Category: Insurance - PFwise.com

Why a Stock / Bond Portfolio Not As Good As a Stock / Index Annuity Portfolio?

2/19/2020

Q. Why a stock/bond portfolio may not perform as well as a stock/index annuity portfolio?

A. In today’s interest rate environment, you may want to consider allocating a portion of your fixed income investments to the Index Annuity, because this powerful accumulation solution has the potential to offer you more growth than traditional fixed income vehicles like CDs and bonds, while guaranteeing your principal against loss in down markets.

Below is a Power 5 Protector Index Annuity brochure from AIG, it shows that a diversified portfolio of 60% stocks and 40% index annuities could have stabilized returns and increased performance by 0.22% for the overall period and by 1.03% in weak bond environments from 1927-2016.

In addition to the above benefits, it also helps for people who need income earlier, as it provides access to your money without a withdrawal charge after 5 years.

Term Life Converting 101 - Part B

2/18/2020

In our last blogpost, we discussed the general benefits of term life policy conversions. Now a case study from American National.

Case Study:

One of American National’s agents, Charles, was kind enough to share his experience with the conversion process at American National. Charles recently had a thirty-year-old client that was recently widowed and raising two small children on her own. She knew the importance of life insurance and wanted to make sure that her parents would have the means to take care of her children if anything were to happen to her. After spending several years as a stay-at-home mom, she was just reentering the workforce. She was working hard to make ends meet, and she scrutinized every dime she spent. However, she knew the peace of mind that obtaining life insurance would give her was worth every penny.

After completing a needs analysis and discussing the difference in premiums between American National’s 20-year level Signature Term and multiple permanent products, the client decided that the term policy was all she could afford right now. She was a little concerned because she wanted to make sure she would not be a burden to her family if she were to pass away in 21-years; however, she was relieved to know she temporarily (for 20-years) had a solution in place to protect her family.

Charles eased her concerns even more when he told her about the conversion opportunities that were available at American National. He let her know that she was making a smart decision to get coverage while she was young and in great health and told her she would have the option to convert to any permanent plan over the next twenty years! Charles also informed her that the conversion options would allow her to change her term policy to a permanent policy without having to go through any more underwriting. He advised her the process was quick and easy and would allow her to get the new policy at the same rate class as her original term policy. He also let her know that if she was able to convert in the next five years, she would even get a premium credit towards her permanent policy! She was so grateful that the term policy with American National would provide the coverage she needed NOW along with the flexibility to get what she really wanted later.

Charles checked in with his client every 6 months to make sure she did not have any additional needs and to review her statements. While meeting with her to review her third annual statement, she mentioned that within the last year she got a huge promotion at work, bought her dream starter home, and was doing better than ever! Happy to hear that she had made huge financial strides in her life, Charles reminded her of the conversion options that she had available on her term policy. Next thing you know, she converted her term policy to the Signature Guaranteed Universal Life, and she now has guaranteed coverage (at a guaranteed premium) until she is 121 years old!

Term Life Converting 101 - Part A

2/17/2020

Do you currently have a term life policy? Are you interested in a permanent product but cannot fit the premium into your budget right now? If you answered “Yes” to either of these questions, then it is time to talk about conversions!

Below is a term life converting 101 from American National, it would work for most of other life insurance carriers too.

American National offers very generous conversion options on our term policies. Clients have the option to convert their term policy to ANY permanent policy available at American National at any time before the end of their level term period or before they turn 65 (whichever comes first). The conversion period will never be less than 5 years! Not only does American National allow the client to convert to ANY permanent policy that best suits their needs, if the policy is converted within the first 5 years, the client will also receive a conversion premium credit!

Converting from a term to a permanent policy is quite simple. The only paperwork that is required is a policy change application, USA PATRIOT Act Form, a signed illustration (or illustration acknowledgement), and a supplemental application. The beauty of a conversion is that if there is no increase in the face amount, the applicant does not go through additional underwriting and will not need to prove additional insurability!

Read out next blogpost for a case study from American National about term life conversion.

How Cash Life Insurance Could Help You Keep More of Your Savings

2/16/2020

Do you want to create a diversified retirement portfolio that balances the limitations and benefits of different financial assets?

