It’s that time again. A new year is here, which means a volatile 2018 is in the rearview mirror. The markets suffered a steep drop at the end of last year after climbing steadily through the first three quarters. A number of factors contributed to the markets’ fourth-quarter tumble, including tariffs, interest rate hikes and trouble in the tech sector.
A new year doesn’t mean those challenges are gone, but it does represent a fresh start. And if history is any guide, January can be a strong month for investors. According to a study from LPL Research, in the 68 years from 1950 through 2017, January has been a positive month for the S&P 500 41 times. It’s been negative 27 times.1 As any investor knows, history doesn’t guarantee future performance. However, there does seem to be a correlation between market performance in January and the rest of the year. How do January returns impact the rest of the year? According to LPL Research, there’s a relationship between January returns and market returns over the remainder of the year. Its research showed that during years in which there was a positive January return, the market had an average return of 12.2 percent over the next 11 months. When the January return was negative, the S&P 500 returned only 1.2 percent the rest of the year.1 If January returns are more than 5 percent, the correlation is even more pronounced. In those years, the market had an average return of 15.8 percent over the next 11 months. In fact, when January has a return of more than 5 percent, the rest of the year is positive 91.7 percent of the time.1 What is the January effect? Why has January been positive more often than not? And why does January’s return seem to impact the rest of the year? There are no definitive answers to these questions, but there are theories. There’s an idea called the “January effect,” which suggests that January returns may be the product of tax strategy. Investors sell stocks in December to harvest tax losses before the end of the year. That depresses prices and creates a buying opportunity in January. Because investors sold at the end of the year, there’s cash on the table to buy in the beginning of the next year. Of course, this is just a theory. There’s no way to conclusively prove whether the January effect is a real phenomenon. Even if it could be proved, it’s never wise to change your long-term investment strategy based on short-term opportunities. If you’re concerned about the volatility in 2018 or the coming year, now is a great time to meet with a financial professional. They can help you review your strategy and possibly make changes that reduce your risk exposure and allow you to take advantage of opportunities. Ready to evaluate your investment strategy? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and goals and implement a plan. Let’s connect soon and start the conversation. 1https://www.thestreet.com/story/14469889/1/stock-market-s-strong-january-performance-bodes-well-for-the-rest-of-the-year.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18345 - 2018/12/31
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A new year is here, and with it comes a flood of year-end tax documents like W-2s, 1099s and others. Before you know it, the April 15 tax filing deadline will be upon us, and it will be time to submit your return.
It’s always wise to meet with your financial professional at the beginning of the year. It gives you an opportunity to discuss the past year, your goals for the coming year and your tax strategy. However, a consultation with your financial professional could be especially helpful this year. The Tax Cuts and Jobs Act was signed into law in late 2017 by President Trump. While some of its changes went into effect last year, 2018 was the first full calendar year under the new law. The return you file in April will likely be the first that reflects much of the law’s changes. Below are a few of the biggest changes and how they could affect your return: Increased Standard Deduction The new tax law impacted a wide range of credits and deductions, from the deduction of medical expenses to credits for child care. Those who itemize deductions may have felt the brunt of these changes. However, the tax law significantly increased the standard deduction. In 2017 the standard deduction was $6,350 for single filers and $12,700 for married couples. The new law increased those numbers to $12,000 and $24,000, respectively.1 Given the changes to itemized deductions and the increased standard deduction, you may want to consult with a financial or tax professional before you file your return. If you’ve traditionally itemized deductions in the past, that may no longer make sense. New Tax Brackets The new tax law also made significant changes to the tax brackets. There are still seven different brackets, just as there were before the passage of the law. And the lowest rate is still 10 percent. The top income tax rate is down to 37 percent, however, from 39.6 percent.2 There are similar cuts throughout the rest of the brackets as well. The law also made changes to the income levels for each bracket. Generally, the bracket levels were increased throughout the tax code, which means you have to earn more before moving into a higher bracket. Under the old tax code, for example, a married couple earning $250,000 would be in the 33 percent bracket. Under the new law, that same couple would be in the 24 percent bracket. A single individual earning $80,000 would be in the 28 percent bracket under the old law but is now in the 22 percent bracket.2 