How can life insurance prevent you from having to become a drug dealer?

If you’ve seen the show Breaking Bad you already know what I’m talking about, but if you haven’t let me summarize it for you. The main character, Walter White, is a middle age chemistry teacher who doesn’t make much money and can barely support his family. His wife, who is pregnant, is forced to take up a job to help pay the bills. Further adding to the expenses at home is their physically handicapped son, Walt Jr. The family faces further challenges when Mr. White is diagnosed with incurable, advanced lung cancer. After a ride along with his DEA agent brother-in-law, Walter finds out that drug dealing can be a lucrative business and perhaps could be a way to pay off some bills and provide future security for his family. Being a genius with chemicals, making meth is easy, but soon after starting up his new business Mr. White also finds out how risky the business really is after having a few run-ins with local criminals.

There is an episode in the beginning of the second season where Walt tries to do the math in his head as to how much money is really needed to make the family financially secured. I found this scene particularly interesting considering it is what I do for a living. Mr. White has a few goals for his family:

·         Pay off existing debt.

·         Pay for Walt Jr’s college education

·         Pay for the newborn’s college education

·         Replace Income to his wife until she can collect social security at retirement.

The number he came up with was around $650,000. That is a lot of meth that needs to be sold in such a short period of time!

Now I’m not sure what assumptions they made in the way of retirement age, inflation, social security, education costs, and household expenses but I did a little number crunching of my own.

My assumptions:

·         Inflation = 3%

·         Tax Bracket = 25%

·         College Expenses: $24,000 (4 year public state – inflated at 7%/year)

·         Household Expenses: $3,500

·         Medical Bills: $50,000

·         Mr. White’s income for social security purposes: $40,000

·         Mrs. White is 45 years old, and retires at age 62 (starts taking early distributions of social security)

My results:

Walter White would need $631,200. So he was pretty damn close on his estimate.

The lesson learned: buy life insurance and you don’t need to become a drug lord.