Blog

Investing Means Tolerating Some Risk

 

That truth must always be recognized.

 

Provided by Michael Snow

                       

When financial markets have a bad day, week, or month, discomforting headlines and data can swiftly communicate a message to retirees and retirement savers alike: equity investments are risky things, and Wall Street is a risky place.

 

All true. If you want to accumulate significant retirement savings or try and grow your wealth through the opportunities in the markets, this is a reality you cannot avoid.

 

Regularly, your investments contend with assorted market risks. They never go away. At times, they may seem dangerous to your net worth or your retirement savings, so much so that you think about getting out of equities entirely.

 

If you are having such thoughts, think about this: in the big picture, the real danger to your retirement could be being too risk averse.

 

Is it possible to hold too much in cash? Yes. Some pre-retirees do. (Even some retirees, in fact.) They have six-figure savings accounts, built up since the Great Recession and the last bear market. It is a prudent move. A dollar will always be worth a dollar in America, and that money is out of the market and backed by deposit insurance.

 

This is all well and good, but the problem is what that money is earning. Even with interest rates rising, many high-balance savings accounts are currently yielding less than 0.5% a year. The latest inflation data shows consumer prices advancing 2.3% a year. That money in the bank is not outrunning inflation, not even close. It will lose purchasing power over time.1,2

 

Consider some of the recent yearly advances of the S&P 500. In 2016, it gained 9.54%; in 2017, it gained 19.42%. Those were the price returns; the 2016 and 2017 total returns (with dividends reinvested) were a respective 11.96% and 21.83%.3,4

 

Yes, the broad benchmark for U.S. equities has bad years as well. Historically, it has had about one negative year for every three positive years. Looking through relatively recent historical windows, the positives have mostly outweighed the negatives for investors. From 1973-2016, for example, the S&P gained an average of 11.69% per year. (The last 3-year losing streak the S&P had was in 2000-02.)5

 

Your portfolio may not return as well as the S&P does in a given year, but when equities rally, your household may see its invested assets grow noticeably. When you bring in equity investment account factors like compounding and tax deferral, the growth of those invested assets over decades may dwarf the growth that could result from mere checking or savings account interest.

 

At some point, putting too little into investments and too much in the bank may become a risk – a risk to your retirement savings potential. At today’s interest rates, the money you are saving may end up growing faster if it is invested in some vehicle offering potentially greater reward and comparatively greater degrees of risk to tolerate.

 

Having a big emergency fund is good. You can dip into that liquid pool of cash to address sudden financial issues that pose risks to your financial equilibrium in the present.

 

Having a big retirement fund is even better. When you have one of those, you may confidently address the biggest financial risk you will ever face: the risk of outliving your money in the future.

 

Michael Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser. Tower Financial Strategies Corp. is also a licensed Insurance Agency.

     

Citations.

1 – valuepenguin.com/average-savings-account-interest-rates [10/4/18]

2 – investing.com/economic-calendar/ [10/11/18]

3 – money.cnn.com/data/markets/sandp/ [10/11/18]

4 – ycharts.com/indicators/sandp_500_total_return_annual [10/11/18]

5 – thebalance.com/stock-market-returns-by-year-2388543 [6/23/18]

When Is Social Security Income Taxable?

To find out, look closely at two factors.

 

Provided by Michael Snow

 

Your Social Security income could be taxed. That may seem unfair or unfathomable. Regardless of how you feel about it, it is a possibility.

 

Seniors have had to contend with this possibility since 1984. Social Security benefits became taxable above a certain yearly income level in that year. A second, higher yearly income threshold (at which a higher tax rate applies) was added in 1993. These income thresholds have never been adjusted upward for inflation.1

 

As a result, more Social Security recipients have been exposed to the tax over time. About 56% of senior households now have some percentage of their Social Security incomes taxed.1

 

Only part of your Social Security income may be taxable, not all of it. Two factors come into play here: your filing status and your combined income.