Itemized Deduction Changes As mentioned, the new tax law increased the standard deduction amounts. However, those increases came at the expense of many itemized deductions. The new law eliminated or reduced many common deductions, including those for state and local taxes, real estate taxes, mortgage and home equity loan interest, and even fees to accountants and other advisers. However, there could be other opportunities to boost your itemized deductions above the standard deduction level. Charitable donations are still deductible, as are medical expenses assuming they exceed the 7.5 percent threshold. If you’re a business owner, you can deduct many of your expenses, including up to 20 percent of your income assuming you meet earnings thresholds.3 Ready to develop your tax strategy? Let’s connect soon and talk about taxes and your entire financial picture. Contact us today at Heritage Financial North. We can help you analyze your needs and goals and implement a plan. 1https://www.nerdwallet.com/blog/taxes/standard-deduction/ 2https://www.hrblock.com/tax-center/irs/tax-reform/new-tax-brackets/ 3https://money.usnews.com/investing/investing-101/articles/know-these-6-federal-tax-changes-to-avoid-a-surprise-in-2019 Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18326 - 2018/12/26 The new year is almost upon us. If you’re like many people, that means it’s time for resolutions. What’s your plan for 2019? Do you want to start exercising or maybe improve your diet? Do you want to take up a new hobby or even further your education? When you’re thinking about resolutions, don’t forget about retirement planning. You could make 2019 the year you finally take back control of your planning and get your retirement back on track. Below are a few planning steps to consider: Maximize contributions to your IRA. Do you contribute to an IRA? If not, now may be the time to start. An IRA can be a powerful savings tool because it offers a variety of tax benefits. In a traditional IRA, the contribution may be deductible, depending on your income. In a Roth IRA, the contribution isn’t deductible, but distributions are tax-free if you’re over age 59½. In both accounts, your earnings accumulate tax-deferred as long as the funds stay in the account. That tax deferral may help you accumulate assets faster than you would in a similar taxable account. In 2019, IRA contribution limits increase to $6,000. You can contribute an extra $1,000 if you’re age 50 or older.1 You don’t have to contribute the maximum, though. Even a modest regular contribution can have an impact. Consider setting up an automatic contribution to an IRA. If you already have an IRA, look at your budget and see how you can increase your contributions. Increase contributions to your qualified retirement plan. If you’re like many Americans, you probably participate in an employer-sponsored retirement plan, such as a 401(k) or 403(b). If so, you may want to increase your contributions. Even a gradual increase can have a big impact on your retirement savings. Your contributions grow tax-deferred, and they may even earn a matching contribution from your employer. Those two factors make an employer-sponsored plan a powerful savings vehicle. In 2019 you can contribute up to $19,000 to a 401(k) or 403(b). If you’re age 50 or older, you can contribute an additional $6,000 in catch-up contributions.2 Not everyone can afford to put $19,000 per year into a retirement plan, though. You could resolve to simply increase your contributions by 1 percent. The following year, you could raise them by another percentage point. Over time, those increased contributions could compound to a sizable amount. Create a stream of guaranteed* retirement income. Today’s retirees face challenges that previous generations didn’t face. There was a time when retirees could count on a company pension and Social Security to fund their retirement. Today, retirees have to shoulder much of that burden with their own savings. Distributions from savings may not be guaranteed*. If you spend too much too soon, or if your investments decline in value, there’s a risk you could outlive your money. If you’re approaching retirement, you may want to take time in 2019 to guarantee* a portion of your future income. An annuity can be a valuable tool for creating a guaranteed* lifetime income stream that isn’t affected by market volatility. You get a reliable stream of income that lasts no matter how long you live. Ready to take control of your retirement strategy in 2019? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits 2https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000 *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18280 - 2018/11/28
The holiday season is here. For many Americans, that means giving to their favorite charitable cause. In fact, a recent survey found that 63 percent of Americans donate to a charity in the last two weeks of December. More than 75 percent of those donations go to either churches, poverty-related charities or children’s causes.1 If you’re passionate about supporting charity, you may be looking for ways to make a lasting impact. Perhaps you would like to use a portion of your assets to leave a charitable legacy that will help others for years or decades to come. A charitable remainder trust is an effective tool that can help you leave an impactful, charitable legacy and also meet some important financial objectives. You can use a charitable remainder trust to generate lifetime income and also to minimize tax exposure. Is a charitable remainder trust right