Last month the White House decided to get into the business of giving financial advice.  The White House’s “Middle Class Task Force” recommended that Americans, many of whom are in a terrible financial bind, begin investing in immediate annuities. 

With the volatility of the stock market, the crash of the real estate market, and the staggering unemployment numbers, Americans are looking for any way to preserve their investments and set themselves up for a livable future.  The most conservative investments, like certificates of deposit and money-market accounts, are returning almost nothing these days. 

If you’re not familiar with these investment options, let me explain how they work.  You buy an immediate annuity by making a large investment with an insurer.  Then you begin to receive large payouts which last for the rest of your life.  An example in a recent Wall Street Journal article shows how a 65-year old buying a $100,000 immediate annuity would receive roughly $7,500 per year. 

Should everyone immediately invest in immediate annuities?  I think that makes about as much sense as suggesting that everyone should take an aspirin every day, just because for some people, it’s a good way to fend off a second heart attack.  Financial planning is never one size fits all.

Some financial gurus suggest, for example, that the best way to use life insurance as part of your planning is to “buy term and invest the difference.”  And while that’s a great strategy for some, it’s a horrible mistake for others.  In the same way, buying immediate annuities makes great sense for some investors, but is a sure way to a less happy retirement for others.

Today’s interest rates are super low, and as the Wall Street Journal article pointed out, these pension-like investments require you to make a very educated wager that hinges on something most of us know nothing about:  how long we’re going to live.  If you live a long time, an immediate annuity can be a great investment.  But if you don’t, the one who will benefit the most from your investment is the insurance company.

Don’t get me wrong.  As someone whose career has been built around helping people to make the right decisions – about life insurance, disability insurance, college savings plans, and yes, annuities – I’m happy to have the White House advocating that Americans take a look at a variety of financial options they might not have considered in the past.  But rushing into something is almost always a mistake, and it pays to take your time and to seek the advice of competent professionals before making any major financial moves – especially when your family’s future is at stake.

If you’re like many Americans, your plans for retirement include not retiring – at least not for a few more years.  Sun Life Financial recently released what it calls its “Unretirement Index,” which found that 65% of working Americans not expect to be working at least one year longer than they had previously planned.  That number is up 11% from where it was at the end of 2008, which goes to show that the lingering recession and its aftereffects are hitting hard, not only with those who have lost their jobs, but with everyone.

Sun Life’s report, which was detailed in the December issue of “Employee Benefits Adviser,” was compared with similar findings by Prudential Financial and by Vanguard.  Both company’s findings showed the same trend: more workers thinking that retirement would have to wait at least a year longer than they had previously considered. 

The Sun Life survey went further, finding that a larger percentage of workers expected to continue working full time or part time well into what would have normally been considered their “retirement years” – age 67 and beyond.  And only 40% of the workers surveyed felt that they would have enough money to cover “basic living expenses.” 

We all know that this recession won’t last forever.  Housing prices will rise, and unemployment will get back down to 5% or 6%.  But now that the U.S. Senate has passed its landmark version of the health care reform bill, we’ll have to wait and see what affect that will have on the current economy.   I hate to use the phrase “perfect storm,” but with banks failing left and right, with more and more Americans out of work, it certainly doesn’t seem like the right time to implement a major program that everyone agrees will cost our government and us taxpayers more money.

Regardless of what’s happening in the broader economy, your retirement savings plans are still, for the most part, in your hands.  You have lots of tools at your disposal, so take the time now to make sure that you’re using all of them.  If you have a 401(k) or 403(b), put as much as you can into it.  If you have whole life insurance, make sure you keep up the premium payments and keep that cash value building.  If you can put money into a traditional or Roth IRA, by all means, put as much as you can into it.

And if, like so many of our clients, you are a medical professional, or you own your own business, or you’re an independent contractor, you KNOW that your success is in your hands.  You’ve worked hard over the years to establish yourself, to build a reliable income stream, and to chart your own course for the future.  Take the steps you need to now to make sure that your business is protected and your retirement is plan with retirement planning guide.  It’s the best retirement plan you’ll ever have!

There’s no question that for many people, money is tight these days.  And when you’re low on options for increasing your income, your thoughts may turn to that life insurance policy that you’ve been paying on for so many years.  You could sell it in what’s called a “life settlement,” but is that the right move?

According to The Wall Street Journal, more than $10 billion worth of life insurance policies were sold this way last year along.  The concept is pretty simple.  You sell your life policy for less than its face value, and when you die, the third party gets the payout from the policy.  You get the cash you need right now. 

