Life and Health

When providing for your family’s future, you rely on investment vehicles that grow and protect your funds. Mutual funds and life insurance are two options. Compare both choices as you select the investment vehicle that best provides for your family.

What are Mutual Funds?

You may deposit money into a variety of mutual funds, including stocks, bonds, cash, annuities, real estate or precious metals. Mutual fund accounts can gain or lose money depending on the type of funds you choose and the current market. They are accessible to anyone, though, whether you have hundreds or thousands of dollars to invest.

Talk to your financial planner or investment banker about mutual funds. Together, you will assess your future goals, beneficiaries’ needs, risk tolerance, age and current income and which mutual funds are right for you.

What is Life Insurance?

Life insurance provides financial resources for your beneficiaries after you die. They can use the funds to pay for funeral expenses, daily living expenses, debt repayment, college funds or any use.

You may purchase term or whole life insurance.

• Term insurance covers you for a certain number of years as long as you pay the premiums. If you die within that time frame, your beneficiaries receive the policy’s death benefit.
• Whole life insurance covers you for a lifetime. The policy accumulates cash value you can borrow for almost any expense.

The policy you choose is based on your beneficiaries’ needs, your financial resources and your risk tolerance, so discuss both types of insurance options with your agent as you choose the right policy for your unique needs.

Why Choose Mutual Funds

Both mutual funds and whole life insurance policies carry risk and can increase or decrease in value. However, mutual funds normally perform better than whole life insurance over time. You may also diversify your mutual funds based on your risk tolerance, fund performance and other factors as you increase their value.

Why Choose Life Insurance

Whole life insurance policies typically feature less risk that mutual funds and grow at a guaranteed rate. You may also choose the type of whole life insurance policy you purchase, which can affect its cash value and performance. Additionally, your payouts are tax-deferred, which can reduce your beneficiaries’ tax burden.

Mutual funds and life insurance are two options that allow you to provide financially for your family. Know the benefits, disadvantages and risks of both options as you choose the right investment vehicle for your needs or decide to use both options.  For more information on mutual funds and life insurance, talk to your insurance agent.

A new study by MassMutual Life Insurance Company suggests that your chosen profession could indicate how you react to the thought of a potential disability. MassMutual commissioned Harris Interactive during September 2006 to conduct a Web survey of 1,023 U.S. career professionals to determine how they would react to a prolonged loss of income due to disability.

The insurer requested the survey because they wanted to gauge the reactions of attorneys, accountants, engineers, marketing, advertising and other professional services executives to see if they varied by occupation. The conclusion the researchers drew from their findings is that attitudes differ from profession to profession.

The MassMutual Benefits Barometer Survey: Disability Perceptions, as the study was called, accomplished three objectives. First, it rated the various professionals on their emotional response to long-term disability; second, it displayed common reasons for not owning Disability Income insurance; and third, it identified resources the different occupational groups have to help pay their bills if they are unable to work.

When it comes to emotional response, advertising and marketing professionals are the most anxious about the possibility of becoming disabled. Sixty-six percent of this group said they would feel financially insecure, and 26% answered they would be unprepared emotionally if they became disabled. Forty-one percent responded that they would be worried about being able to work again.

Attorneys and executives in professional services, including information technology and financial services, were less emotional about becoming disabled. Eighty-two percent of the attorneys polled felt they would get well and return to work. However, 70 % said that they would have anxiety toward their future financial situations, while 44% responded that they would feel like a burden to their families. The responses received from executives in professional services were neither overly anxious nor optimistic, as compared to other professionals.

When the responses provided by engineers and accountants were compared with all the career professionals surveyed, this group revealed itself to be the most dispassionate about becoming disabled. A mere 35% of engineers responded that they would feel a lack of financial security and only 27% of accountants would be worried about being able to work again.

When study participants were asked why they didn’t own Disability Income insurance, 44% said they didn’t feel they needed it, 30% said it costs too much, and 27% answered that they’re in good health.

The question concerning financial resources available to draw from in the event of a disability also drew some interesting responses. About 21% of attorneys surveyed reported they could live on half of their salary for “as long as they had to.” This group was the most likely to have a variety of resources such as stocks, bonds, mutual fund investments, home equity loans and loans from family or friends that they could use to keep them financially stable if they became disabled.