for you? That depends on your unique goals, needs and objectives. However, it may be worth considering as part of your overall legacy strategy. What is a charitable trust? A charitable remainder trust is a legal document that facilitates the sale and transfer of your assets to a charitable organization. It’s usually used in conjunction with assets that have appreciated significantly in value over time and could create a sizable tax liability. You start by identifying the charity and creating the trust document. You then transfer ownership of specific assets from yourself to the trust. The trust can sell the assets and use those funds to create a diversified portfolio that’s aligned with your needs and goals. The trust then pays you income over a set period of time, usually the remainder of your life. Upon your death, the trust assets are transferred to the designated charity according to your instructions. There are several tax benefits to this type of structure. First, the trust isn’t taxed on the sale of the assets because they are ultimately intended for charity. That means you could place a highly appreciated asset in the trust and minimize your tax exposure. Second, you also may realize a current income tax deduction for contributing assets to the trust, as they’re considered a charitable donation. A tax professional can help you determine exactly how you might benefit. How does the trust generate income? Remember, the trust doesn’t transfer your assets to the charity until after you pass away. In the meantime, the trust pays you annual income. The amount of income depends on the type of trust you establish. You can set up your trust to pay you a level income amount every year. The income amount stays the same regardless of what happens to the value of the trust assets. This type of arrangement can offer predictability, but there can also be drawbacks. If the trust assets decline in value, your income could become problematic and may deplete the trust value. An alternative approach is to take a fixed percentage of the trust value each year as income. The trust value is reassessed at the beginning of every year, and your income is adjusted accordingly. Your income may not be predictable from year to year, but it will stay proportionate to the overall value of the trust. If the trust value increases, so will your income. if the value declines, your income will decline, too. What drawbacks should you consider? A charitable remainder trust isn’t for everyone. One of the biggest drawbacks is that it’s irrevocable. That means you can’t get the assets back out of the trust, even if you change your mind after the fact. Before you establish a charitable trust, make sure you won’t need the assets in the future. There are a number of risks that could arise through retirement, including the need for long-term care or costly medical care. Develop a plan to address those risks before donating assets to charity. It’s possible that there may be other charitable actions you could take that are more appropriate for your needs and goals. A financial professional can help you develop the right strategy for your objectives. Ready to develop your charitable plan? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation. 1https://www.worldvision.org/about-us/media-center/survey-majority-americans-donate-charity-end-december Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18276 - 2018/11/27 Social Security recently announced some good news for retirees. The cost-of-living adjustment (COLA) in 2019 will be the highest in seven years. Next year’s benefit increase of 2.8 percent is significantly higher than 2018’s 2 percent raise. In fact, other than 2012, there hasn’t been an increase of more than 2 percent in the past 10 years. There weren’t any COLA increases in 2010, 2011 or 2016.1 The 2019 COLA is a positive development for seniors as it means that they get a much needed pay increase. The purpose of COLAs is to help retirees keep up with inflation and afford increasing prices for things like food, energy, housing and more. Social Security bases its COLAs on a broad version of the consumer price index (CPI).1 COLA Doesn’t Always Match Retiree Inflation An increase in Social Security benefits is always good news. However, Social Security benefit increases usually aren’t enough to help most retirees keep pace with inflation. Consider that Social Security probably isn’t your primary form of income. Ir likely makes up just a portion of your overall cash flow. Remember, the COLA only applies to Social Security benefits; not all your income. Many people also debate whether the CPI that is used by Social Security is appropriate for retirees. Social Security uses the CPI-W, or consumer price index for urban workers, to estimate COLA.1 The problem is that the CPI-W tracks costs for workers, not for seniors. Many retirees face different costs than the average worker faces. For instance, retirees may have increased health care and housing costs. The CPI-W doesn’t weight those areas heavily, so it may not be an accurate gauge for retirees. How to Keep Pace With Inflation Inflation is inevitable throughout a long retirement, and it can have a big impact on your standard of living. Even a moderate amount of inflation can cause prices to double over several decades. To maintain your lifestyle, you’ll need to do more than rely on Social Security benefit increases. You may want to talk to a financial professional about strategies to increase your income over time. For example, you can use an annuity to generate a guaranteed* income stream. Often, the annuity is guaranteed* for life, regardless of market performance. You also may want to look at long-term care insurance with an inflation protection rider. Long-term care can be a sizable expense, and it usually isn’t covered by Medicare. Also, costs are rising every year, often at a higher rate than inflation. An insurance policy in which the benefits are aligned with inflation could help you keep up with rising costs. Ready to develop your retirement inflation strategy? Let’s talk about it. Contact us at Heritage Financial North today. