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on 17 August, 2017

roth ira vs life insurance

In a few ways, a Roth IRA and life insurance share some similarities. They both receive tax-advantaged treatment in the IRS code. They enable efficient wealth transfers from one generation to another, and they can provide a tax-free legacy. But despite these similarities, Roth IRAs and life insurance are very different.

For one, a Roth IRA is a non-qualified retirement plan while life insurance is, well, just that – an insurance product. Yet some people have been asking which of these options might be the “better” retirement planning vehicle.

However, it isn’t an “either-or” question, but rather a matter of what makes sense for each person based on their individual needs, goals, and overall financial picture. That may include planning situations in which a life insurance policy is used as a tax-advantaged growth and income vehicle alongside a Roth IRA. And maybe even some other retirement accounts!

Nevertheless, it’s important to understand the differences between a Roth IRA and life insurance – including ways the rules may apply differently to them. With that said, here's a quick look at these two options.

on 16 August, 2017

  what is safe money img

“What is safe money?” That is a question that many Americans are asking. And it’s not surprising why. From retirement presentations and dinner seminars to weekend financial talk shows and radio commercials, safe money is a common theme in many public forums.

Generally speaking, a broad definition of safe money is “the money you can’t afford to lose.” Since everyone has different needs, goals, and situations, this concept means different things to every person. For some, safe money could be lifelong savings they have built up and need to preserve. Or it might be accumulated wealth that needs to be protected from risk, as it will be a source of retirement income.

For others, it could be a stockpile of money they will need at a certain time, like funding their children’s college education, paying off the mortgage, or buying a luxury item for which they saved a long time. Yet for some other Americans, safe money might be a future account balance – a sum of money that they want to grow safely and efficiently.

So, the answer to “what is safe money?” is it depends. Your own needs, goals, and situation provide the financial context of its meaning. But boiling down to the essentials, safe money is about security and protection… money that is safe and as free from unnecessary risk as is possible.

in Annuity
on 15 August, 2017

how long accumulation period last for immediate annuities

The short answer? Immediate annuities actually don’t come with an accumulation period. Once you have paid premium into the contract – in most cases a one-time lump – the insurance carrier will start income payments nearly right away. Your income payouts may start anywhere from 1-12 months after the premium payment date.

When this starting date is depends on your contract and frequency of payments. You may receive income on a monthly, quarterly, or even annual basis. Many contract holders opt for a monthly payment schedule.   

The insurance carrier puts the entire sum of your premium into a pool of other premiums it has been paid. Then it allocates these premiums into conservative, low-risk investments. In return, the carrier pledges to make payments to you – or someone you specify – for a specified period of time, which can be for the rest of your life. The income you receive includes a fixed sum and interest paid on a continual basis.  

Therefore, immediate annuities don’t have an accumulation period – there is little time between when you pay premium and start receiving income. Many immediate annuity contracts start income payments just a month after the day you bought your annuity.

Where accumulation periods do apply is with deferred annuities. In these contracts, your money will be left alone for a number of years before you start taking income. Let’s get into more details below.

on 14 August, 2017

protect wealth academy

Brent Meyer, President and Founder of SafeMoney.com, recently sat down with Protect Wealth Academy (PWA). PWA is an organization which teaches investors how to protect their assets, minimize taxes, and create wealth. During the conversation, they talked about retirement planning, why it's critical to plan for a long retirement lifespan, as well as growth, income, and protection strategies using guaranteed insurance contracts.

You can read the interview in full here.

in Annuity
on 10 August, 2017

annuity options explained master

Are you considering different annuity options for your retirement portfolio? An annuity is a type of insurance product, purchased from a life insurance company and/or an annuity company. Annuities are popular retirement options due to the safety they offer for your money, the potential for tax-deferred growth, and their reliability for giving permanent, lifelong income.

That being said, sometimes it can be confusing when you try to make sense of different annuity types, contract features, benefits, and downsides. Since you would commit a sum of your money to an annuity contract for a period of time, it’s prudent to do research and develop an understanding of your annuity options before committing to any financial decision. Here is a short guide to help you get started on understanding the different annuity options.

on 09 August, 2017

 

longevity retirement planning

A number of recent studies indicate that today’s Americans have a higher life expectancy compared to previous generations. The Social Security Administration suggests that after reaching the standard age of retirement, 65, U.S. men and women may anticipate living at least a couple of decades more.            