Advertising and marketing professionals were the least financially stable of all the professional groups and the least likely to say they would rely on stocks, bonds, mutual fund investments or a home equity loan to tide them over until they could return to work.

Many parents purchase 529 plans that allow them to save for their children’s’ college education. Life insurance is another savings vehicle for children, so compare both plans as you choose the best option for your child’s future education.

529 Plans

529 Plans are a unique way to save for your child’s college education. The money grows tax-free, and distributions are not subject to federal income tax. You can open an account with a 529 Plan manager or your financial planner. Consider these facts about 529 Plans.

Uses: Spend 529 Plan funds on tuition, books and other college expenses at a qualified school, including vocational schools, colleges and universities. If you withdraw the money for something other than education, you will owe penalties and taxes on the distributions.

Fees: Expect to pay a 529 Plan fee based on your portfolio. Additionally, you may owe a broker fee if you purchase the policy through a financial advisor.

Investment Return: When you invest in 529 Plans, you choose the portfolio in which you invest your funds. There is no limit to your return potential, but you also aren’t guaranteed a return since you invest in mutual funds, bond mutual funds or money market accounts.

Financial Aid: While 529 Plans allow you to pay for college, they do affect your child’s financial aid package. Your child could lose up to 5.64 percent of the 529 Plan’s total value in college financial aid.

Life Insurance

Cash-value or whole life insurance policies accrue cash over time. Buy a policy when your child is born, and it could pay for your child’s college education in 18 years. These policies grow tax-deferred. Understand several facts about using life insurance for college.

Uses: Life insurance is flexible since you can use the accrued money for any expense. Your child can withdraw the funds for college or buy a car or house or vacation if they get a full scholarship or decide not to attend college.

Fees: Expect to pay regular premiums for your life insurance policy. You’ll also owe the insurance agent a commission.

Investment Returns: The type of life insurance policy you buy dictates the returns you receive. On average, you could see a three to six percent return over 10 years.

Financial Aid: Borrow money from your cash-value or whole life insurance policy for school, and you don’t have to claim it as income on your Free Application for Federal Student Aid forms. Overall, it will minimally impact your child’s financial aid eligibility.

When paying for your child’s education, start saving early. If possible, invest in 529 Plans since they’re specifically designed for education.

Most people do not look forward to planning the distribution of assets upon their death. However, it is a task that all of us must face. And, that’s where trusts enter the estate-planning arena. A trust is simply an arrangement whereby one person holds legal title to an asset and manages it for the benefit of another. In one form or another, it may be used in personal financial planning.

One of the most remarkable characteristics of a trust is the ability of the trust to bridge the gap between life and death. Essentially, the person establishing the trust is able to rule from the grave, not forever, but to the extent the law allows. Usually, a trust can be designed to last for many generations.

Trusts can also be set up for an individual’s own benefit, not necessarily for tax purposes, but for many other reasons. He might want investment management, or a desire to invest in a new business venture with strong potential but with a high risk. He could then use the trust to ensure an income in the event of failure. He might elect to set up a family trust with the primary purpose of observing its operation and eliminating any deficiencies that might appear in actual operation. Though he might feel that presently he is able to manage his affairs, he is not certain about the future.

In this instance, a “standby trust” could prove to be useful. On the other hand, trusts can be established for the benefit of others, such as children, a spouse, grandchildren, or even parents. Additionally, an individual might want to provide for what might be regarded as missing elements in the abilities, experience, or training of beneficiaries.

This is especially a consideration when minors, or others deemed legally incompetent, are the intended recipients. But trusts may be set up for the benefit of competent, responsible adults too-for the same reasons the person establishing the trust might want to set up a trust for himself. These reasons include freedom from management burdens, expert administration, mobility, and other practical reasons, the most important being cash savings.

Although avoiding probate might be a consideration, the estate and gift tax savings made possible by the use of trusts might be even more important in many cases. Use of the trust device can often permit a donor to transfer assets for the benefit of a beneficiary, while shielding such assets from the reach of creditors. The laws of most states permit the creation of so-called “spendthrift trusts.” Use of such trusts might allow the individual establishing the trust to place both trust principal and income out of the reach of the beneficiary’s creditors.