 

Social Security defines your combined income as the sum of your adjusted gross income (AGI), any non-taxable interest earned, and 50% of your Social Security benefit income. (Your combined income is actually a form of modified adjusted gross income, or MAGI.)2

 

Single filers with a combined income from $25,000-$34,000 and joint filers with combined incomes from $32,000-$44,000 may have up to 50% of their Social Security benefits taxed.2

 

Single filers whose combined income tops $34,000 and joint filers with combined incomes above $44,000 may see up to 85% of their Social Security benefits taxed.2

  

If you are a head of household, or a qualifying widow/widower with a dependent child, the combined income thresholds for single filers apply to you.2

 

What if you are married and file separately? No income threshold applies. Your benefits will likely be taxed no matter how much you earn or how much Social Security you receive. (The only exception is if you are married filing separately and do not live with your spouse at any time during the year. In that case, part of your Social Security benefits may be taxed if your combined income exceeds $25,000.)2

 

You may be able to estimate these taxes in advance. You can use an online calculator (a Google search will lead you to a few such tools) or the worksheet in I.R.S. Publication 915.2

 

You can even have these taxes withheld from your Social Security income. You can choose either 7%, 10%, 15%, or 22% withholding per payment. Another alternative is to make estimated tax payments per quarter, like a business owner does.2,3

 

Did you know that 13 states tax Social Security payments? In alphabetical order, they are: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. Sometimes, only higher-income seniors face such taxation. In Kansas, Missouri, and Rhode Island, for example, the respective AGI thresholds for the taxation of a single filer’s Social Security income are $75,000, $80,000, and $85,000.1

 

What can you do if it appears your benefits will be taxed? You could explore a few options to try and lessen or avoid the tax hit, but keep in mind that if your combined income is far greater than the $34,000 single filer and $44,000 joint filer thresholds, your chances of averting tax on Social Security income are slim. If your combined income is reasonably near the respective upper threshold, though, some moves might help.

 

If you have a number of income-generating investments, you could opt to try and revise your portfolio so that less income and tax-exempt interest are produced annually.

 

A charitable IRA gift may be a good idea. You can make one if you are 70½ or older in the year of the donation. Individually, you can endow a qualified charity with as much as $100,000 in a single year this way. The amount of the gift counts toward your Required Minimum Distribution (RMD) and will not be counted in your taxable income.4

  

You could withdraw more retirement income from Roth accounts. Distributions from Roth IRAs and Roth workplace retirement plan accounts are tax exempt as long as you are age 59½ or older and have held the account for at least five tax years.5

 

Will the income limits linked to taxation of Social Security benefits ever be raised? Retirees can only hope so, but with more baby boomers becoming eligible for Social Security, the I.R.S. and the Treasury stand to receive greater tax revenue with the current limits in place.

 

Michael Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

 

Citations.

1 – fool.com/retirement/2018/08/30/everything-you-need-to-know-about-social-security.aspx [8/30/18]

2 – forbes.com/sites/kellyphillipserb/2018/02/15/do-you-need-to-pay-tax-on-your-social-security-benefits-in-2018 [2/15/18]

3 – cnbc.com/2018/09/12/the-irs-is-warning-retirees-of-this-impending-surprise-tax.html [9/12/18]

4 – fidelity.com/building-savings/learn-about-iras/required-minimum-distributions/qcds [9/17/18]

5 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [10/25/17]

 

Smart Financial & Insurance Moves for New Parents

As you start a family, consider these ideas.  

 

Provided by Michael Snow

 

Being a parent means being responsible to a degree you never have been before. That elevated responsibility also impacts your financial decisions. You are now a provider and a protector, and that reality may make the following financial moves necessary.

 

Think about a budget. As a couple, you may have lived for years without budgeting. As parents, this may change. You will face new recurring costs: clothes, toys, diapers, food. Keeping track of weekly or monthly expenses will be handy. (The Department of Agriculture has an online calculator where you can estimate the total cost of raising a child to adulthood. The math may surprise you: the U.S.D.A. puts the average cost at $233,610 for a middle-income family.)1,2

  

Take care of health and life insurance. Your child should be added to your health insurance plan quickly. Most insurance providers require you to notify them of a child’s birth within 30 days. You can get started before then; be aware that a Social Security number and birth certificate can take weeks to arrive in the mail. If you are in a group health plan, talk with the human resources officer or benefits administrator at work, and let them know that you want to add a dependent to your health care plan. (If you have coverage through a private plan, your premiums may go up after you notify the carrier.) Under the Affordable Care Act, a parent or legal guardian who has health coverage arranged through the federal or state Marketplace has 60 days from the date of birth or adoption to enroll a child as a dependent on their plan; once that is done, health care coverage for the child will apply, retroactively.3