There is no denying the fact that a longer life is a reason to celebrate. However, this increased longevity certainly adds new challenges in the process of retirement planning. While living a longer life is a worthy milestone for most, whether it will be enjoyable is largely based on the question of whether its quality is high. So, it’s prudent to pay careful attention to longevity risk in retirement planning – that way you are well-prepared for the uncertainty of potentially spending decades in your post-work life stage.

in Annuity
on 08 August, 2017

Is an Annuity Death Benefit Taxable

The proceeds from an annuity death benefit are taxable when they are received by the beneficiary. In the case where the recipient is a surviving spouse, he or she can initiate certain measures to defer the payment or taxes on the amount received. In other instances where the recipient is not the spouse, the recipient will have to pay taxes on the money he or she receives from the annuity. Depending on who the beneficiary is, these funds may be subject to estate taxes as well.  

Before deep diving into this, it may be useful to have a clear understanding of what an annuity is. A simple way to think of an annuity is to refer to it as an insurance product that offers a certain income benefit, backed by contractual guarantees. It can be utilized as a component of a retirement benefit plan. As an individual, you can purchase the annuity by paying a lump-sum premium payment or by making several premium payments over an extended span of time. The annuity premiums are allocated into the annuity contract, and the annuity owner receives benefits as the money grows over time. 

What is an Annuity Death Benefit? 

When the holder of an annuity contract passes away, the money and the death benefit available from the annuity come into play. Many annuity products come with the provision for the annuity holder to include a death benefit for a beneficiary, which they choose while setting up the contract. The policyholder may choose his or her child, spouse, or any other individual as the beneficiary. In some cases, depending on the type of payout option the policyholder chooses, the insurance company may be the beneficiary. It would receive the balance of the money in the contract when the policyholder passes away. This payout option is called “life-only,” and depending on your financial picture it may or may not make sense for your personal situation. You can ask your insurance or financial professional for more details.

in Annuity
on 07 August, 2017

 qualified annuities vs non qualified annuities

While researching your retirement income options, you have probably come across the concept of annuities. Chances are the general idea of annuities is pretty straightforward. But once you start digging deeper and trying to find your way around the different annuity terms and concepts, things may start looking a lot more complex.

If purchasing annuities is on your list of options, then one of the first decisions that you will need to make is whether to opt for a qualified or a non-qualified annuity. One piece of good news is that these terms apply to all of the different types of annuities, including fixed, fixed index, variable, and so on. The primary difference between the two is the type of money you may put in them – after-tax dollars or income that you haven’t yet paid taxes on, pre-tax dollars.

While this is the essential difference between qualified and non-qualified annuities, knowing specifics behind each type can help with making a well-informed decision. So, without further ado, let’s get into the basics of a qualified annuity versus a non-qualified annuity.

in Annuity
on 04 August, 2017

 

what is a market value adjusted annuity

Have you ever heard of a market value adjusted annuity? If you are planning for your retirement income, then you may be considering an annuity as one of your options. Of course, there is a number of possibilities when it comes to purchasing annuities. So, it is important to understand clearly what annuities are so you can make sound financial decisions.

In cases when you are looking for tax deferral and an instrument which can offer safe growth and reliable future income, a fixed annuity can be the perfect option. These typically entail an average contract of seven to twelve years and guarantee a minimum annual interest rate. While the duration of the contract and interest rates are important to consider, you should also take into account whether the annuity is subject to a Market Value Adjustment (MVA). It's common for an MVA to be attached to fixed annuities, and as you probably noticed, it's these contracts with an MVA that are called "market value adjusted annuities."

Before making a decision, it's important to know what a market value adjusted annuity is. So, let's get into it.

on 03 August, 2017

 thrift savings plan distribution options basics img

Editor's Note: This article is not intended to be and should not be used for tax advice. We have published this to be a source of information and for educational purposes only. Please consult with a qualified tax planning professional for guidance with your personal circumstances.

As part of the federal civil service or the uniformed services, you may participate in the Thrift Savings Plan (or TSP). According to the Thrift Savings Fund, there were 4.8 million plan participants and approximately $458 billion in plan assets under management, as of December 2015. But while millions of federal employees rely on the plan, many are confused about their TSP distribution options for retirement.

In retirement, you will need access to your money for income. However, it’s prudent to be aware of all implications before you start taking money from your account. The Thrift Savings Plan has a unique framework for withdrawals. Making a withdrawal before knowing everything involved can greatly affect your future money access options.

Here are some basics on different distribution options you may have with the Thrift Savings Plan.

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