Blog Archives - PFwise.com

3 Things You Can Do To Take Control Of Your Financial Life

7/31/2020

You can't control the stock market's volatility, but you can take control of your own financial life, with the 3 actions below -

1. Update your estate plan
Get power attorney, healthcare proxy, living will, etc. set up or updated

2. Refinance your mortgage
Take advantage of the current lower rates to save on thousands or more on interest expenses.

3. Increase your life insurance coverage
COVID-19 taught us that the mortality risk is real, you can evaluate and increase your life insurance coverage so your loved ones are fully protected in case anything happens.

7 Jaw-Dropping Stats about Social Security

7/30/2020

Fool.com has an article that compiles some interesting facts about social security:

Some of the interesting facts include: the average Social Security check is $1,507 per month. Also, the breakdown of men versus women: a man’s average Social Security check is $1,627 per month while a woman’s is $1,297 per month.

Another article from Fool.com also has some surprising numbers, including social security's average benefits may cover just over 1/3 of household expenses!

Tax Reduction in Retirement Maximizes Social Security Benefits

7/29/2020

Do you know the government intends to net $650 billion in tax revenue over the next decade from retirees Social Security? Would you appreciate strategies that could prevent your Social Security from being income taxed?

There is no inflation protection on the thresholds to determine if your Social Security is taxable. If your modified adjusted gross income and half your Social Security benefits exceed $25,000 and you are single, your Social Security becomes taxable. If married that number begins at $32,000. Up to 85 percent of Social Security benefits can be income taxed.

Title: Surprise! Social Security Will Net $650 Billion Over the Next Decade by Taxing Its Beneficiaries
https://www.fool.com/retirement/2020/06/13/surprise-social-security-will-net-650-billion-over.aspx

Title: 50% of seniors don’t keep their Social Security benefits: Here’s why
https://www.foxbusiness.com/money/50-of-seniors-dont-get-to-keep-their-social-security-benefits-in-full-heres-why

Do You Believe Tax Will Be Higher In The Future?

7/28/2020

Here are two articles about higher taxes for Americans in the future.

One article from ThinkAdvisor gives highlights from a discussion at The American College. Professor Laurence Kotlikoff, professor at Boston University and co-writer of the book about Social Security “Get What’s Yours” made it clear that governments will require more revenue and will probably raise rates.

The other article from FinancialAdvisor magazine said they might raise rates or reduce deductions to raise revenue. Either way, government at every level will require additional revenue. That Means Higher Taxes!

What's the implication if tax will be higher in the future? Roth IRA conversions and irrevocable trusts will be good ideas!

1 Minute Video From AIG About Long Term Illness Stats

7/27/2020

1 Minute Video From AIG About Healthcare Stats

7/26/2020

1 Minute Video From AIG About How to Prepare for Retirement

7/25/2020

1 minute long video from AIG about retirement:

Interesting Financial Numbers for Millennials

7/24/2020

Interesting Financial Numbers for Generation X

7/23/2020

Interesting Financial Numbers for Baby Boomers

7/22/2020

The Amount of Life Insurance You Own is a Symbol of Your Status

7/21/2020

The original article appeared on ThinkAdvisor.com:
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No, I did not mean to write the title differently.The amount of life insurance people own can be viewed as a status symbol for those that like to throw big numbers around.

I always thought life insurance was a way someone demonstrated their view of the value they place on themselves to others. Many years ago, I realized that there was a direct connection between the value a person places on their life and the value their life holds to others and the amount of life insurance they own.

I have never really had to work very hard to convince someone who knew that they needed life insurance to apply for any. The hardest situations I have encountered are the ones where a person would rather buy expensive jewelry, go on a long vacation, buy the biggest house, or buy the most costly clothes or car.

This is as true in family situations as it is in business. A situation I was involved in several years ago involved the owner of the largest company of its type on Long Island. The man was in his late 60s. He had diabetes, and heart problems, but he ran his company like a lion.