Your tax-deferred investment withdrawals, for example, will become taxable income. Add that income to any withdrawals on your stocks, bonds or mutual funds, and you could have a higher-than-anticipated tax bill.

Including tax-advantaged products like cash value life insurance can be key to a smaller tax bill later in life, as the chart below shows.

How to Create a Tax Efficient Retirement

2/13/2020

What should you do today to help protect your retirement income?

This document from Lincoln Financial below gives you some good ideas if you haven't thought about this topic before -

QLAC 101 - Which Carriers Have the Best QLACs?

2/7/2020

In our last blogpost, we discussed factors to consider when purchasing QLAC. Now the question - which carriers have the best QLAC products?

We recommend products from AIG, Lincoln, and Principal.

Below is up-to-date information about AIG's QLAC product, including producer and consumer guides, sales ideas, fact sheets, and more. If you are interested in the other carriers' QLAC products, please contact us.

QLAC 101 - Factors to Consider Before Purchasing QLAC

2/6/2020

In our previous blogposts, we discussed what is QLAC and showed an example of QLAC. Now we will discuss what factors to consider before purchasing QLAC.

The decision to purchase a QLAC is a personal one and should take into account your family's needs and financial goals. For instance, you may not want to take RMDs on the entire pretax balance of your IRA if doing so would provide you with more income than you need. But will your financial standing be as strong 20 or even 10 years from now? A QLAC would allow you to enjoy your earlier retirement years knowing that you have guaranteed income in place when you really might need it.

Specifically, the following QLAC related decisions should be considers.

Single or joint life?
If you are married, you can choose a joint contract, which will provide income payments that will continue for as long as one of you is alive. Choosing a joint contract may decrease your income payments—compared with a single life contract—but may also provide needed income for your spouse should you die first.

Include a cash refund death benefit?
When purchasing a QLAC, the income lasts for your lifetime (joint contracts pay income for you and your spouse, as long as one of you is alive). You may also want to consider adding a cash refund death benefit. This provides for a lump sum paid to your beneficiaries if your lifetime payments do not exceed the dollar amount you invested in the QLAC. While a contract without the cash refund death benefit may provide higher income payments, it does not include beneficiary protection for your heirs.

When to start income?
A QLAC should be part of a broader income plan, to help ensure that your essential expenses like food, health care, and housing are covered during retirement—ideally with lifetime income sources such as Social Security, a pension, or lifetime annuities. Deciding on an income start date will depend on how this income stream will best fit into your overall plan. Here are some hypothetical examples of how someone might choose an income start date:

A 70-year-old retiree with an existing income stream that will stop at age 75 (for example, proceeds end from the sale of a business, the retiree stops working part time, inheritance income ceases) might start income at age 76 for the QLAC to replace the income that is ending.
A couple in their late 60s might like to include an income stream that begins at age 80 or 85 as part of their overall plan, to help cover higher anticipated health costs later in retirement.
A couple at age 65 might be comfortable taking withdrawals from their investment portfolio to cover their expenses at the beginning of their retirement, but they are concerned about the potential need for it to last 30 years or more. They might consider a QLAC that provides lifetime income starting at age 85 to help address these concerns.

Need to change the income start date?
For contracts that include a cash refund death benefit, you typically have the ability to change the income date by up to 5 years in either direction (subject to an age-85 maximum). For example, if you initially select age 78 as your income start date, you could subsequently change this date to any time from age 73 to age 83. Of course, the amount of income that you will receive will typically be adjusted to a lower amount if you decide to change the date to an earlier age, and a higher amount if you change the date to a later age.

In our next blogpost, we will show you some of the best QLAC providers.

QLAC 101 - How to Use QLAC?

2/5/2020

In our last blogpost, we discussed what is QLAC, now we will show how to use QLAC to create steady later in life income streams.

Let's say you own one or more traditional IRAs with a total balance of $200,000 as of December 31 of the previous year. You would be limited to using $50,000, which is 25% of $200,000 and is less than $135,000, to fund the QLAC. But if your total IRA balance is worth $540,000 or more, the maximum you can contribute to a QLAC is $135,000. Keep in mind that in both cases the money that remains in your IRA or 401(k) is still subject to RMDs.

