocks, 40% bonds.
      • Take 1 minute to calculate your actual allocation, and sell the fund which is higher than its target.
      • For example, if your actual holdings over time are: 42% domestic stocks, 21% international stocks, 37% bonds, this tells you to eat domestic stocks because it is the highest above your intended allocation (2% higher than target rather than 1% higher than target for international stocks).
        • If you follow the above methodology, I don’t believe you’ll need to ever formally rebalance (sell fund A and buy fund B) to get back to your desired asset allocation.
    • Only eat your IRA accounts after the brokerage account is depleted. Eat brokerage first, then Roth IRA, then trad IRA.
  • You’ll want to convert $18k/year from your Trad IRA to a Roth IRA. Doing so will be completely tax free (because $18k is the standard deduction for heads of households, as you would be after I kick the bucket). You may as well do it every single year. Do so at this link: https://personal.vanguard.com/us/ConvertToRoth
    • After many years of doing this, you will approach $0 in a Trad IRA. This is great. You’ve converted pre-tax money to post-tax money without paying a penny in taxes.
      • In the first two years following my death, you’ll convert $24k/year for free since you’re a “qualified widow” during this time period.
        • Thanks to Davis for this suggestion.
      • Thanks Brandon for correctly pointing out that you’re entitled to take the “head of household” deduction rather than the “single” deduction once I kick the bucket. I cleaned up this bullet after his suggestion.
  • Real estate in the midwest is cheap, but without a job or family tying you here, you should probably consider moving. In a few years, I’d considering moving to somewhere with better weather, better schools, and lower property taxes.
  • A decade after I kick the bucket, you’ll want to assess your financial situation and see if you can tolerate more risk. If things are looking good (in terms of portfolio size divided by annual living expenses exceeding 30), consider increasing the risk of your portfolio:
    • Total Stock Market Index (VTSAX): 55%
    • Total International Stock Index (VTIAX): 25%
    • Total Bond Market Index (VBTLX): 20%
      • There is no magic in what I’m recommending here. Keep roughly a 2/1 ratio of domestic to international stocks. 20% bonds is riskier than the initial recommendation of 40% bonds, but it will have a higher expected return going forward. 10 years after I kick the bucket, you’ll be in the position to take on a bit more risk if things are going well (as manifest by a high ratio of investment balance to annual living expenses).
  • Reader Brandon mentions that you’d be eligible for Social Security survivors benefits as well, so check that out.
    • I’m sure you’d be eligible for other government programs as well, which you should look into.


Where to Turn if You Need Financial Help

My favorite resource for financial wisdom is the Bogleheads forum. Feel free to post there for help and an army of brilliant successful investors will help you through your questions. Here’s the link to their personal finance forum, which is where you’d post your questions (link). You can log in with my username & password there or create your own account. You’re in good hands with the Bogleheads. I can’t think of a better internet resource to direct you to than there.

Further, we have several smart friends. XXXX, XXXX, and XXXX come to mind as people you might want to bounce ideas off of if you need a different set of eyes.


Advanced Tax Planning (capital gain harvesting)

As mentioned above, you’ll want to sell index funds to eat when dividends are not enough. If you’re not working, the taxes owed on these capital gains will likely be zero (you can easily validate yourself in Taxcaster). If you’re in the 0% capital gains tax region, then when it comes time to sell funds, go ahead and sell those funds with the lowest “cost basis.” This sounds complicated, but basically what it means is that you want to sell index funds that have appreciated the most. This strategy is similar to that of “capital gains harvesting”, which I’d also recommend doing every year. GoCurryCracker and MadFientist have written extensively on the topic. If you’re not eating the capital gain, but are instead doing capital gain harvesting, here’s how that transaction would work:

Index fund purchase price (i.e. the “cost basis”): $100

Current index fund price: $250

Unrealized (because you haven’t sold it yet) capital gain: $250-$100=$150.

If you sell the fund, you’d realize a capital gain of $150 and pay $0 taxes on it if you’re in the 0% tax region (confirm with TaxCaster).