Usually these laws prevent the beneficiary from assigning any part of the interest in the income or principal of the trust since most creditors look to property that could be assigned by the beneficiary. Their attempts to reach assets can be thwarted or at least made more difficult. The person establishing the trust is generally permitted to make free use of his own assets, even if the result is to prevent a beneficiary from dealing with the trust’s assets at will.

Careful consideration should be taken before trusts are established. In addition, be certain to seek the advice of a qualified legal professional before establishing trusts.

Salary continuation plans offer your company an invaluable resource for attracting and retaining key employees. Whether you work in Human Resources or are a key executive, understand salary continuation plans and how they work.

What is a Salary Continuation Plan?

Companies may offer salary continuation plans to key employees or executives as a supplement to their employee benefits package. In the event that the executive retires, becomes disabled, dies or otherwise separates from the company, the plan provides a salary to the employee or designated beneficiary.

How Does a Salary Continuation Plan Work?

After a company decides to offer salary continuation plans, they negotiate with the key executive to determine a specified benefit amount. That set amount can be contributed to the plan while the executive remains employed or paid annually during retirement.

Employees who participate in a salary continuation plan pay no out-of-pocket expenses. The plan also grows tax-free. However, the employee will be taxed on any benefits they receive.

Typically, the executive receives access to the plan when he or she retires, is disabled or otherwise separates from the company. If the executive dies, a designated beneficiary may receive the plan benefits.

The salary continuation plans may feature vested scheduling based on the employee’s position, length of employment and other arrangements. For example, a director may receive 100 percent of the annual salary while junior executives receive a lower percentage or the executive may be required to remain with the company for a certain number of years to receive the full plan amount.

How are Salary Continuation Plans Funded?

Most salary continuation plans are funded with a whole life or universal life insurance policy. The company wholly funds and usually owns the policy, pays the premiums and controls the cash value of the policy, and the key executive is named as the policy’s beneficiary. A life insurance agent sets up salary continuation plans and can make adjustments as needed.

Advantages of Salary Continuation Plans

Companies and employees gain several advantages with salary continuation plans. Weigh the advantages as you decide if this coverage is a wise choice for you.

Company Advantages:

1. Reward and retain key executives.

1. Use vesting schedules to “tie up” key executives.

1. Recover costs easily.

1. Plans are flexible, easy to understand and relatively simple to implement.

Employee Advantages:

1. Enjoy a supplemental source of retirement income in addition to your 401(k) plan benefits.

1. Increase the value of your executive benefits package.

1. Negotiate the benefit amount.

Salary continuation plans benefit companies and key executives. Discuss the details with your insurance agent as you take advantage of this important benefit.

No one likes to believe that, in our society, there are predators who take advantage of individuals who are the least able to defend themselves. However, the sad truth is that across America every year, millions of seniors are hoodwinked by fraud, scams, and swindlers. These common scams can happen in the home or at the mall. They can be carried out in person, by mail, on the phone, or over the Internet.

In reviewing telemarketing fraud, the United States Congress has stated that telemarketing schemes have become a $40 billion per year “industry.” There are approximately 140,000 active telemarketing firms in the U.S., and Congress estimates that up to 10% of these might be fraudulent. Many of these fraudulent telemarketers prey on older Americans.

The American Prosecutors Research Institute indicates that senior citizens are more susceptible to telephone fraud than others because they possess more than half of all the financial assets in this country and their assets can be converted easily into large sums of cash. Secondly, older people are more likely to be at home to receive telemarketing calls. And finally, many older Americans are too polite to hang up. Amazingly, some senior citizens are subject to fraud because they are just too nice.

But there are steps you can take to protect yourself at home, on the phone, and online. On the Internet, beware of any “free” service or product. Don’t give out personal information unless you absolutely know who the provider is. Just because your friend knows them is not good enough. Furthermore, don’t use your credit card to make purchases on the Internet. No site, not even a bank site is 100% safe.

