Blog Archives - PFwise.com

What Are the Pros and Cons of Revocable Transfer On Death Dead?

7/31/2017

Q. What are the pros and cons of the revocable transfer on death dead?

A. About half of the states allow homeowners to use a transfer on death (TOD) dead to transfer their real estate to their heir(s). If a TOD deed is in place, you can avoid the costly trust and probate issues.

However, a TOD deed only addresses real estate, nothing else. If you have minors, a trust is a must. If you have other assets, a trust might also be needed. In addition, with a trust, you can attach an incapacity clause, which will allow someone you appoint to step in and act on your behalf if you ever become unable to handle affairs.

How To Identify IRS Imposters

7/30/2017

Q. What are the signs of IRS imposters and how to deal with them?

A. Here are some tax scam signs:

Demand immediate payment of taxes with a prepaid debit card, wire transfer, or gift card.
Ask for your credit card or debit card numbers over the phone.
Intimidate you and threaten to have you arrested for nonpayment.
Insist on payment without giving you the opportunity to question or appeal the amount they claim you owe.
Ask you to pay a collection agency or someone else directly.

If you encounter such IRS imposters, do the following:

Fill out the IRS impersonation scam form on the Treasury Inspector General for Tax Administration website (go to tigta.gov and click Contact) or call TIGTA at 1-800-366-4484.
File a consumer complaint with the Federal Trade Commission at fte.gov. Add the words IRS Telephone Scam to the comments in your complaint.

How To Protect Retirement Income From Tax?

7/29/2017

Q. How to protect retirement income from tax?

A. This CNBC article mentions some good strategies to protect retirement income from taxes, some highlights include:

Older or ill investors might consider deferring capital gains until they pass, thereby saving heirs significant amounts in taxes otherwise due.
Stay healthy or be generous: Health-care and charitable expenses can shave your tax bill.
Employ "tax location optimization" strategies.

How Many Funds Do I Need In Order to Diversify My Portfolio?

7/28/2017

Q. How many funds do I need to own in order to diversify my portfolio?

A. For a retirement portfolio, your goal is not to diversify, but to optimize your return without taking on too much risk exposure. Read this CNN Money article, it points a good way to build out a diversified portfolio.

Why Not To Co-sign A Loan

7/27/2017

Q. What's the consequence if I co-sign a loan and the borrower defaults?

A. The burden will be on you if you co-sign a loan and borrower defaults, and you can bet that the lenders will aggressively pursue, because ultimately the lenders can garnish your social security benefits.

According to the Federal Trade Commission, 75% of all co-signed loans in default are ultimately repaid by the co-signers, not the original borrowers. Delinquencies are also reported on the co-signers' credit reports.

For example, in an effort to recover millions in unpaid student debts, the federal government sometimes debits the Social Security benefits of recipients who co-signed loans. About $1.1 billion reportedly has been collected this way since 2001. In 2015 alone, $171 million was taken from about 114,000 recipients age 50 or older who had co-signed loans that had been in default for at least a year.

Is Hepatitis C An Automatic Decline for Life Insurance Application?

7/26/2017

Q. I have hepatitis C, will my life insurance application be automatically declined?

A. The answer is No. You could possibly get a Standard class approval when certain conditions are met.

There are about 170 million people worldwide who are infected with HCV (hepatitis C Virus), and the most common infection comes from exposure to blood that contains the virus. Many people who test positive for hep C have no idea how they contracted the virus and deny all risk factors for exposure. Of those exposed, up to 85% will develop a chronic infection. Among those who are chronically infected w/ hep C, after 10-20 years, about 20% will develop cirrhosis.

The risk assessment for hep C varies according to factors such as the time frame since the person was exposed, the lab testing—specifically liver function tests, whether a biopsy was performed, alcohol or drug use, and response to treatment. A detailed history is helpful and allows us to give the best possible idea of potential offer from the carriers.

With appropriate treatment, hepatitis C infection can be cured. Typically, treatment is going to be recommended for patients w/ more than 6 months of elevated liver function tests and RNA levels. The most common form of treatment is with interferon, which is injected and/or oral ribavirin. The response to treatment depends upon a number of factors, some of which include the extent of fibrosis seen on biopsy, the amount of hep c virus detected in the blood, and which of the six known genotypes of hep C that the applicant has.