 

Term life insurance provides an affordable way for new parents to have some financial insulation against a worst-case scenario, and disability insurance (which may be available where you work) provides coverage in the event of an extended illness or injury that stops you from doing your job. If you have a Health Savings Account (HSA), you can contribute more per year when you have a child. The maximum annual contribution for a family is currently set at $6,850 (and for the record, the I.R.S. is allowing families to contribute up to $6,900 in 2018).4

  

Draft a will and review beneficiary designations. A will can do more than declare who receives your assets when you die. It can also name a legal guardian for your child in the event both parents pass away. Additionally, you can specify a guardian of your estate in your will, to manage the assets left to a minor child. While you may have named your spouse or partner as the primary beneficiary of your IRA or investment account, you may decide to change that or at least add your child as a contingent beneficiary.5

 

See if you can save a little for college. The estimated cost of four years at a public university starting in 2036? $184,000, CNBC reports. That may convince you to open a 529 plan or have some other kind of dedicated college savings account with investment options. Most 529 plans require a Social Security number for a beneficiary, so they are commonly started after a child is born, rather than before.2,6

  

Review your withholding status and tax forms. An addition to your family means changes. You may also become eligible for some federal tax breaks, like the Earned Income Tax Credit, the Adoption Tax Credit, the Child Tax Credit, and the Child & Dependent Care Credit.7

 

Keep the big picture in mind. You still need to build retirement savings; you still need to have an emergency fund. Becoming a family might make accomplishing those tasks harder, yet they remain just as important.

 

After reading all this, you may feel like you need to be a millionaire to raise a child. The fact is, most parents are not millionaires, and they manage. Whether you are wealthy or not, you will want to take care of many or all of these financial and insurance essentials before or after you bring your newborn home.

 

Michael Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal or accounting services. If assistance is needed the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are un-managed and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser. Tower Financial Strategies Corp. is also a licensed Insurance Agency (not licensed in all states)

     

Citations.

1 – cnpp.usda.gov/tools/CRC_Calculator/default.aspx [9/20/18]

2 – tinyurl.com/y8rlmm7w [2/26/18]

3 – healthcare.com/info/health-insurance/baby-health-insurance-newborn [10/18/17]

4 – tinyurl.com/ya5g75ez [5/1/18]

5 – everplans.com/articles/what-does-a-guardian-of-the-estate-do [9/20/18]

6 – cnbc.com/2018/05/07/this-is-how-much-parents-need-to-save-to-cover-college-bills-in-2036.html [5/7/18]

7 – efile.com/tax-deductions-credits-for-parents-with-children-dependents/ [9/20/18]

Do You Really Need Life Insurance?

Too many Americans have no life insurance. Their loved ones may pay dearly for that choice.

  

Provided by Michael R Snow

 

September is National Life Insurance Awareness Month – a good time to think about the value and importance of insuring yourself.

 

According to a recent Bankrate survey, 42% of Americans have no life insurance at all. They may not know that life insurance coverage has become much more affordable than it once was.1

 

Many people ask if life insurance is really worth the cost; maybe you are among them. The simple answer to that question is yes. It can be stunningly cheap: a healthy, non-smoking man in his thirties may pay less than $45 a month for a $1 million 20-year term policy. Permanent life insurance costs more than term life insurance, but permanent life policies can build cash value over time; term policies cannot.2

 

Life insurance is about managing risk, and if other people rely on you financially, you need to have it in place in case your passing puts them at financial risk. When a spouse or parent dies, there are financial matters to address: a sudden lack of income for a household, bills and mortgages or rent to pay, final expenses such as funeral or cremation costs, and the cost of children’s education. Without adequate life insurance coverage, a household is hard-pressed to meet these immediate, financially draining challenges.