In my experience, there definitely are times when selling your life insurance to another party makes sense.  When you no longer need the life insurance – for example, when your kids are grown and gone, your house is paid for, and you’ve got enough money to cover any estate taxes that will be due when you’re gone yourself. 

But it’s difficult to determine just how much your life insurance policy might be worth to another party.  If you’re 70 years old and have a policy with a $1 million face value, would you take $250,000 for it today?  Or even $400,000? 

And there are other factors to be considered as well.  There is no more life insurance benefits for your loved one, somebody is waiting for you to die, and there’s plenty of paperwork to go around.  According to current industry transaction, you as the seller should not expect to walk away with much more than 20 cents in return for every dollar of the policy’s face value. 

So if you’re in a cash crunch, and you’re thinking that selling your life insurance might be a way out, be sure to talk to a couple of expert  advisors at (866) 972-3262 before you take the plunge.  It may be a good move for you, but you bought the life insurance for a reason.  Most people would shudder at the thought of choosing to lose 80% of their investment.  You should too. Let me know what you think…

1. American consumers spend more money on average in 2 months than all the consumers in China and India spend in a year (source: Time Magazine). 2/04/08 issue, bullet # 14

2. 54% of American investors do not read financial literature (e.g., newspaper or magazine articles) because they believe the content is “too hard to understand” (source: AARP). 4/28/08 issue, bullet  # 13

3. More than 1 in 4 Americans (27%) believe they will be able to withdraw at least 10% per year from their accumulated assets throughout their retirement years (source: Investment News, USA Today). 5/12/08 issue, bullet # 14

4. 46% of the mortgages taken out by US home buyers in calendar year 2006 utilized greater than 95% financing, i.e., the home buyer put less than 5% down (source: Money). 5/26/08 issue, bullet # 7

5. The average amount of money that more than 2,000 adults anticipated they will need in order to retire comfortably was $1.13 million (source: USA Today, Kelton Research). 6/16/08 issue, bullet # 4

6. Americans are projected to be assessed $52 million a day in late fees charged by credit card companies during calendar year 2008 (source: R.K. Hammer, USA Today). 8/04/08 issue, bullet # 13

7. The top 1% of US taxpayers is responsible for the payment of 40% of all federal income tax.  Ten years ago (1998), the top 1% of taxpayers paid 35% of all federal income tax.  Twenty years ago (1988), the top 1% of taxpayers paid 28% of all federal income tax (source: Tax Foundation, IRS). 8/18/08 issue, bullet # 11

8. The oil ministers from 7 of the 13 OPEC countries were educated at US colleges, including Texas A&M, University of Colorado, University of North Carolina, Tufts University, Harvard, Lehigh University and Stanford University (source: OPEC). 9/08/08 issue, bullet # 9

9. As of 1/01/34, an estimated 43.8% of all owner-occupied homes in the US that had a first mortgage were in default on that loan (source: Department of Commerce, Federal Reserve Bank of St. Louis). 10/20/08 issue, bullet # 9

10. In the 1-year following the low point from each of the 9 bear markets that have occurred since 1957 (not counting the current 10th bear market) the S&P 500 stock index has experienced a double-digit return.  The best of the 9 produced a +58.3% return.  The worst of the 9 was up +23.2% (source: BTN Research). 11/24/08 issue, bullet # 1

11. Nearly 1 out of every 3 US homeowners (32%) believes the value of his/her primary residence has increased in value over the last year (source: USA Today). 12/01/08 issue, bullet # 8

12. As of 9/06/08, the S&P 500 stock index had produced 26 days that resulted in a gain or loss of at least 4% in the previous 7,626 days, a period of almost 21 years.  In the 100 days from 9/06/08 to 12/15/08, the S&P 500 also had 26 days that resulted in a gain or loss of at least 4% (source: BTN Research). 12/15/08 issue, bullet # 3

Learn more about life insurance, college savings, retirement savings, disability insurance, long term care and find the best term life rates and life insurance quote.

Have a happy holidays and prosperous new year.

CBO Director Peter Orszag testified before the House of Representatives that Americans have lost $2 trillion in their 401k’s in the last 15 months. Only two weeks after Orszag’s testimony, Congressman George Miller announced that 401k losses had doubled to $4 trillion in just two weeks. That is forty percent of the value of 401k’s gone in less than a year and a half! People who haven’t retired yet are equally disturbed as retired who are living on investment income! Many will have to postpone retirement, and many will never make back what they have lost. This equates to a lower standard of living for many Americans. People who have some time should definitely consider the whole life insurance as a retirement savings supplement. Whole life policy provides guaranteed cash value with a non-guaranteed dividend so you can stop worrying about stock market risk. It is a life insurance policy so – it covers premature death and disability benefits if waiver of premium rider is added with a very attractive return. Please call (866) 973 -3262 to speak with whole life specialist or complete this whole life quote request form now.