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation. 1https://www.ssa.gov/cola/ *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18149 - 2018/10/17 Planning to retire soon? If so, you may want to consider long-term care. Research from the U.S. Department of Health and Human Services suggests that long-term care will be a reality for many of today’s retirees. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives. While a third of all seniors will never need care, 20 percent will need it for more than five years.1 Long-term care is a broad term and it is often used to describe many different services. Generally, though, long-term care is extended assistance with basic living activities such as cleaning, bathing, eating and more. While it’s often provided in an assisted living facility, it can also be provided in your home by a health aide or even family. Many people people try to opt for home care because they want to be in their home but also because they believe home care is more affordable. That’s not always the case. A Genworth study found that a room in an extended living facility and a full-time, in-home health aide both cost $4,000 per month on average in 2018.2 Considering that care is often needed for a year or more, it’s easy to see how costly long-term care can be. Unfortunately, many seniors fail to plan for long-term care because they think that they won’t need it or that they can simply rely on family. Many of these assumptions are born from a misunderstanding of why long-term care is needed. Below are descriptions of some of the major health issues that can cause a long-term care need and what kind of care is often required. With a better understanding of the threat, you can implement a plan and a funding strategy. Causes of Long-Term Care By far, the largest drivers of long-term care are cognitive issues like Alzheimer’s. Nearly 25 percent of those who need care do so because of Alzheimer’s.3 The risk of suffering Alzheimer’s is substantial. According to the Alzheimer’s Association, your risk of developing the disease doubles every five years after age 65. By age 85, almost one-third of seniors are at risk.3 Alzheimer’s may be the most common reason why people need long-term care, but it’s not the only reason. Nearly 35 percent of those who need care do so because they are suffering from complications related to a stroke, injury, circulation issues, or cancer. Nervous system issues and respiratory issues are also big factors.4 Even if you don’t get Alzheimer’s, you still may need care. Also, keep in mind that many of these health challenges are progressive and incurable. You could live for years with Alzheimer’s, cancer, heart disease or any of the other issues. They’re likely to intensify as you get older. While you may be able to rely on family and friends in the early stages, that may not be the case as the disease progresses. Types of Care The type of care you receive also factors into the total cost. Not all care is the same. Many people believe that Medicare will cover their long-term care needs. Medicare may pay for some of the care, but that usually only happens if it involves skilled nursing and is focused on recovery and treatment. Recovery usually isn’t the goal of long-term care. Very often, those who need care are beyond the point of recovery. While there may be medication involved, much of long-term care is focused on custodial assistance and lifestyle support. Long-term care aides often help with things like eating, bathing, mobility, incontinence, and basic medication needs. Those activities usually don’t fall under the umbrella of skilled nursing, which means the care is unlikely to be covered by Medicare. If you don’t have a long-term care funding strategy, now may be the time to develop one. Long-term care insurance could be an effective tool to minimize your risk and limit your out-of-pocket costs. Ready to develop your long-term care strategy? Contact us today at Heritage Financial North. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html 2https://www.genworth.com/aging-and-you/finances/cost-of-care.html 3https://www.alz.org/alzheimers-dementia/what-is-alzheimers/risk-factors 4http://www.aaltci.org/news/long-term-care-insurance-news/top-reasons-for-long-term-care-insurance-claim-alzheimers-cancer Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18148 - 2018/10/17 Do you have a plan to manage incapacitation? It’s a risk that could be reality for many retirees. Incapacitation is the inability to make or communicate your own decisions. It’s often caused by cognitive disorders like Alzheimer’s, but people also become incapacitated because of strokes, cancer or other conditions. Incapacitation may not seem like a high planning priority, but it’s too important to ignore. If you don’t have a plan, your family could face legal and financial challenges during your incapacitation. You may have people making decisions on your behalf whose wishes don’t necessarily align with your own. Below are a few