His oldest son worked quietly within the company, primarily focused on keeping his father from overspending. The man was in the process of constructing a palace on the North Shore of Long Island, overlooking the Long Island Sound. It was kind of weird, because he had no spouse and was not all that close with his few children, so the question was, who was going to inhabit the walls of this big structure?

The man drew heavily from his company funds to pay for the building of this place. At one point, when he realized he was spending heavily, Mr. ___ decided to buy a life insurance policy for $1 million death benefit. Knowing a little about Mr. ___’s medical profile I was not that excited. I said, “You know I will have my work cut out for me, but, if you get your doctors to cooperate, I will do the best I can.”

He promised to complete an application and get his doctors to respond to the requests for medical records which were going to be coming from the life insurance companies. With his completed application in hand, I went to two different wholesalers with the man’s complete medical profile.

He was rejected by 14 companies from one wholesaler, and nine from another. Ironically, the second wholesaler received an approval from one of the companies that had rejected him from the first wholesaler. (That’s business, I guess). I went back to the man somewhat nervous, because I knew I would be presenting news Mr. _____ probably did not want to hear.

“Mr. ____, I have good news, and I have bad news,” I said. “Which do you want first?”

My client was a former U.S. Army Ranger and feared very little.

“Give me the bad news first,” he said, somewhat bored with the whole discussion.

“Well, you were rejected by about 23 life insurance companies,” I said with a hint of glee in my voice.

“And, now you are going to tell me good news!” Mr___ almost hissed at me with anger on his face.

“Yes, you are going to love this,” I blurted out. “You know the first list of 14 rejections…”

“Yeah, so,” Mr. ____ chimed in.

“Well, the same company that rejected you from list 1 said yes on list 2. Same company, different underwriter.”

Mr. ____ did not share my enthusiasm. Instead, he wanted to know the cost (which was roughly $21,000). He drew a deep breath and said, “Call me next week. I’m going to think about it.”

Mr. ___ never bought the insurance. Two years later, he was dead from a heart attack.

His dream home was still unfinished and had to be sold for pennies on the dollar, while the son fought hard to keep Mr. ___’s company operating.

A few months later, the doors of the company closed for the last time.

About 35 full-time employees were left without a job. The son was left to figure out his next occupation at the age of 42. If only Mr. __ had purchased the life insurance.

5 Exciting Numbers of Sagicor WealthCare Indexed Single Premium Universal Life

7/20/2020

Consumers now can take advantage of WealthCare Indexed Single Premium Universal Life Insurance offered by Sagicor which offers some of the best benefits of a life insurance product on the market today:

Guaranteed death benefit with upside cash accumulation and death benefit potential with index crediting
A paramed-free experience with no senior supplement
No need for face-to-face client meetings
eApplications and electronic policy delivery

Some more numbers about this product:

$500,000 maximum chronic illness benefit
100% return of premium — starting day one
65% participation rate — Global Multi-Index Bonus PAR Strategy
8% cap — S&P 500® Index Bonus CAP Strategy
0 third-party telephone interviews for your clients

5 Midyear Financial Checkups

7/19/2020

1. Review your financial goals
You probably have several savings goals and accounts. Your annual financial review should revisit each of your priorities. If your life situation has changed, make adjustments as necessary.

At the same time, check the beneficiaries you've listed on your accounts. Your retirement account assets (for example, money in a 401(k) or IRA) pass directly to the beneficiaries you designate with your account custodian, trustee, or plan administrator. Your beneficiary designations supersede any directions in your will for accounts that have them—so consistency in who you name as a beneficiary is important.

2. Check your investments
This is also the time to see what you own, ensure that your investment mix continues to meet your needs, and make any changes that might be necessary due to the past year’s market performance. In general, if any of your allocations are more than 10% away from your target, you may want to rebalance it back to your desired investment mix.

Then, look at specific investments and evaluate their role in your portfolio. If you own mutual funds, see whether they are performing as you expected and if there have been any changes to the fund's investment approach. If you own stock in individual companies, evaluate each company’s current status and prospects, and decide whether they justify being kept in your portfolio.