Underwriting for hep C can be very involved and typically we’re looking at a minimum of a Table 4-6, although Standard approvals are possible in a very select few number of cases that demonstrate ideal scenarios. This is a big improvement over past history, where diagnosis of hep C was usually an auto-decline.

How Permanent Life Insurance Reduces 5 Financial Risks

7/25/2017

Q. What are the benefits of a permanent life insurance?

A. The eBook below has a nice summary of how a permanent life insurance product could help consumers reduce 5 financial risks:

Death risk
Serious illness risk
Opportunity risk
Probate risk
Beneficiary risk

Please contact us if you want to design a permanent life insurance product that could help you reduce these 5 risks.

4 Ways to Save on Foreign Exchange Fees When You Travel Abroad

7/24/2017

Q. How to save on foreign exchange fees when travel abroad?

A. Try the following 4 ways to save on foreign exchange fees when you travel overseas:

1. Which Credit Card / ATM Card to Use?
Before you leave, call your credit card and ATM card companies and see which one offers free foreign transaction or conversion fees (typically $3 per ATM withdrawal and up to 3% on purchases).

2. Where to Get Foreign Cash?
Skp Travelex, a currency-exchange firm and ATMs at airports, both tend to offer expensive exchange rates or charge fees. Wait until you can withdraw local cash at a major ban's ATM at your destination.

3. Do Foreign Exchange While At Home?
Your best chance for a good foreign currency exchange rate is at regional banks, or credit unions rather than national banks.

4. Charge the Amount in Dollar or Foreign Currency?
If you use your credit card, some merchants may ask if you want to charge the amount in dollars rather than the local currency. Do not do that, as those merchants may set an unfavorable exchange rate.

Best Options for Solid Investment Income and High Risk

7/23/2017

We have introduced investment income options with low and medium risks, now the high risk and high yield options:

Closed-end Funds
Closed-end funds use borrowed funds to invest in stocks or bonds, and sometimes trade at steep discounts to the value of their underlying investments. BlackRock Enhanced Equity Dividend yields 6.5%.

Mortgage REITs
Mortgage REITs put borrowed money into pools of home loans. They will take a hit if short-term interest rates rise a lot, but they also offer juicy yields. Blackstone Mortgage Trust offers 8% and Annaly Capital Management offers 10%.

Best Options for Solid Investment Income and Medium Risk

7/22/2017

In our last blog post, we discussed some solid investment income options with low risks. Now we will introduce a few more with higher yield and higher risks.

High-yield Bonds
These are also called junk bonds, here are a few good ones recommended by Kipliinger's Personal Finance magazine:

Vanguard High-Yield Corporate (4.8%), a fund geared to relatively safe junk bonds.
VanEck Vectors Fallen Angel High Yield Bond ETF, with a payout level of 4.9%.

Bank Loans
Here are a few good bank loans: Fidelity Floating Rate High Income - it buys debt of firms with OK credit (3%), Loomis Sayles Senior Floating Rate and Fixed Income A (5%).

Foreign Bonds
Foreign bonds usually pay higher rates than U.S. securities, if you are willing to take a little more risk. Fidelity New Markets Income yields 5.8% and buys bonds of countries in eastern Europe, Latin America and the Middle East.

Master Limited Partnerships (MLP)
MLPs own oil pipelines and other infrastructure in the energy sector. Enable Midstream Partners yields 7.9%, Enterprise Products Partners is a large and well diversified pipeline that yields 6.1%.

If you are okay to take a little extra risk, there are two more options you could consider.

Best Options for Solid Investment Income and Low Risk

7/21/2017

Q. With interest rate still low, what are the good investment options for solid income and low risk?

A. If you are looking for investment income in this low interest rate environment, below are some good options:

1. Municipal Bonds
This is suitable for people in high tax brackets because investment proceeds are exempt from federal income tax. For example, Fidelity Municipal Income 2019 offers modest return *yield 1.1%) and low risk. If you can take a little more risk, you can consider SPDR Nuveen S&P High Yield Municipal Bond ETF that pays out 5.1%.