Then you immediately buy back the fund (in reality it will probably be the next day for our index funds). When you do so, the cost basis of the fund will now be $250.

So what’s the point of the above nonsense? It’s to increase your cost basis. Taxes on investments are based on capital gains. Capital gains = sales price – cost basis (i.e. the purchase price). If you can grow your cost basis for free using “capital gain harvesting”, you may as well do so. In the future as you get a job (or the tax code changes), this opportunity may not exist. You may as well do it while you can.



In writing this letter, it’s apparent that I need to involve you more in the day-to-day (incredibly simple) mechanics of managing our investments, which will hopefully demystify this whole investing thing for you. Takeaways for me: show you how to 1.) make our next backdoor Roth contribution next month, and 2.) pay our property taxes through bill pay.

18 thoughts on “If I’m hit by a bus: A letter to my wife”

  1. When I first saw this in my inbox, I thought it was your way of telling me you got hit by a bus today. I’m glad that was just the title and not reality. 🙂

    • I can assure you that if I’m in the process of dying, I’ll contact you personally before blogging about it publicly. Sorry for the confusion.

  2. 40% in VBTLX seems so high to me but then again, I am not in the wealth preservation stage currently. Please tell me that in the accumulation stage that are not parking that much in bonds.

    • I’m 0% bonds currently. Relatively low net worth. Can tolerate much risk currently. If I kick the bucket, I’m advising my wife to be really conservative in the first decade to mitigate sequence of returns risk. Once she’s past the first decade and still doing okay financially, I’m advising her to feel free to take on a bit more risk.

  3. I’ve been meaning to do this for awhile since first hearing about through dough rollers. Hopefully between spring-summer semesters I can finally make some progress!

  4. I did this a couple of years ago after hearing about it on Motley Fool. The guy who was a big proponent of it died in a freak biking accident. But at least his wife knew what to do, I guess.

    • Hopefully it’s not a precursor of a horrible and untimely death, but it’s nice to have a broad plan of how to proceed.

  5. Hey Frugal Professor, been following your blog since you first guest posted at GoCurryCracker. Keep up the great content!

    I did this same process for my wife a short time ago. Two quick notes that came to mind while I was reading: 1) your spouse (and children) may be eligible for social security survivor benefits while your children are still young and 2) while your children still qualify as dependents, the Roth Conversions could be tax-free up to the $18k head of household standard deduction.

    • Brandon, thanks for chiming in! I’m embarrassed to say that I never understood what the head of household was until I googled it right now. You’re exactly right that the standard deduction should be updated in the article to reflect that change. Thanks as well for the thoughts on social security survivor benefits as well. I’ll have to log onto my newly formed Social Security account to learn more about them and see if I can’t get an survivor estimate for if I kick the bucket now. Thanks again for the input!

  6. Larger tax free roth conversions in the two years following your death if your wife has at least one dependent child. “Qualifying widow”. Treated as married filing jointly for two years.

  7. Good post. Pls add one thing. Pls ask your wife to call social security. 1-800-772-1213. The SSA survivor benefits may be siginificant as they will pay each of your children survivor benefits until age 18 that can be used toward their college costs, general living expenses,or to fund their future savings accounts.

  8. Have you updated your letter to include Merrill Edge investments? One thing keeping me from enrolling in BofA’s Preferred Rewards program (great posts on it, by the way!) is a suspicion that BofA/ Merrill Edge might make things difficult for my beneficiary if I got hit by a bus one day and try to push higher fees and active management. My hunch is that Vanguard/Fidelity/Schwab would be more of a reliable custodian in the same situation. Is this a concern that you share at all?

    • This is a good point. I’m 98% sure my wife knows about our $110k of Merrill money. I’ll have a discussion with her tonight to ensure she knows.

      With access to Personal Capital, I’m sure she’d be able to figure it out eventually.

      I’m not sure that I trust ME less than the others. I’d probably advise her to keep the account open to continue to milk the 5.25% CC rewards.


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