3. Get a tax break
A simple way to reduce your taxes is to take advantage of opportunities to lower your taxable income by contributing to tax-advantaged retirement accounts like a 401(k) or IRA. If you have a high deductible health plan (HDHP) and are eligible for a health savings account (HSA), contributing to the HSA can also give you a tax break. A taxpayer with a marginal tax rate of 24%, for example, could potentially realize a tax savings of $240 for every $1,000 in pre-tax dollars contributed to an HSA, traditional 401(k), 403(b), or IRA.

4. Protect what's yours
It's wise to evaluate your insurance needs annually to make sure you have the right amount and type of insurance to cover unforeseen circumstances that can derail your finances.

Life insurance may be a good place to start. If your family is growing, you might want to increase the amount of your life insurance to protect your loved ones. You might also benefit from looking into long-term care insurance, which may offer a variety of features and options. Don't forget disability insurance as well. You may be covered at work. But it’s a good idea to make sure you're adequately covered just in case anything prevents you from working and earning a paycheck for an extended period of time.

5. Review important paperwork
Thinking about a will, health care proxy, and power of attorney can be an uncomfortable topic, but consider the alternative: Do you want someone else making important financial and health decisions on your behalf without any input from you? If you don't have any of these key documents, take the time to set them up.

If you have them, review your paperwork and think about any life events you’ve been through. Marriage, divorce, birth, and death are 4 big events that can affect estate plans, but there are other factors that could affect your planning.

Everyone Needs These Legal Forms, Just In Case

7/18/2020

A family emergency can happen without warning, lining up the legal documents below will save you precious time and unnecessary hassle.

1. Durable power of attorney
This document generally goes into effect immediately, gives you and your spouse the authority to manage each other's financial if one of you becomes incapacitated. Adult children or a trusted friend can also hold your power of attorney.

You can order the form from an online legal site such as Nolo.com, for about $60. Or you can use an estate planning attorney to create one.

2. Health care proxy or health care power of attorney
This document gives you and your spouse the right to make medical decisions for each other - or you can give other family members the right to make medical decisions for each of you.

3. Medical information release
This form gives doctors permissions to share your spouse's medical records with you. There is no standaridized medical release form, so you should get one form from your doctors or hospital.

4. Living will
This document lets you and your spouse provide written guidance on what kind of treatment each of you wants or doesn't want -during a terminal illness.

One-stop place to get these forms

Fivewishes.org: you can find a form that serves as both a healthcare power of attorney and living will, acceptable at 44 states and the District of Columbia.
Americanbar.org: if the above form doesn't meet your state's requirement, you can find free resource at this site, search for "giving someone power of attorney for your health care".
Caringinfo.org: you can find a state-specific living will form at this site.

Why We Are Not So Great at Risk Assessment

7/17/2020

A recent New York Times article highlights many factors at play in human psychology that can skew our risk perception. Here are the things skewing your assessments:

Optimistic bias. Optimistic bias is the reason we order a side of bacon even though we know diets high in processed meats correlate with a higher risk of colon cancer. Surely colon cancer happens to other people, right? However, people living in heavily individualistic societies — like the United States — tend to exhibit higher levels of optimistic bias.

False sense of control. The more control people think they have, generally, the less worried they are. This is why, for many, driving a car seems safer than flying in a plane. The car, of course, is statistically much more dangerous — in 2018, according to the National Transportation Safety Board, 36,560 Americans died in car accidents compared with 381 Americans killed in aviation accidents. So while masks and frequent hand washing are definitely ways to lower your risk of contracting the coronavirus, they may also be emboldening you. Social distancing is still key to preventing the spread of Covid-19.

Unclear cultural cues. We often learn about dangers in the same way from multiple sources. Take smoking, for example. You probably learned about tobacco causing cancer as a kid — either from your parents or from school. The messaging around Covid-19 is less clear because there’s not an existing well of shared cultural knowledge about its dangers. In fact, in some places, public health experts and elected officials are disagreeing on what is and isn’t safe. That means we’re getting a range of cultural cues and we may struggle to parse out which cues to follow.