2. Investment-grade Bonds
Yields on high-quality corporate debt have risen over the last year. Three funds worth a look: Metropolitan West Unconstrained Bond (2.3% yield), DoubleLine Total Return Bond (3.4%), and Pimco Income Fund (3.7%).

3. REITs
REIT share prices look cheap in comparison with the value of their property holdings. Schwab U.S. REIT, an ETF, pays 3.6% from a large REIT portfolio. Hospitality Properties Trust (6.3%) leases space to hotel operators. Realty Income (4.2%) is a giant that pays dividends every month.

If you could take a little more risk,, you could have other higher yield options, please see our next blog post.

Life Insurance Carriers' Newsletters - July 2017

7/20/2017

American National Independent Voice
North American Delivering the Difference – July 2017
North American Annuity News – June recap
OneAmerica Care Solutions News – June 2017
Prudential Life Essentials – July 5th

4 Credit Card Tips When Travel Internationally

7/19/2017

Q. Any credit card tips when travel internationally?

A. It's a good idea to use credit cards when travel overseas, because credit cards come with some advantages:

1) Protection
You’re protected against unauthorized charges by federal law in case your card is lost or stolen. The law limits your liability to $50 but many credit card issuers offer zero-liability protection.

2) Better Exchange Rate
Purchases made with a credit card typically get a much better exchange rate than you can get from a currency exchange vendor or ATM, because your card issuer offers close to the best rate available as it’s set by the major networks, Visa and Mastercard. But, depending on the policies and features of your credit card, you may also pay a fee for the currency conversion. Credit card networks charge the fee to your bank and the cost is generally added to your purchase. Some credit card issuers will pay the currency conversion fee for you, so you may want to shop around for a new credit card before your trip.

Here are some tips when use credit cards overseas -

1) Call Card Company Before the Travel
You don't want your foreign transaction declined. So it's a good idea to call your credit card company and tell them your travel plan before leaving home.

2) Take Multiple Cards
In case of loss or theft, or transactions suspended by the card company, you will be covered if you bring multiple cards with you.

3) Shop Around to Avoid Foreign Transaction Fees
Credit card companies typically charge a foreign transaction fee on purchases. The fee is typically 3% of each purchase. That can add up. Shopping around ahead of time for a new card that offers no foreign transaction fees could save you a chunk of money.

4) Use Cards With A Chip
Chip and PIN cards have been used in Europe and many Asian countries for years, but they have just started to be widely used in the U.S. Some issuers in the U.S. still require a signature rather than a PIN - those cards are known as chip and signature cards. You were probably recently sent a new card recently with an embedded chip for payment. Using the chip for payment instead of swiping the card makes for a more secure transaction - and it’s pretty much required if you plan to use your card while traveling.

In Europe, bus or train ticket machines, gas pumps, and vending machines only accept chip cards because it’s so much better at preventing fraud. If your card doesn’t have a chip, ask for a new one with the technology, or get a new credit card with chip technology.

After-tax 401k Contributions

7/18/2017

We have discussed pre-tax 401(k) and Roth 401(k) before, now after-tax 401(k).

Prior to the advent of the Roth 401(k) some 401(k) plans allowed after-tax 401(k) contributions. Post the advent of the Roth 401(k) some plans still do not offer a Roth 401(k) – since it is not mandatory. Lastly, some plans allow for pre-tax, Roth and after-tax contributions. Combined contributions from all three sources cannot exceed the 2017 IRS limit of $54,000. Based on your age, after-tax contributions allow you to more than double or more than triple the contribution limits of pre-tax and Roth 401(k) plans.

Since the IRS places modest contributions limits on Roth IRAs (subject to income bands), after-tax contributions provide a back-door means to accumulate future Roth IRA balances following a rollover. Unlike a Roth 401(k), only the principal portion (not gains) of post-tax contributions can be rolled over to a Roth IRA. The same tax free withdrawals rules and RMD rules described above apply to this type of Roth IRA rollover. IRS Guidance Notice #2014-54 clearly allows for after-tax contributions to be rolled over to a Roth IRA.