 

Many growing families have inadequate life insurance coverage. The Bankrate survey discovered that 37% of parents with children under age 18 had no policy at all. Some younger families find coverage through group plans, but perhaps not enough: 32% of the survey respondents raising minor children said that the death benefits on their life insurance contracts were $100,000 or less.1

 

The problem of inadequate coverage seems to plague households of all ages. A five-figure life insurance payout can pay for a funeral, but it will not offer much economic insulation to a family after a wage earner dies. Bankrate found that 47% of the Americans who have life insurance have policies with coverage amounts of $100,000 or lower. Twenty-one percent of Americans have policies with death benefits of $25,000 or lower.1

 

How much coverage is adequate for you? Ideally, you should determine that with the help of an insurance professional. As a rough rule of thumb, the death benefit on a policy should be about 15 times your income. If you are considering a term life policy, the term should not end before your envisioned retirement age.2

 

Life insurance can also be valuable while you are alive. A policy with cash value components may grow over time. After a while, you may be able to borrow against the cash value. Sometimes the payout amount on these types of policies can be adjusted as well as the size of the premiums. Of course, you must keep paying the premiums to keep any kind of permanent life or term life policy in force.3

 

While you may decide you prefer one kind of policy over another, the important thing is to have coverage in place – not just to reassure yourself, but those you love. Life insurance can help a spouse or a family maintain financial equilibrium at a time when it is most needed.

 

Michael R Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser. Tower Financial Strategies Corp. is also a licensed Insurance Agency. (not licensed in all states)

  

Citations.

1 – bankrate.com/finance/insurance/money-pulse-0715.aspx [7/8/15]

2 – forbes.com/sites/timmaurer/2016/01/05/10-things-you-absolutely-need-to-know-about-life-insurance/ [1/5/16]

3 – nerdwallet.com/blog/insurance/should-you-consider-cash-value-life-insurance/ [5/6/15]

 

Retirees, Check Your Withholding

 

It may need to be adjusted due to the 2017 federal tax reforms.

 

Provided by Michael R Snow

 

The Internal Revenue Service has a message for you. You may need to adjust the amount withheld from your paycheck or the size of your estimated tax payments because the agency is using new withholding tables this year. Should you underpay your taxes for 2018, you could be hit with a tax penalty in 2019.1

 

If you are retired or about to retire, you should take note of this announcement. While it may seem aimed at salaried employees and small business owners, the changes to the withholding tables also impact you.

 

Many retirees work in the gig economy. They walk dogs, drive for ridesharing companies, serve as home health aides, and act as management, marketing, legal, and health care consultants. The common thread here is self-employment. Self-employment means making estimated tax payments. This is a new experience for some baby boomers.2

 

If you have started freelancing or started a part-time business, you must join their ranks. You must file like a business owner even if you have an informal business venture that has lost money; if there is a profit motive, the I.R.S. considers that self-employment.2,3

  

Double-check your withholding even if you do not work part time. Paying estimated taxes is normal after you retire, whether you work or not; an employer no longer files a Form W-4 for you. Your retirement income probably comes from multiple sources and includes Social Security benefits, mandatory annual retirement account withdrawals, and maybe pension income from a past employer or a pension-like income arranged through a private contract.4

  

Part of your Social Security income can be subject to federal income taxes if your “combined income” exceeds a certain level. “Combined income” = adjusted gross income + non-taxable interest + 50% of your Social Security benefits. If you are single and your combined income falls between $25,000-$34,000, you may see up to 50% of your benefits taxed; the limit is 85% when your combined income tops $34,000. If you and your spouse file jointly and have a combined income between $32,000-$44,000, as much as 50% of your benefits may be taxable; above $44,000, the ceiling is 85%. Some states also tax Social Security benefits.4,5

 

Given all this, Form W-4V may be handy. You can file it to withhold a flat percentage from each Social Security payment: 7%, 10%, 12%, or even 22%.4,5

 

Do you receive a pension or pension-style income? Then you may want to file Form W-4P, which withholds taxes from those payments (you can indicate the number of allowances you wish to claim; the more you claim, the less money you withhold).4

 

Regarding the Required Minimum Distributions (RMDs) you must take annually from traditional IRAs and other qualified retirement accounts after age 70½, you have an interesting option if you are wealthy enough not to need 100% of the money. You can tell the custodian of your IRA (or other retirement account) that you want taxes withheld from the RMD, effectively taking care of the quarterly estimated tax payments you would otherwise make on the RMD amount.4

  

To help with all this, the I.R.S. offers an online withholding calculator. This is a feature of its Paycheck Checkup campaign. You can find it at irs.gov/individuals/irs-withholding-calculator.1

     

Be sure to consult a tax professional about your withholding. Fine print may need to be studied. For example, not all income is subject to withholding; some forms of self-employment income, income derived from rental activities, and income from jobs in the sharing economy may be exempt. Have this conversation before 2019 arrives.1

 

Michael R Snow* may be reached at316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

    

Citations.