Confirmation bias. If you are wondering if it is safe to dine outdoors with friends, you may do a search for: “Is dining outside safe during coronavirus?” But that search is likely to turn up articles about why it is safe to dine outside at this time. What most people do is that they only seek confirming evidence, a phenomenon called confirmation bias. If you really want the full breadth of information on dining out, you should also look up “dangers of dining outside during coronavirus."

Exposure therapy. Many of us are getting used to living in a pandemic. That’s lowering our guard as well. Exposure therapy, or having people confront their fears in tiny doses, is how patients with anxiety-specific phobias are treated. If you were afraid of dogs but had to work in a puppy store, eventually, you’re going to get used to it.

How Does 7-Pay Test Work for Cash Value Life Insurance Policies

7/16/2020

Cash value life insurance has always provided consumers with the opportunity for tax-deferred growth within the policy that could be accessed when the policy value is sufficient, for any reason, subject to surrender charges and withdrawal fees.

However, in addition to the guideline premium test (GPT) or cash value accumulation test (CVAT), which qualifies a policy as life insurance under the Internal Revenue Code, a cash value life insurance policy is also subject to the 7-pay test. This test determines the amount of premiums that can be paid into a policy and still receive favorable tax treatment of cash withdrawals and loans. Life insurance policies that fail the 7-pay test are called modified endowment contracts (MECs).

Personal Finance Budget Worksheet

7/15/2020

Below is a good worksheet from Transamerica that you can use to determine the extra monthly income you will need to address your retirement income gap.

Palladium Single Premium Immediate Annuity Case Studies

7/14/2020

Elevated Liver Function Tests (ELFTs) and Life Insurance

7/13/2020

One of the most common abnormalities in an insurance exam lab is an elevated liver function test. Although they may be generated by other tissues in the body, an unexplained elevation of one or more liver function tests is a concern for impaired liver function.Elevations in SGOT (or AST) and SGPT (or ALT) are usually caused by liver damage, which allows these enzymes to be released out of the cells.

The GGT (or GGTP) test is a very sensitive enzyme for the detection of early liver disease or damage. It also is an inducible enzyme, meaning that it will rise when the liver is busy metabolizing some types of drugs or toxins (like alcohol).Many impairments may cause elevations in one or more of the liver enzymes, including hepatitis, cirrhosis, fatty liver, excess alcohol use, liver cancer or metastases, as well as certain medications such as Dilantin, phenobarbital, allopurinol, and many others.

Underwriting for Elevated Liver Function Tests (ELFTs)The primary questions to be asked of a proposed insured that presents with this history are:

How long has the proposed insured had elevated liver functions?...or is it a new finding?
Was the elevated testing done by their doctor or insurance exam labs?
How elevated are the tests? 1X normal?...2X normal?... more than 3X?
Has there been a positive alcohol marker test?...if so, what is the drinking history?
Has there been testing done for hepatitis?... ultrasound?.... biopsy?
Is there a known cause of the elevations?...has a doctor reviewed the elevated labs?

The goal in underwriting abnormal liver tests is to determine the underlying cause and rate the case for that issue. Many of the conditions listed above can be quite serious. The level of the amount above normal will have a definite role in the final offer or quote. The underwriter will consider the degree of elevation, the clinical history, and the current physical findings.
We do have several carriers that are more aggressive than others and will allow slight increases, even in the Preferred Best type categories.

How Much Money Do You Need to be “Happy”?

7/12/2020

The question of “how much do you really need to spend to be happy” is one that anyone (or any couple) can ask of themselves.

In this great article, Moore suggests a practical approach to answer it:

First, simply track spending for a while to figure out what the monthly spend number is.

Next, take a hard look at the expenditures to figure out what would it really take minimalistically just to ‘survive’ in the current lifestyle.