In your home, you control access and never, ever, let anyone inside whom you don’t know. If you make the decision to purchase something from a door-to-door salesperson, which is not recommended, pay by post-dated check or ask to pay upon delivery of your item. Never pay cash. And don’t use your credit card or give your credit card number. Even better, ask the salesperson to come back tomorrow after you’ve had a chance to think about it, and then investigate to confirm they are legitimate.

On the phone, get an answering machine or caller ID to screen your calls, and only pick up the receiver if it is someone you know and trust. If a salesperson gets through, don’t accept anything they claim is free; such as sweepstakes prizes, cruises, or high-yield investment returns. If it sounds too good to be true, most likely it is too good to be true. Never give your credit card, phone card, Social Security, or bank account number to anyone over the phone. In fact, it is illegal for telemarketers to ask for these numbers to verify a gift or prize.

If you feel suspicious of any person or company, trust your instincts and hang up, close the door, or turn off your computer. Call the police or the Better Business Bureau and report the questionable activity. Or contact the National Consumers League Fraud Information Center at www.fraud.org. With vigilance and good common sense, you can help yourself as well as other potential victims avoid this insidious crime.

Be safe. Be careful, and don’t become another victim.

Saving for retirement is important for your financial future. Consider a Roth IRA because it offers five benefits.

What is a Roth IRA?

A Roth IRA allows you to contribute up to $5,500 ($6,500 for consumers over the age of 50) per year. You receive no tax benefits when you contribute, but the contributions and earnings grow tax-free.

You may withdraw funds from your Roth IRA when you turn 59-1/2 years old and the account has been opened for five years. There are no required minimum distributions. When you do withdraw money, it’s tax-free and penalty-free.

The 5 Benefits of the Roth IRA

Carefully consider five benefits of the Roth IRA as you plan your retirement strategy.

1. Gain tax-free income during retirement.

   You will pay no taxes on your Roth IRA contributions and earnings. That’s a huge advantage, especially if you’ll be in a higher tax bracket when you begin taking distributions.

1. Receive investment flexibility.

   Retirement funds such as certificates of deposit or traditional IRAs require you to wait for distributions. Your Roth IRA offers greater flexibility.

   Withdraw funds from your Roth IRA for any purpose when you turn 59-1/2. There are no required distributions or penalties. Also, you may withdraw funds sooner than 59-1/2 years of age for these purposes.

   • First-time home purchase
   • Postsecondary education expenses
   • Permanent disability
   • Unreimbursed medical expenses of over 10 percent of your adjusted gross income or 7.5 percent if you’re over 65 years old
   • Health insurance premiums during unemployment
   • Back taxes

1. Contribute after age 70 1/2.

   Traditional IRAs do not allow you to make contributions after you turn 70-1/2 years old. Instead, you must take distributions and pay taxes on those distributions.

   A Roth IRA includes no age limits for contributions. As long as you continue to earn income, you can contribute to the account and watch the total and your future financial security grow.

1. Assist your heirs.

   Every Roth IRA includes an account beneficiary. Select an heir or multiple heirs who then receive tax-free income. This benefit is particularly attractive if caring for heirs or leaving an inheritance is an important part of your financial plans.

2. Gain a back-door entry as a high earner.

   There are income limits to Roth IRA contributions that inhibit high earners from opening this type of account. However, you can open a traditional IRA and then convert those funds into a Roth IRA. A tax professional helps you make this conversion.

A Roth IRA provides five key benefits. Consider them carefully as you choose the best retirement strategy for your needs.

Term life insurance is temporary, but it doesn’t have to stay that way. Most term life policies sold today can be converted to permanent whole life or universal life which will provide coverage until you die and can offer significant advantages.

When you convert from term life to permanent, you won’t have to answer questions about your health or undergo a medical exam. If you bought a policy when you were in excellent health but then later got sick, you’ll maintain the health rating you had when you purchased coverage.

If you’re relatively young, the conversion feature also allows you to build your life insurance investment gradually as money becomes available. More and more people are using this strategy to accumulate a life insurance nest egg for their beneficiary(ies). For instance, you might convert $100,000 of a $1 million term life policy to permanent life every few years.

When shopping for convertible term life coverage, ask yourself:

Is there a deadline for converting?

Although some policies let you convert at any time until the end of the term, others only allow conversion during a specific period.