1 – irs.gov/newsroom/avoid-penalty-for-underpayment-of-taxes-irs-says-check-withholding-make-estimated-payments [9/6/18]

2 – irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center [12/14/17]

3 – irs.gov/businesses/small-businesses-self-employed/business-activities [4/23/18]

4 – cnbc.com/2018/09/12/the-irs-is-warning-retirees-of-this-impending-surprise-tax.html [9/12/18]

5 – kiplinger.com/article/retirement/T051-C000-S004-retiree-tax-tip-tally-taxes-on-social-security.html [9/5/18]

 

The IRA and the 401(k)

 

Comparing their features, merits, and demerits.

 

Provide by Michael Snow

 

How do you save for retirement? Two options probably come to mind right away: the IRA and the 401(k). Both offer you relatively easy ways to build a retirement fund. Here is a look at the features, merits, and demerits of each account, starting with what they have in common.

 

Taxes are deferred on money held within IRAs and 401(k)s. That opens the door for tax-free compounding of those invested dollars – a major plus for any retirement saver.1

 

IRAs and 401(k)s also offer you another big tax break. It varies depending on whether the account is traditional or Roth in nature. When you have a traditional IRA or 401(k), your account contributions are tax deductible, but when you eventually withdraw the money for retirement, it will be taxed as regular income. When you have a Roth IRA or 401(k), your account contributions are not tax deductible, but if you follow Internal Revenue Service rules, your withdrawals from the account in retirement are tax free.1

 

Generally, the I.R.S. penalizes withdrawals from these accounts before age 59½. Distributions from traditional IRAs and 401(k)s prior to that age usually trigger a 10% federal tax penalty, on top of income tax on the withdrawn amount. Roth IRAs and Roth 401(k)s allow you to withdraw a sum equivalent to your account contributions at any time without taxes or penalties, but early distributions of the account earnings are taxable and may also be hit with the 10% early withdrawal penalty.1 

 

You must make annual withdrawals from 401(k)s and traditional IRAs after age 70½. Annual withdrawals from a Roth IRA are not required during the owner’s lifetime, only after his or her death. Even Roth 401(k)s require annual withdrawals after age 70½.2

 

Now, on to the major differences.

   

Annual contribution limits for IRAs and 401(k)s differ greatly. You may direct up to $18,500 into a 401(k) in 2018; $24,500, if you are 50 or older. In contrast, the maximum 2018 IRA contribution is $5,500; $6,500, if you are 50 or older.1

 

Your employer may provide you with matching 401(k) contributions. This is free money coming your way. The match is usually partial, but certainly nothing to disregard – it might be a portion of the dollars you contribute up to 6% of your annual salary, for example. Do these employer contributions count toward your personal yearly 401(k) contribution limit? No, they do not. Contribute enough to get the match if your company offers you one.1

 

An IRA permits a wide variety of investments, in contrast to a 401(k). The typical 401(k) offers only about 20 investment options, and you have no control over what investments are chosen. With an IRA, you have a vast range of potential investment choices.1,3

 

You can contribute to a 401(k) no matter how much you earn. Your income may limit your eligibility to contribute to a Roth IRA; at certain income levels, you may be prohibited from contributing the full amount, or any amount.1

 

If you leave your job, you cannot take your 401(k) with you. It stays in the hands of the retirement plan administrator that your employer has selected. The money remains invested, but you may have less control over it than you once did. You do have choices: you can withdraw the money from the old 401(k), which will likely result in a tax penalty; you can leave it where it is; you can possibly transfer it to a 401(k) at your new job; or, you can roll it over into an IRA.4,5

 

You cannot control 401(k) fees. Some 401(k)s have high annual account and administrative fees that effectively eat into their annual investment returns. The plan administrator sets such costs. The annual fees on your IRA may not nearly be so expensive.1

 

All this said, contributing to an IRA or a 401(k) is an excellent idea. In fact, many pre-retirees contribute to both 401(k)s and IRAs at once. Today, investing in these accounts seems all but necessary to pursue retirement savings and income goals.