Third, calculate the difference between the two – what you’re spending in practice, and what it would take at a minimum – and consider which dollars really, purposefully, should be put back into the spending budget to add to the (admittedly very) minimalistic lifestyle.

Finally, figure out how to adapt spending in practice to fit the (more ideal) spending pattern that’s now delineated.

Did Actively Managed Funds Perform Better In Bear Markets?

7/11/2020

Q. Did actively managed funds perform better in bear markets?

A. There is an assumption that actively managed funds tend to do better in bear markets. Unfortunately, it doesn't hold up in front of data.

According to the latest Morningstar data, 52% of actively managed mutual funds and almost 60% of actively managed bond funds were able to beat their category index benchmarks in Q2 (with just over 50% of actively managed funds outperforming during the downturn itself from the market peak in February to the trough in late March).

However, viewed on a year-to-date basis, only 43% of actively managed future funds have been able to outperform, as the number of equity outperformers dropped below 50%, and in the case of active bond funds in particular, barely 1/3rd outperformed in total year-to-date (as short duration bets were the wrong way in the midst of rapidly falling interest rates as the pandemic recession unfolded).

You Can Have Direct Access to Coveted DFA Strategies Soon

7/10/2020

Dimensional Fund Advisors (DFA), which built a $500 billion active mutual fund business by providing exclusive access to financial advisers, is entering the world of exchange-traded funds later in 2020 where anyone with a brokerage account will have access to at least three DFA strategies.

The ETFs, which will be actively managed, include a U.S. all-cap core strategy, non-U.S. developed all-cap core and emerging markets all-cap core.

The move is significant not simply for DFA’s foray into ETFs themselves, but the fact that by repackaging their mutual funds as ETFs, they will become available to any/all investors who wish to buy them (unlike DFA’s mutual funds that were only available through DFA-approved advisors).

Why Open A Roth IRA Account For Your Child Who Has Income?

7/9/2020

Helping a young person fund an IRA—especially a Roth IRA—can be a great way to give them a head start on saving for retirement. That's because the longer the timeline, the greater the benefit of tax-free earnings.

Use Gift Money to Open A Roth For Your Child
Although it might be nearly impossible to persuade a teenager with income from mowing lawns or babysitting to put part of it in a retirement account, gifting money to cover the contribution to a child or grandchild can be the answer—that way they can keep all of their earnings and still have something to save. The contribution can't exceed the amount the child actually earns, and even if you hit the maximum annual contribution amount of $6,000 (for 2019 and 2020), that's still well below the annual gift tax exemption ($15,000 per person in 2019 and 2020 or with gift splitting, a married couple could gift their child $30,000 a year.)

It Will Be a Custodial IRA Account
You can open a custodial IRA for a minor. This type of account is managed by an adult until the child reaches the appropriate age for the account to be transferred into a regular Roth IRA in their name. This age varies by state. Funds in the custodial IRA do not count toward assets when considering Expected Family Contributions for college. Bear in mind that once the account has been transferred, the account's new owner would be able to withdraw assets from it whenever they wished, so be sure to educate your child about the benefits of allowing it to grow over time and about the rules that govern Roth IRAs.

How to Build More Realistic Retirement Plans?

7/8/2020

You know that offering guaranteed income solutions can help complement a portfolio and instill confidence in your retirement plans. But some people, like those who plan to draw income based on returns from mutual funds and other assets in their portfolios, may not see the value guaranteed solutions offer. Unfortunately, there’s no way to predict how those investments will play out over time, especially in the face of life’s uncertainties.

When evaluating investment options, consider guaranteed options such as Protective® Guaranteed Income Indexed Annuity. This product offers three guarantees to help people strengthen their retirement portfolios with predictable income they can count on.

Below is a Protective flyer for its agents to use, if you are interested in this product, you can contact us here.

Use Life Insurance to Protect Your Retirement

7/7/2020

The link below from AIG provides an educational presentation that shows you how to use life insurance to protect your retirement.

Life to the Max.