What are your conversion options?

This will depend on the insurance company and the quality of its portfolio.

What are your options if you don’t convert?

Once your policy reaches the end of its term, the premium spikes and is no longer guaranteed. To keep coverage in force, you’ll either have to either pay a far higher rate or shop for a new policy, which might be difficult if your health has declined.

We’d be happy to review your financial situation and offer our recommendations. Just give us a call.

Medical advances keep us healthier. However, debilitating illnesses still affect thousands of people, and the costs of treating those illnesses cause many medical bankruptcies. With critical illness insurance, you may get the treatment you need, keep your home and other assets, and spend time with your family.

Critical Illness Insurance Coverage

Dozens of medical conditions, including injuries, disease and surgeries, are covered under critical illness insurance. Several examples include:

• Alzheimer’s disease
• Cancers
• Coma
• Heart attack
• Heart valve surgery
• Kidney failure
• Loss of sight/speech/hearing
• Multiple sclerosis
• Organ transplant
• Paraplegia
• Severe burns
• Stroke

Many critical illness insurance companies offer critical illness categories such as cancer and related conditions, organ transplants and heart-related conditions. You may purchase coverage for one category or may more to purchase a policy that covers all the categories.

Policies usually range from $10,000 to $1 million. When you do file a claim, the insurance company will pay it in a lump sum. You may then use the money for any expense you wish, including:

• Medical bills, deductibles, co-payments or diagnostic testing
• Experimental treatment
• Out-of-network doctors and hospitals
• Transportation to treatment
• Wheelchair or other medical equipment and supplies
• Home health care
• Home improvements or retrofitting
• Household living expenses
• Income replacement
• Family vacation
• Childcare

Keep in mind that critical illness insurance typically provides coverage for two to 25 years. While the insurance remains in effect as long as you pay the premiums, critical illness insurance policies include a waiting period, also known as an elimination period, during which you cannot receive benefits.

Critical Illness Insurance Costs

Your age, height, weight, family health history, nicotine use and current medical conditions affect the cost of your critical illness insurance policy. Premiums may increase when these factors change.

Also, your costs depend on the amount of coverage you buy. Choose the right amount of coverage for you when you add two years worth of mortgage or rent payments and the amount of your outstanding credit card debt.

How to Purchase Critical Illness Insurance

When you decide critical illness insurance is right for you, purchase it in several ways.

1. Purchase an individual policy, which includes a medical exam.

1. Add the benefit through your employee benefits package and pay the premiums through payroll deduction. You’ll either receive a certificate under your employer’s group plan or an individual workplace policy.

1. Add as a supplement to your major medical health insurance policy.

1. Purchase as a supplement to your life insurance policy.

With critical illness insurance, you can afford medical treatment and provide for your family. It gives you peace of mind and may be a wise investment.

The self-employed tackle challenges that those employed by others rarely face: doing budgets, growing their business – and, of course, Health insurance.

The cost of individual Health coverage has skyrocketed during the past decade, with average monthly premiums growing more than 500%. What’s more, co-pays and deductibles keep going up, while covered services are shrinking.

However, there are options that can help the self-employed enjoy significant savings on Health insurance:

The Consolidated Omnibus Budget Reconciliation Act (COBRA)

COBRA is a federal law that guarantees workers who lose their jobs – and thus the Group Health benefits provided by their employers,- he opportunity to retain coverage on themselves and their families for up to 18 months, as long as they pay the policy premium (plus a surcharge of up to 2%). COBRA gives the self-employed a short-term ‘time cushion” during which they can make other health care choices.

Online Providers

The Internet has given rise to a number of smaller, increasingly flexible, more price-conscious, and highly competitive companies that offer the self-employed a variety of options for affordable Health insurance.

The Affordable Care Act (ACA)

Everything that we know about Health insurance for the self-employed (as well as employees in small and medium -sized businesses) is in a state of flux as more provisions of the ACA take effect over the next few months. The government, in partnership with Health insurance providers, will offer a variety of options – and require every adult to carry some type of coverage, or face a tax penalty.

For more information on how to get the best value on your Health insurance, at an affordable price, feel free to get in touch with our agency at any time.