Insurance

MP900409002 300x300 Revisit Your Life Insurance Coverage Before You RetireGiven the state of the economy and the threat of Medicare and Social Security cuts, “retirement” has unfortunately become the new dreaded dirty word in households.

While plans to cut expenses are being discussed far earlier than retirement in today’s world, the expense-cutting is permanent within the context of a retirement discussion.

One area in which to consider cutting expenses is your life insurance premium.  Life insurance is often purchased when the covered individual is younger, with a large enough death benefit to cover one’s family, mortgage, estate taxes (where applicable) and other areas should the covered individual pass on.

At retirement, however, that same covered individual may not need to be concerned about leaving money to send children to college or to pay off his or her mortgage.  As a result, there may be room to lower one’s premium in exchange for a change in coverage.

Rather than get a new policy — which may result in higher premiums if you go through the underwriting process again — consider the following 3 ways to potentially lower your premiums on your existing policy:

1.  1035 Exchange:  If your policy has cash value, discuss with your advisor transferring that cash value into an alternative life insurance policy with potentially lower premiums.

2.  Inquire about Flexible Premiums:  Obtain an illustration from your advisor or agent with a reduced death benefit or the maximum tax-free cash flow that may be obtained without requiring more premium to support you past your life expectancy.

3.  Change Your Financial Plan:  Discuss changing your policy’s role in your overall financial plan with your advisor.  For example, consider using a cash value policy as a tax-deferred savings vehicle, a low interest loan source, or tax-advantaged cash flow source.

As with all changes to your insurance policy contributions, make sure you have a discussion with your advisor or insurance agent and receive an illustration first (for example, so that you don’t inadvertently turn your policy into a Modified Endowment Contract or MEC, and incur taxes and penalties on withdrawls).

With the right moves, retirement may not stay a dirty word for long.

View on The Wall Street Geek’s business website Price Capital.

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dog with firefighter Revisit Your Life Insurance Coverage Before You RetireCountry star Trace Adkins and his family just endured a devastating home fire. What thankfully saved them was having a home fire safety plan. It involved determining a meeting place ahead of time to gather, which lowered the chances that a family member would hide in an unsafe place and become unaccounted for.

The same kind of planning can also occur with your finances. No one expects to wake up in the middle of the night to a fire that destroys your home. But it can happen, and rare things tend to happen these days. If you take the time to prepare even the slightest plan, your future self may thank you.

Here are 5 things to consider for protecting you and your family financially in the event of a home fire:

1. Insurance: Naturally, insurance makes the top of the list because it may provide you with the money to get temporary shelter and to replace damaged property. Insurance carriers can offer you a policy to cover a variety of calamities includes fires and floods. It’s important to take pictures of your belongings and to store those pictures in a safe place in order to have a smoother claims process.

2. Emergency Fund: Insurance doesn’t provide you with money to replace your belongings and find temporary shelter right away. While undergoing your claims process, an emergency fund with 4-6 months of living expenses may help lower short term stress due to money.

3. No or Low-Interest Credit Card or Line of Credit: In the absence of an emergency fund, a no or low-interest credit card or line of credit may help provide you with the money to get your family to safety without losing money on high interest fees. Once your claim is processed, it’s key to pay these off.

4. Offsite Backups: Carbonite and other brands of backup software can automatically store the contents of your computer offsite from your home. You ideally want to get your computer to state where losing your hard drive wouldn’t be catastrophic, and its contents can be easily restored onto a new hard drive — including purchased software.

5. Residual Income: We all wish that we didn’t have to work 8-10 hours per day or more in order to generate income. However, if you’re able to position your income so that you’re able to take 4-6 weeks off to rebuild your life without losing your income, that may give you the space to focus on rebuilding your life faster. Alternatively, ask your employer about your company’s personal time off policy to address family emergencies and plan ahead around it.

We often neglect to plan for the financial side of unexpected events. Adding items like these to your fire safety checklist may help you have a more well-rounded plan for surviving catastrophes and putting the event behind you quickly. As with life, hope for the best but plan for the worst.

View on The Wall Street Geek’s business website Price Capital.

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tumblr ll05sx7Ryf1qhn506 Revisit Your Life Insurance Coverage Before You RetireProspective clients in their 30′s often approach me with the same question:  what should I be doing?