An Example
Let's assume a woman is approaching age 70½ and does not need her full RMD to cover current expenses. By investing a portion of her traditional IRA assets in a QLAC at age 70, she would not have to take RMDs on the assets invested in the QLAC, and she would receive guaranteed lifetime income starting at a date of her choice, up to age 85.

During the deferral period, she would rely on Social Security, RMDs from the remaining money in her IRA, withdrawals from investments, and other income, such as part-time work or a sale of a business, to cover expenses. If she invests the $135,000 in a QLAC and defers to age 80, her guaranteed income would be $15,200 a year no matter what happens over time, and she would receive a total of $228,000 in payments if she lived to age 95—or more if she lived longer.

In our next blogpost, we will discuss what factors to consider if you should purchase QLAC or not.

QLAC 101 - What Is QLAC?

2/4/2020

Q. What is QLAC?

A. A QLAC is a Deferred Income Annuity (DIA) that can be funded only with assets from a traditional IRA or an eligible employer-sponsored qualified plan such as a 401(k), 403(b), or governmental 457(b).

The US Treasury Department issued a rule creating Qualified Longevity Annuity Contracts (QLACs) in 2014. QLACs allow you to use a portion of your balance in qualified accounts—like a traditional IRA or 401(k)—to purchase a deferred income annuity3 (DIA) and not have that money be subject to RMDs starting at age 72.

At the time of purchase, you can select an income start date up to age 85, and the amount you invest in a QLAC is removed from future RMD calculations. QLACs address one of the biggest concerns among individuals in retirement: making sure they don't outlive their savings.

Why Purchase QLAC?
There are two main reasons.

First, you can delay required minimum distributions (RMDs) on the money in your QLAC. Without a QLAC, you would be forced to start taking distributions based on the total value of that retirement account at age 72 (formerly 70 ½) - and paying income tax on those distributions. Many people don’t need distributions at that age, and don’t want to pay tax on that money yet. With a QLAC, you won’t have any RMDs on premiums paid until age 85.

Second, longevity. If you are worried about outliving your funds, a QLAC solves the problem. It provides guaranteed monthly income as long as you live. Plus, you get the amount you were promised at purchase, no matter what’s happened to the stock market or interest rate in the interim. You're effectively transferring that risk to the insurer.

In our next blogpost, we will show you a few QLAC examples about how it works.

5 Financial Things to Review Annually

1/31/2020

An annual financial checkup can take place at any time during the year and can help you better understand the "big picture" of your overall financial planning efforts. You can stop and think about your family's financial goals, such as saving for retirement, a house, or a child's education. You can consider reducing taxes on your investments, protecting your income, or building a financial cushion.

Here are 5 questions to ask when you do an annual financial review.

1. Is my investment strategy on track?
You probably have several savings goals and accounts. Your annual financial review should revisit each of your priorities and your strategy for reaching them. If your situation has changed, make adjustments as necessary. At least once a year, check your target asset mix to ensure that it continues to meet your time frame, risk tolerance, needs, and preferences, and to perform any rebalancing that might be necessary in light of the past year's market performance.

2. Am I saving tax-efficiently?
Beyond applying diversification strategies broadly to your overall portfolio, what approaches are you exploring to help defer, reduce, or more efficiently manage taxes on your investments? Basic rule of thumb: Consider putting certain investments which generate taxable income—for example taxable bonds and real estate investment trusts—in tax-deferred accounts like 401(k)s and IRAs. For those investments which are more "tax-efficient"—like stocks and ETFs held for more than a year—place them in taxable accounts.

3. Am I protecting my income?
You've worked hard and want to protect your income. So it's wise to evaluate your family's total insurance needs annually to make sure you have the right amount and type of insurance to cover unforeseen circumstances that can derail a financial plan. 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.

4. Am I preserving my assets?
Use your annual review to make sure you have an estate plan, and that it continues to reflect your family status and financial situation. Ensure that it helps make the best use of the latest estate and tax laws, and that key individuals know where to find relevant documents and information.

5. How does my financial plan affect my family?
It's not just your retirement or financial future that you are planning for, especially as you age. You are likely researching and cultivating strategies to provide financial assistance to a number of people that you care deeply for, including parents, children, or even grandchildren. Beyond college, a lot of parents are helping to launch their millennial children into the world of fully independent living. Meanwhile, many have aging parents who can no longer live on their own or manage their own financial and personal affairs. Will caring for others affect your financial goals, priorities, and outcomes?

