A recent article in The Wall Street Journal advised readers to “beware rule changes on Coverdells.”  Coverdells Education Savings Account, in case you’re not familiar with them, are investments that offer tax-free growth and withdrawals, as long as the money is use for qualified educational expenses.  They were once known as education IRAs, and sometimes they’re still referred to that way, although the money that goes into them is not deductible from taxable income. 

If you’re a parent who already owns a Coverdell, the article continued, you should be aware that there is good news – you can invest as much as $4,000 until April 15^th, since the money deposited before April 15^th counts towards the previous year’s (2009) limit.  And, there’s bad news.   Unless Congress extends the current benefit, starting next year withdrawals that are used to pay for expenses from kindergarten to 12^th grade will no longer be tax free.

That doesn’t mean that Coverdells are bad investments, of course.  They’re still a good way to save for and finance education in the United States.  Even with their limitations, such as the fact that beneficiaries must be under age 18 when the money is contributed, and that the money can’t be refunded to the person who started the account, they’re still better than doing nothing.

But there is one savings vehicle allows you to tax-free growth and withdrawals without those limitations.  Imagine being able to contribute what you wanted, when you wanted, without any limits.  Imagine being able to use the funds for any level of education, for any member of your family – even yourself!  Imagine the funds not all being needed, and the overage being returned to you, the person who created and funded the account.   Imagine even being able to pass the funds along to your heirs in the event of your death. 

By now you’ve probably figured out what savings vehicle I’m talking about.  It’s whole life insurance, of course.  And not only can it help you to save towards and fund your children’s educations.  You can use the money for any other purpose you choose as well.  Many types of life insurance policies have loan provisions that allow you not only have tax-free growth of your capital, but also to borrow tax free against the balance of your account.  For education, or for whatever other purpose you choose.

Life insurance is the only savings vehicle that I know of with so many uses – including the most important: making sure that in the event of your death, your family’s financial needs are completely taken care of.

I was listening to a personal finance podcast the other day, and the question was raised again about what kind of life insurance someone should buy.  The host went on for the next couple of minutes talking about how everyone should “buy term and invest the difference.”  Now I’m a fair person, and I admit that there are many, many times when that makes more sense than any alternative. 

But if there were a doctor out there who, for every patient, wrote the exact same prescription, it wouldn’t be long before that doctor would be out of patients at best, and in jail for malpractice at worst!  In my experience, absolutes only work as descriptions of reality.  One plus one equals two.  The sun is the center of our solar system.  Beyond things like that, absolutes just don’t work.

And when it comes to financial planning, it makes sense from my perspective to take a long, hard look at the patient before recommending a course of treatment.  Whole life insurance sales, according to recent figures, are now selling at a rate that is much higher than the year before. 

Here’s one reason why.  In order to beat the return on your investment in a whole life policy, you’d have to average 10% or more on your investment of the difference between what you’re paying for term life and what you would have paid for a whole life policy.  Can anyone show me an easy way to make that kind of return these days?  I can’t think of one.

And here’s another reason.  The Pollyanna mindset that says “let’s not worry about today, because tomorrow will be even better!” has all but disappeared as the various sectors of the economy have fallen like dominos over the past couple of years.  Stocks are just now beginning to recover, but jobs are still nowhere to be found, real estate values are not even beginning to show signs of growth, and with looming changes in heath care and taxes, the average American has very little hope that the next five years will bring prosperity back.

At BeamaLife we’re experts in all kinds of life insurance products term life insurance or whole life insurance, and we know how to help you find the one that makes the most sense for where you are financially right now.  So don’t buy into the “buy term and invest the difference” mentality.  For many people, it’s more like “buy term, plan to invest the difference, spend the money on other things, and then find yourself without the coverage you need when you need it most.” 

Call one of my experts today at (866) 972-3262 for a free, no-risk review of your life insurance.  We’re your best resource for advice, and the surest way to get the coverage you want for a price that you can afford.  Your family and your financial future deserve nothing less!

Too often, you have been advised to buy term insurance and invest the difference in the stock market for better return. Even though this sounds convincing on paper, it lacks verifiable facts, ignores feasibility of continue investing in stock market and demonstrate ignorance of life insurance tax advantage. When you calculate long term compounding tax burden of taxable investment, consider the lack of discipline to save regularly and the opportunity cost of term insurance premiums; it is very difficult for this advice (buy the term insurance and invest the difference in stock market) to succeed.

Please let me know if you think otherwise and can prove your opinion with verifiable facts.

Life insurance needs will change but it is best to keep life insurance policy instead of dropping the coverage when you grow older. When an individual ages, a permanent policy becomes an increasingly important asset, because a person’s insurability tends to decrease over time. A term policy provides temporary coverage, but relying on term insurance to help offset other expenses can be a risky move. Why? If the term policy expires, the individual loses the ability to utilize the tax efficiencies of life insurance that increase with age and over time. Following are some other important reasons why you should have whole life insurance policy.

1. It helps to counter inflation and its effects on other assets that are used to supplement retirement income by providing stable cash value accumulation.
2. The tax-deferred treatment of life insurance versus the taxes generated by other kinds of assets (CD, Mutual Funds, Savings Accounts).
3. A valuable financial tool when illness or disability strikes (if the appropriate riders are attached).
4. It provides a legacy to your children/grand children or charity, and offset estate taxes.
5. Greater financial protection in the event that Social Security benefits are reduced.

Please let me know your thoughts and comments.

Time magazine had a wonderful article explaining why the life insurance industry is so much safer than all the other financial service industries. The article explained that insurance companies only held about ten percent of total assets in the real estate investments that pulverized the bank and investment industries. The article even explains that AIG, the insurance company, was solvent because of insurance companies and life insurance part of the business is still solvent according to New York state insurance department. Insurance companies are  required by law to have money set aside to pay claims. That is very different from credit default swaps, which had no money set aside to pay claims. It also explains that insurance companies contribute to state guaranty funds, which come into play when an insurance company becomes insolvent. This make life insurance ideal not only for death benefit purpose but also for safer savings and risk management purposes. Learn more about whole life insurance, term life insurance and find the best life insurance rates and term life quote & whole life quote.

http://www.time.com/time/business/article/0,8599,1849023,00.html

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.