 

Michael Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

    

Citations.

1 – nerdwallet.com/article/ira-vs-401k-retirement-accounts [4/30/18]

2 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [5/30/18]

3 – tinyurl.com/y77cjtfz [10/31/17]

4 – finance.zacks.com/tax-penalty-moving-401k-ira-3585.html [9/6/18]

5 – cnbc.com/2018/04/26/what-to-do-with-your-401k-when-you-change-jobs.html [4/26/18]

 

What People Overlook When Shopping for Life Insurance

 

A few realities that must be acknowledged.

 

Provided by Michael R Snow

  

Shopping for life insurance means paying attention to detail. In scrutinizing these details, however, some fundamental, big-picture truths may be ignored.

 

If you want to renew or upgrade coverage later in life, the terms could be less than ideal. You may be healthier than most of your peers, you may have the constitution of someone half your age, but insurers base policy premiums and terms of coverage on actuarial norms, not exceptions. Purchase a term life policy at age 50, and your premiums may be considerably more expensive than if you had bought the same coverage at age 30. This is the way of the insurance business.1

 

Have you had a serious illness? Have you been diagnosed with a medical condition, such as diabetes, sleep apnea, or high blood pressure? You are looking at higher life insurance premiums, and insurers may limit the amount of life insurance coverage you can buy.2

 

A guaranteed acceptance life insurance policy may be the answer, but even with one of these policies, you may have to live a certain number of years after buying the coverage for your heirs to receive a death benefit. Many times, if the insured dies within 2-3 years of the policy purchase, the named beneficiaries only receive an amount equivalent to the premiums that have been paid, plus interest.2

 

Your beneficiaries need to know that you own life insurance. Roughly $1 billion in life insurance payouts sit unclaimed in America. Why? The beneficiaries are unaware of them. Also, sometimes beneficiary designations are hazy; a “husband” is named as a primary beneficiary on a policy, but the insured has married more than once, so an ex-spouse contests the beneficiary form. Such legal challenges may generate court costs offsetting the financial value of the death benefit.3

    

While it seems obvious to inform heirs about a life insurance policy, some people never do – and this simple oversight continues to obstruct life insurance payouts.

 

You need to name a beneficiary in the first place. Some consumers fail to, however, and that can create problems. If you do not designate a beneficiary for your life insurance policy, its death benefit could be included in your estate, exposed to probate and creditors.4

 

You must also recognize that you could live much longer than you expect. Years ago, most life insurance policies were sold with the assumption that the insured party would die by age 100. If the policyholder lived beyond that maturity date, the insurer would simply pay out the cash value of the policy (or something similar) to the insured person at that time.5

 

Today, maturity dates on life insurance policies are often set at age 121, but not all are. There is still a possibility that you could outlive a maturity date and money could be paid out to you instead of your named beneficiaries. This possibility must be acknowledged.5

 

As you shop for life insurance coverage, keep all this in mind. Some policyholders (and their heirs) tend to lose sight of these realities.

 

Michael R Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal or accounting services. If legal or accounting assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp. (not registered in all states), a Registered Investment Adviser. Tower Financial Strategies Corp. is also a licensed insurance agency (not licensed in all states).

 

Citations.

1 – investopedia.com/articles/investing/102914/7-factors-affect-your-life-insurance-quote.asp [6/28/18]

2 – nasdaq.com/article/4-errors-to-avoid-with-your-life-insurance-cm868133 [10/30/17]

3 – baltimoresun.com/health/blog/bs-md-insurance-deceased-database-20170111-story.html [1/11/17]

4 – thebalance.com/must-life-insurance-be-used-to-pay-a-decedent-s-bills-3505232 [5/12/18]

5 – lifeinsurance.org/blog/does-life-insurance-expire-at-a-certain-age [6/28/18]