It’s almost instinctual that we replace “want to” with “should be” during this decade.  With our 40′s in the lineup as the next decade marker, it’s no wonder that the responsibility clock begins to tick louder prompting young adults to make important life decisions while time and energy are still on their side.

As an advisor (as well as a detail-oriented, meticulous person), it’s very exciting for me to see someone take steps to clearly define his or her goals and put in place a plan to reach them.  It’s particularly exciting to meet with a young adult since it often brings the challenge of allocating a stream of income across multiple goals that will come to fruition over the course of 30-40 years.

While it may feel as if you need to address an endless “should be” list of personal finance items, key personal financial seeds to sow in this age group towards securing your future typically fall within the following six categories:

Retirement Planning

When do you want to retire, and how?  Your answers will dictate how much you need to start saving today, whether you need to invest to potentially increase your rate of return, and how to leverage the various retirement accounts available to you.

How you save for retirement (or semi-retirement) may be one of the most important decisions you make today since the growth of your savings is a factor of time and technique.  Using a retirement calculator is an excellent way to visualize how frequency, duration and rate of return all make an impact.

Also keep in mind that not all retirement accounts are the same.  For example, a 401K plan has limited investment options compared to a Roth or Traditional IRA.  Higher income earners may also consider tax-deferred insurance-based products with principal guarantees (yet often also with surrender penalties).  An advisor can help you determine what’s appropriate for your goals.

Insurance

Does anybody depend on you or your income?  Or if you looked around right now and suddenly lost something you see, would that hurt your financially?

If you answered yes to any of these questions, consider getting an insurance policy.  Insurance is available for a laundry list of things including life, health, disability, home, car, floods, and renter’s.  Even key person insurance is available for insuring against the loss of a business partner, or personal liability insurance for if you’re personally sued by someone (for example, if your dog bites your neighbor).

If you get insurance through your job, it may be cheaper than if you got a policy directly with an insurance carrier. However, you may lose coverage when you change jobs or retire.  As a result, consider getting your own policy.  If you’re young and healthy, you may be able to lock in a reasonable premium for the lifetime of your contract.

Life Events

Are you planning to have children?  Or get married?  Start a business?    You may need to weigh the financial requirements for each against you ability to save for retirement and pay for insurance.

Once again, a variety of savings techniques are available with advantages and disadvantages that could help or hurt your overall financial picture.

For example, saving to a state 529 college savings plan may provide you with a state tax write-off.  However, where you incorporate your business and the business structure you choose may incur either a higher personal tax burden or potential personal liability risks.

Estate Planning

If you pass away tomorrow, do you have a plan in place to transfer your assets to a beneficiary?  If not, you may run the risk of a judge deciding who gets your savings and even who gets the things in your apartment.  This could result in a creditor getting your prized rock guitar collection, and not a relative.

Your plan may include creating a will, ensuring that your retirement accounts and insurance plans have up-to-date beneficiaries,  or ensuring that you have a trust established to transfer assets to a child or charity with ideally a low tax burden.

Real Estate

Do you have plans to buy a home in the future?  Upgrade to a new home?  Or to buy a vacation home?  Are you considering investing in foreclosed properties, or flipping?  Are you thinking about buying commercial real estate for your business?

Success in each of the above requires lining up the right advisors, planning towards having a successful transaction that you can afford, and hedging against market changes (including property tax changes) that aren’t in your favor.

What if you’re deciding between buying and renting?  The jury is out on whether home prices will continue to decline.  But if you currently cannot afford the costs associated with buying a home, realize that other options exist.

For example, you can participate in the real estate market at a lower cost and higher liquidity with REITS (e.g., real estate investment trusts, which trade like stocks) and potentially receive a stream of income from your investment.  Or simply invest your money elsewhere to get the long term return that you may be seeking.

This is not intended to be the complete list of areas that you need to consider since all situations are different.  However, this may be a good place to start to begin organizing your “should be” list before the ticking clock turns into time bomb.  If it ends up being all too complicated or if you’re concerned about putting the right plans in place, then you may need to speak with an advisor that you know and trust.  That’s what we’re here for.

View on The Wall Street Geek’s business website Price Capital.

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