different costs and consequences that can come from incapacitation if you don’t have a plan in place. Incapacitation may not be a likely scenario, but it is possible, especially if you’re entering retirement. Now may be the time to develop a strategy. Financial One of the biggest challenges of incapacitations is that it limits your ability to manage your finances. The bills don’t stop just because you’re struggling with medical problems. If you’re married, your spouse will likely be able to handle bill payments, investment management and more. However, he or she could have trouble with accounts that are only in your name. If you’re not married, there could be more complicated issues. A grown child or other family member may need to manage your bills and income. You may not want that person delving into your financial affairs. It’s also possible that the person may be someone who doesn’t have your best interests at heart. You can minimize these risks in a number of ways. One is to utilize joint accounts whenever possible, especially if you’re married. At a minimum, keep your spouse informed about your various accounts, bills and income sources. You also could put certain assets in a living trust. You’d name yourself as trustee and another person as successor trustee. If you ever become incapacitated, your successor trustee takes over management of the trust assets. Legal There could also be legal ramifications to your incapacitation. Even if you’re covered by health insurance, many insurers may not agree to coverage for certain procedures without consent from the primary party. Obviously, if you’re incapacitated, you can’t provide consent or guidance. In that case, the insurer may wish for someone to become your guardian or power of attorney. That usually requires legal documents, court hearings and more. It can be especially complex if your family can’t agree on who should fill that role. Again, you can eliminate this confusion with a little advanced planning. A power of attorney is a document that designates another individual as your decision-maker in the event you become incapacitated. That way you know who is making decisions on your behalf, and you can communicate your wishes to that person. Personal The personal impact of incapacitation is often the most significant cost for families. Your health issues could create an emotional and traumatic period for your family. They could be struggling with logistical challenges, health care costs, and stress about your wellbeing. It’s possible that your family members may not agree on the best course of treatment or how your finances should be managed. Multiple people may feel that they should be in charge. Because the issue is already emotional, it’s not difficult for these conflicts to become heated. Probably the last thing you want is for your loved ones to fight or argue because of your health issues. Incapacitation planning can minimize this risk and provide clear instructions to your loved ones. That way they can spend less time arguing about decisions and more time supporting you and one another. Ready to develop your incapacitation plan? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18089 – 2018/10/2 A comprehensive financial plan takes into account all aspects of your financial life, highlighting how one part — and even just one decision — can affect the others. Think of it as a money ecosystem with a “butterfly effect.” Such a plan illuminates your entire financial system, highlighting interactions and allowing you to make informed decisions. The ABCs of a Comprehensive Financial PlanComprehensive financial plans are characterized by clarity and prioritization. One conundrum many people struggle with is funding conflicting goals that overlap. A great example is retirement and saving for a child’s college education. In this type of situation, questions that typically spring to mind include:
Read the rest of my article here in the leader of personal finance news and business forecasting magazine Kiplingers. Are you considering your legacy and how to distribute your assets after you pass away? Perhaps you want to fund your grandchildren’s education or help your grown children get started on their retirement nest egg. Maybe you have assets that hold sentimental value that you would like to distribute to specific relatives. An estate plan can help you accomplish these goals and more. Your estate plan should prioritize your objectives and offer a strategy. It should also identify risks and challenges, such as taxes, end-of-life costs and even probate expenses. One potential risk is the existence of debt. Many retirees try to minimize debt before they end their career. However, that’s not always possible. Unexpected costs always arise, even in retirement. You could have credit card debt, mortgages, medical bills and more. Any leftover debt could reduce the amount of assets that go to your heirs. When you pass away, many of your assets will likely pass through a process called probate. That’s the legal process for settling an estate, and it often includes notifying heirs, liquidating assets, distributing inheritances and other tasks. Paying final debts is an important part of probate. Your creditors could actually file liens and judgments against your estate, tying up your assets and restricting the distribution of your funds. Fortunately, there are steps you can take to minimize the burden of your debt and protect your legacy. Below are three steps to consider. If you have debt and are worried about its impact on your estate, consider implementing