Roth 401k Contributions

7/17/2017

We discussed pre-tax 401(k) contribution in last blog post.

Some retirement plans allow you contribute to a Roth 401(k), subject to the same contributions limits described in Pre-tax 401k Contribution discussion. Although your contributions are taxed before entering your account; principal, interest, dividends and capital gains are tax free (not deferred) when withdrawn. You may be able to pay lower taxes now in order to avoid what would have been higher taxes when you take withdrawals.

Since the IRS places modest contributions limits (subject to income bands) on Roth IRAs, Roth 401(k) contributions provide a back-door means to accumulate future Roth IRA balances following an IRA rollover. Roth 401(k) balances (including principal and gains) can be rolled over to a Roth IRA, where withdrawals are also tax free. Furthermore, Roth IRAs are not subject to required minimum distributions (RMDs) for the original owner or the surviving spouse. Avoiding RMDs is a valuable income and estate planning strategy.

Next topic - after-tax 401k contribution.

Pre-tax 401k Contributions

7/16/2017

We discussed before that there are three 401(k) contribution types and how Rollover will work for each of them. Now let's take a look at pre-tax 401(k) contribution.

You are generally permitted to contribute to your 401(k) plan based on the 2017 IRS limits: $18,000 per year for those under age 50 and $24,000 per year for those 50 years of age and older.

Most 401(k) plans offer the ability to make these contributions on a pre-tax basis only. Taxes on principal, interest, dividends and capital gains are deferred until you begin making withdrawals. Withdrawals are taxed at your federal and or states income tax rate(s) in the year of the withdrawal. You may be able to defer taxes when your income tax rate(s) are high by contributing on a pre-tax basis and take withdrawals when your income tax rate(s) are low, such as in retirement.

Next blog post will discuss Roth 401k contribution.

Rollover 401K Money With Both Pretax and Aftertax Contributions

7/15/2017

Q: I am ready to rollover my 401(k) to an Individual Retirement Account (IRA) account, however, some of my money is after-tax and some is pre-tax. How can I complete the rollover on a tax-free basis?

A. Depending on the type of 401(k) you have, you may have some money that has never been taxed (pre-tax) and some money that has already been taxed (after-tax). Until recently, the IRS was vague on the ability to complete this type of rollover.

Effective January 1, 2015 and retroactive to September 18, 2014, IRS Guidance Notice #2014-54 provides clear guidance on the ability to complete the rollover of after-tax money to a tax-free tax shelter. Specifically, pre-tax balances can be rolled over to a Traditional IRA or Rollover IRA, while the after-tax balance can be rolled over to a Roth IRA. The after-tax balance should not be confused with Roth 401(k) contributions.

We will discuss all of the three contribution types in next several blog posts.

What Is Tested In A Life Insurance Urine Test?

7/14/2017

Q. What is tested in a life insurance urine test?

A. The life insurance urine test along with a blood test with larger policies are checking for two categories.

The first series is looking for drugs, both illegal and prescription to test against medical records for abuse. Underwriting will test for nicotine and cotine, which stays in the system longer than just nicotine for tobacco use.

The second set of tests are used to check for diseases like cancer, diabetes, heart disease, blood disorders, kidney disease, etc. These results are usually compared to the individuals medical records for their risk assessment.

Can Term Life Insurance Be Used As A Collateral For A Loan?

7/13/2017

Q. Can term life insurance be used as a collateral for a loan?

A. Yes, term life insurance can be used as collateral for some loans. Most commonly, people use term life insurance as collateral for loans through the SBA (Small Business Administration). When the loan is expected to be paid off within 10 years, using a term life insurance policy is a very inexpensive way of providing collateral.

If you need a term life quickly, please contact us as we can help you get a non-med term life quickly.

Can Annuities Be Willed?

7/12/2017

Q. Can annuities be willed?

A. Annuities are contracts. They identify a beneficiary to receive proceeds in the case of a premature death. The company is required to honor the beneficiary. If the beneficiary is the estate, or there is no surviving beneficiary, then the will can direct the disposition of the proceeds. Most of the time people who purchase annuities name living persons who survive them.

Should I Pull Money Out of Investment Account to Pay Back Loan?