Between 1977 and 2007, employment of US workers 65 and over increased 101%. The number of employed men 65 and over rose 75%, but employment of women 65 and older increased by nearly twice as much, climbing 147%.

While the number of employed people age 75 and over is relatively small (0.8% of the employed in 2007), this group had the most dramatic gain, increasing 172% between 1977 and 2007.

"Are There More Older People in the Workplace?" US Bureau of Labor Statistics, July 2008.

 Please call (866) 972-3262 to speak with a retirement specialist to discuss about your retirement savings plan or complete your personalized retirement savings proposal request now.

When we think or talk about insurance, we typically relate it with a cost or treat it as an expense. This is true for health insurance, homeowner’s insurance, car insurance, or even term insurance. And most of us try to minimize our expenses, and we should. The common thought process flows as follows: If I buy term insurance, I will minimize my cost. However, there are several other factors that you need to consider to calculate the true cost of term insurance. For example, the opportunity cost of premiums and the compounding tax consequences for your other savings and investments.

Most people feel that they need insurance before age 65, not after, when their kids are out of college, their home is paid for, and they have enough in the bank for retirement. So they buy 20- or 30-year term insurance to cover them until they feel they no longer have financial obligations. This seems logical—until you understand the living benefits of life insurance.

The concept of buying term insurance until age 65 is called the “survivorship need,” which is one very compelling reason behind purchasing insurance. But there are other important purposes for life insurance, such as covering federal and state estate tax if you fall into the estate-tax bracket. Even if you do not fall into the estate-tax bracket, insurance can be a tremendous savings vehicle through the cash value build-up inside the policy. For example, whole life insurance (one type of permanent insurance), when purchased from a solid insurance company, has an internal rate of return of 5% on average over the long term. Additionally, by law, an insurance contract is tax-deferred, so you are not paying any taxes on that growth. And under the current tax law, you can take out a distribution from a permanent policy by way of a loan that is also not taxed.* This savings adds an additional 2% to 2.5% onto your rate of return. Lastly, the opportunity cost and monetary savings of the term insurance premiums that you did not pay adds another 2% to 2.5%, so your total annual rate of return is around 10%. Furthermore, this 10% is achieved while avoiding stock market volatility, and if you should pass away prematurely, you are passing on all of the death benefits to your beneficiaries without any income tax or estate tax burden (if your policy is structured in the right manner). There are very few investment vehicles that will provide this kind return. One final aspect of permanent insurance is that the cash value or account value accumulations inside the policy are protected from many kinds of creditors in most states.*

BeamaLife.com is an industry-recognized website offering such counsel along with the best whole life insurance rates. Please call (866) 972-3262 to speak with our whole life insurance specialists or complete a whole life insurance quote request now!

In summary, if your current lifestyle does not allow you to spend the additional dollars on whole life insurance, you should buy term insurance to cover the survivorship risk. However, if you are putting money away at the end of the month in some type of savings or investment vehicle that is making less than 8–9%, it is definitely worthwhile to consider a permanent policy, specifically a whole life insurance policy.

*The information contained in this post is provided with the understanding that it is not intended to be interpreted as specific legal or tax advice. Neither BeamaLife nor any of its employees or specialists are authorized to give legal or tax advice.

You may have heard a lot about compound interest, but this is probably the first time you are reading about compounding your taxes.  When you reinvest your interest or return in the same investment vehicle; you are now eligible to get interest or return on the additional money.  In this manner, your interest is compounding or multiplying faster. Compounding has a definite advantage in the short run, but if done unwisely, it can create a significant tax liability as well. The biggest impact of compounding occurs in taxable accounts such as savings accounts, money-market accounts, or personal investment accounts. Compounding also has a negative impact in tax-deferred accounts such as traditional IRA, 401(k), pretax retirement accounts, and annuities. You might think – what is wrong in paying more taxes when we make more return or interest but there is a way where you can pay less tax on more return. That is why the Roth IRA and Roth 401(k) make more sense than the pretax IRA and 401(k). Permanent life insurance especially whole life insurance provides a similar benefit to the Roth IRA and Roth 401(k)—without stock market volatility.  It also offers flexibility to use your money before age 591/2, the earliest age you can take money out from any kind of tax-deferred retirement account without paying the hefty 10% IRS penalty. And, unlike any other retirement savings plan, permanent life insurance covers you for death and total disability if you add a waiver of premium rider to your policy.

Please call (866) 972-3262 to speak with a retirement specialist or complete your personalized retirement savings proposal now.