these action items in your estate plan. Reduce your debt levels. Perhaps the most effective way to limit the impact of debt on your estate is to take steps to reduce your debt while you’re alive. For example, if you have credit card debt, consider developing a strategy to pay it off. If you owe back taxes and penalties to the IRS, contact the agency to negotiate a payoff plan. Also, think about loans on which you may be a co-signer. For example, did you co-sign your children’s student loans? If so, the lender could demand that the balance be paid after your death. You may want to work with your child and the lender to see if you can be removed as a co-signer so the balance doesn’t hold up your estate distribution. Provide liquidity to your estate. Sometimes it’s not the debt that causes estate problems, but rather the illiquidity in the estate. An individual may pass away with medical debt, credit card debt or other loans. The person’s assets may be illiquid property, like real estate or collectibles. There may be few liquid assets available, such as cash or investments. In these cases, the estate executor may be forced to sell assets to generate cash to pay the debt. That can be especially difficult for heirs if the assets have sentimental value. You can minimize this risk by creating liquidity for your estate. Consider using life insurance as a tool to leave cash for your heirs. If you can’t qualify for life insurance, work to create a reserve of cash. Protect your assets from creditors. You also may want to utilize tools that offer some protection against creditor action. Many of these tools are beneficiary-designated products such as life insurance, annuities, IRAs and trusts. Depending on your state laws, these types of assets flow directly to the named beneficiaries without going through probate. You may want to maximize the assets in these accounts so your heirs can receive their distributions quickly, without waiting for your executor to settle outstanding debts. Ready to protect your loved ones? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and create a strategy. Let’s connect soon and start the conversation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18086 – 2018/10/1 Do you want to leave a legacy for your spouse, children or grandchildren? If so, permanent life insurance may be the right financial tool for you. As the name implies, permanent life insurance provides coverage for life, assuming you meet the required premiums each year. It also accumulates tax-deferred cash value, which you may be able to use as a supplemental reserve in the future. If you’ve never considered permanent insurance before, you may be overwhelmed by the choices available. There are permanent policies designed to meet a wide range of needs and budgets. Not all policies are right for all situations. Below are descriptions of the three most common types of permanent policies. Before you commit to a policy, do your due diligence and make sure it’s right for your objectives. A financial professional can also help you find the right policy for you. Whole Life Whole life is a type of permanent policy in which your death benefit and premium amount remain constant for the duration of the coverage. As long as you make the required premium payments, the policy stays in force and you are covered for life. In each premium payment, a portion goes toward the cost of insurance, and another portion goes into a cash value account. The insurance company then pays annual dividends into the cash value, and those funds accumulate on a tax-deferred basis. The dividends may fluctuate from year to year, so be sure to look at the insurer’s dividend history. However, your cash value is not exposed to market risk and will never decrease. Universal Life Universal life insurance is similar to whole life, but there are a few important differences. Like whole life, universal life has a set premium and death benefit, and it also has a tax-deferred cash value account with no downside risk. One big difference, though, is that you have the power to adjust your premium or death benefit in a universal life policy. If you’ve accumulated enough cash value, you also may be able to skip premium payments in certain years. That flexibility could be helpful as your needs and goals change over time. Also, universal life policies offer interest-based accumulation rather than dividend payments. Your interest rate could fluctuate over time. The policy will offer a guaranteed* minimum interest rate, however, so you’ll always know the least amount of interest you will earn in any given year. Variable Universal Life Variable universal life (VUL) offers death benefit protection but also unique growth opportunity. Your policy has a death benefit and premium, similar to universal and whole life policies. However, you have the option to invest your cash value in subaccounts, which are similar to mutual funds. Because they’re invested in financial markets, VUL subaccounts often allow for greater growth potential than is available in whole life or universal life policies. However, return and risk often go hand in hand. Your subaccount values could decrease, and you may have to make additional premium payments to support the policy. Ready to find the right permanent life insurance policy for your goals? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and choose the right policy. Let’s connect soon and start the conversation. *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 17963 – 2018/9/4 |
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