7/11/2017

Q. Should I pull money out of my investment account to pay off loan?

A. It depends on what kind of return you could get from your investment account. If it is going to be higher, after tax, then you should keep investing and pay off the loan gradually. If your investment has not been able to generate the return higher than your loan's interest rate, it's better to pay off the loan.

Another downside of paying off the loan is you will lose liquidity due to the large amount of money used to pay off the loan.

Stroke and Life Insurance - Part B

7/10/2017

In our last blog post, we discussed two types of strokes. Now we will discuss what kind of underwriting class someone with a stroke might get -

Here are some questions the applicant with a stroke might have to answer:

Age of diagnosis?... and was it diagnosed as a TIA or CVA?
Was this the first occurrence?...if not, when were prior instances?
Any history of CAD, PVD, diabetes, hypertension, or smoking?
Has there been follow up testing and have results been negative?
Is there a known cause of the stroke?
Is there any residual neurologic or cognitive impairment?

Strokes have a tendency to recur and, because of that, will often have a postponement period of 3 to 12 months. If there are no further incidents, underwriting improves as time from the stroke occurrence increases. Age of the person at the time of the occurrence or diagnosis is also a factor. TIAs are underwritten more favorably than CVAs, and we can often get offers of T2-3 and up. CVAs are more difficult to underwrite, but offers of Table 4-6 are not uncommon.

If you have any question, please contact us as we have experience in helping with complicated health situations.

Stroke and Life Insurance - Part A

7/9/2017

Q. If I had a stroke, can I till get life insurance?

A. In general, a stroke refers to the death of brain tissue, due to lack of oxygenated blood reaching a particular area of the brain. They can either be characterized as a mini stroke - TIA (Transient Ischemic Attack) or full stroke - CVA (Cerebrovascular Accident). Strokes are one of the leading causes of death and disability in adults today.

Transient Ischemic Attack (TIA)
A TIA, is a brief, temporary ischemic attack (less than 24 hours), that resolves itself without permanent damage to the brain or residual neurologic impairment. Most TIAs are due to a small temporary blockage of a cerebral or carotid artery that impairs neurological activity for a short period of time. Symptoms include temporary numbness, dizziness, weakness, blurry vision or dizziness, speech abnormalities and fainting. Because of the fleeting nature of TIAs, the Dr.’s diagnosis is usually made from history alone, rather than by physical exam or lab testing. Often it’s reported to the doctor by someone that observed the event and can recall the symptoms.

Cerebrovascular Accident (CVA)
A CVA, in contrast, occurs when one or more blood vessels in the brain are blocked or rupture, and often lead to permanent damage. Lack of blood flow (ischemia) is the major cause of strokes, and atherosclerosis (plaque in the arteries) is the leading cause of cerebral ischemia. High blood pressure, smoking, diabetes, peripheral vascular disease (PVD) and heart disease are all major risk factors for strokes. Testing for CVAs will include CT scans, MRIs, carotid ultrasounds or Doppler testing and echocardiograms or stress tests. CVAs have similar symptoms as TIAs and can result in long lasting neurological impairments, memory loss, and paralysis.

In our next blog post, we will discuss what kind of underwriting class someone who had a stroke might get.

Qualified Plan to Qualified Plan Transfer Options

7/8/2017

Q. What are the qualified plan to qualified plan transfer options?

A. The table below gives you a nice summary of the qualified plan to qualified plan transfer options:

What is the Best Retirement Plan for Small Business Owners?

7/7/2017

Q. What is the best retirement plan for small business owners?

A. The answer is it depends because there are multiple retirement plan options for a small business owner to choose from, below is a general guideline -

For employers with a long-term horizon to fund a plan for their employees, defined contribution plans work well.
For sole proprietors or small business owners wishing to minimize administrative costs, a SEP or SIMPLE plan may be the best choice.
For small business owners without employees wishing to maximize contributions, a Solo-401K may be the right plan.
Profit sharing is appropriate if discretionary contributions or a vesting schedule are important.
For employers with older key employees, defined-benefit plans may be more appropriate.
For employers that wish to have their employees fund a portion of the retirement cost, a SIMPLE or 401K plan may be the most suitable.