How to Use Life Insurance to Make Retirement Less Taxing?

1/29/2020

3 of 4 Americans surveyed feel concerned about how taxes could impact their retirement.

As you plant the seeds for your retirement, now is the time to consider how taxes will affect you when you begin spending your savings. Often, you’re tending to products that could not only raise your taxes in retirement, but erode your retirement income. The good news is that you can make solid decisions now to benefit you in the future.

As you grow your retirement portfolio, consider adding more tax-efficient assets, like a life insurance policy that provides a valuable death benefit as well as a different layer of protection to your overall retirement portfolio.

3 Ways to Get Health Insurance Plans For Early Retirees

1/25/2020

Q. We plan to retire at age 55, what options do we have for health care until we are eligible for Medicare?

A. In general, there are 3 option for early retirees to get health care coverage:

1. Use COBRA
The Federal law requires companies with 20 or more employees to let workers remain on their health plan, but that coverage is only up for 18 months, and you will have to pay the full premium.

Best for: early retirees need to fill a short gap in coverage, or if you are undergoing treatment and other policies available won't cover your current doctors or providers.

2. Use State Health Insurance Exchange
You can buy a policy through your state's health insurance exchange (www.healthcare.gov), which could be pricey.

Best for: early retirees with preexisting conditions since insurers can't deny you coverage or charge you more for them. Also, early retirees with low income (eligibility for subsidy is 400% of the federal poverty level - $49.960 for an individual or $67,640 for a couple in 2020).

3. Buy Directly From An Insurer
You can buy directly from an insurer or through an agent (nahu.org). Off-exchange policies are not eligible for tax credits, but some insurers offer different premiums, cost sharing, or provider networks than their on-exchange versions.

Best for: early retirees who are not eligible for subsidy or are looking for a specific feature.

Survey Results About Gen X and Gen Y and Life Insurance

1/24/2020

Believe it or not, more than 50% of Gen X & Y would be in trouble if they lost the primary wage earner, see the results below ...

One Solution That Meets Baby Boomers Changing Needs

1/22/2020

Retirees want financial security for the future, also like simplified underwriting and combination solutions that offer living benefits. That’s what makes Sagicor’s WealthCare Indexed Single Premium UL a stand out solution.

Consider this comprehensive solution for:

People with cash on the sidelines, looking for guarantees, flexibility and growth.
People who are concerned about the costs of care.
People who don’t want to forfeit asset control, because they can have a return of premium.

Will the bill mean I find annuities in my 401(k) plan?

1/18/2020

Q. Will the Secure Act bill mean I could find annuities in my 401(k) plan?

A. Based on an article at Barron's, one provision of the bill eases the path for employers to offer annuities as part of their retirement plans by providing safe-harbor language that takes them off the hook if an insurer whose products they use runs into financial trouble. (The employers continue to have fiduciary duty in picking appropriate products, or annuities in this case.)

Academics have long discussed the merits of having some sort of guaranteed income option inside plans to help retirees when they start drawing on their nest egg. The concern is that the bill leaves the door open to all sorts of annuities, not just the low-cost, simple ones academics favor.

Policy watchers would have liked some framework for what annuities are allowed in a plan. As for when retirement savers will find such options in their plans, State Street's Kahn recommends thinking along the lines of evolution, rather than revolution. Employers have been looking at all sorts of guaranteed lifetime-income options and financial-services companies have been working on solutions for years, including target-date funds that incorporate some sort of guaranteed income option, Kahn says.

If nothing else, the bill will likely bring attention to the need for providing some sort of guaranteed income stream for retirees beyond Social Security.

Protective Guaranteed Income Annuity - All About the Numbers

1/16/2020

The product highlights below show how Protective Guaranteed Income Indexed Annuity provides three times the guarantees with:

Guaranteed Income for Life
Fueled by a 4% roll-up to the benefit base (which can double in 15 years) thanks to opportunities for bonuses along the way.

Guaranteed Rate Cap for Term
A guaranteed rate cap that won't change for the term so you will never be surprised by a lower renewal rate during the withdrawal charge period.

Guaranteed Flexibility
Two unique income options chosen at benefit election, with access to competitive withdrawal rates at key ages both now or later.

Comparison of Term Life Products With Living Benefits Riders in NY State

1/7/2020

Our last blogpost showed a comparison of term life products with chronic illness rider, but New York state is usually different from the rest of states due to its tighter regulations, below is a comparison table for NY:

Comparisons of Term Life Products With Chronic Illness Riders

1/6/2020

Q. Which term life products have chronic illness rider included?

A. There is a new trend in term life product offerings - accelerated access solution that is innovative and flexible that allows policy owners to customize their chronic illness coverage and monthly payout according to their financial needs. It helps with unexpected healthcare costs as well as other expenses due to chronic illness if it not a permanent condition. Besides, it pays benefit on an indemnity basis - no receipts required and family care is covered!

Below is a comparison of some current offerings on the marketplace:

If you are interested in any term life products with living benefits riders, please contact us.

Breakeven Years For Different Income Streams

12/29/2019

Planning retirement income? How do you size up payout delay versus starting right away? The following table compares a few different scenarios and shows you the breakeven years given different income streams -

3 Easy Ways to Live Longer and Healthier

12/26/2019

Do you want to live longer and healthier? Recent scientific studies revealed 3 easy ways -

1. Spend 2+ hours each week outdoor
In a recent study of nearly 20,000 people in England who had reported how long they spent in natural environments in the past week, plus their health and well-being, researchers found that spending just 2 or more hours outdoors was associated with consistently higher levels of health and well-being (even after controlling for the health benefits that might otherwise be a byproduct of the physical activity that happened to be outdoors).

2. Surround yourself with plants
In a mega-study of more than 8 million people (!) across seven countries, a recent study conducted in collaboration with the World Health Organization and published in Lancet Planet Health (that itself was a meta-study of 9 separate longitudinal studies over long periods of time) found that “when you are exposed to greenery or greenness around your home, your probability to die… is less compared to those with less green-ness around their home”, and specifically that for every 10% increase in vegetation within 1,600 feet of the home, the probability of death drops by 4%. Notably, the green space could be grass, trees, or gardens, public or private, and held up in every country measured.

3. Be kind to other people
Recent research from the book “The Five Side Effects Of Kindness” finds that being kind to another person, even just in a small way, appears not only to help others but to be good for our own health, slowing the body’s aging process by reducing free radicals and inflammation through the release of oxytocin. In addition, oxytocin triggers the release of nitric oxide, which dilates blood vessels and reduces blood pressure (protecting the heart). And other research finds a link between compassion and activity of the vagus nerve, which regulates heart rate and controls inflammation levels. In fact, one study found that even just meditating on compassionate thoughts towards yourself and others (even people you dislike!) stimulates the parasympathetic nervous system and elevates the levels of dopamine (the feel-good hormone), resulting in increased positive feelings, well-being, and social connections.

Life Insurance Transfer-For-Value and Tax Implications

12/17/2019

It's well known that life insurance's death benefit payment is generally tax free for the beneficiaries. However, do you know that in situations where a life insurance contract is transferred for "valuable consideration", the death benefit payment could be subject to income tax?

See the Q&A and examples from John Hancock below for more details.

Term Is Just the Beginning ...

12/16/2019

Q. I have a term life product, what if my needs change in the future, what should I do at that time?

A. The document from Prudential below shows some hypothetical scenarios that when your situation changes, you could use the simple term life product you currently have to convert it to serve your other needs later ...

How Much Could a $250,000 Single Premium Immediate Annuity (SPIA) Pay?

12/14/2019

If you are interested in knowing how much your $250,000 could lead to lifetime payment, below is a table from American National showing you an hypothetical example -

5 IRC Tax Codes That Life Insurance Products Benefit From - Details

12/9/2019

How Global Clients Could Leave a Legacy With U.S. Life Insurance

12/3/2019

Do you fit the profile below -:

A Non-U.S. citizen who wants to -
Continue to diversify global portfolio with U.S. assets
Provide a legacy to families paid in U.S. dollars
Access the benefits of U.S. life insurance, including flexibility, tax efficiency and competitive pricing

If yes, please keep reading the document and a case study from Lincoln Financial Group below -

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PFwise.com does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.

To the extent that any material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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