TAKING SMALL LEAPS
2016 is a leap year. An extra day added so the calendar can refresh itself. It may also be a great time to take some personal refreshing leaps. Here are some suggestions:
- Take a trip—Leap to a new environment by plane, train, boat, car, bus, or even bicycle. It can be long or short, costly or inexpensive. Just see, hear, touch, smell, taste the newness. Refresh your soul.
- Pull out the old board games—Have gatherings with family or friends and play games you haven’t played in many years. Maybe even leap frog! Refresh your attitude.
Below are some refreshing money ideas. Why not leap into further discovery of how any of these may be refreshing to you.
OUT-OF-THE-BOX THINKING ABOUT MONEY
1. The clock keeps ticking on filing and suspending for Social Security recipients born before April 30, 1950. If you were born before that date and have not started collecting Social Security or file and suspended, then you should consider meeting with an advisor who is knowledgeable in this arena, and discuss the optimal time you should start collecting your pension from the government. Making a wrong decision could mean as much as two hundred thousand dollars! This is not chump change.
2. Have you crossed the line? You are probably familiar with the acronym DOB, but are you familiar with DOU? That is the day of un-insurability. This is the term used for when you apply for life, disability or long-term care insurance, and in some cases health insurance, and are denied coverage. The insurance company is saying. “We looked at your health history, and we do not want to take the risk.” It is important to purchase these policies prior to DOU. All insurance companies do appraisals on the applicants, and not everyone qualifies for the coverage. All of us will face our “DOU” at some point in our lives. It is important to secure coverage before it occurs.
3. Are you part of the sandwich generation? You have kids at home and are also looking after aging parents. The population is aging, and many families are being hit with expenses on both sides. Consider purchasing long term-care insurance for your parents. There are several long-term care products on the market that can fill this need. The insurance is for the survivors not the parent needing the care. Not having the coverage could put an enormous burden on the family both emotionally and financially.
4. Long-term care is drastically changing and many insurance companies have exited the market. There were approximately 115 companies writing long-term care insurance about 20 years ago. Today there are only seven carriers. For many people, long-term care planning is the missing piece for protecting their financial future.
5. The government should mandate the stamping of “GU” on all the IRA and 401K statements mailed. The “GU” stands for the “government and you.” The statements arrive at home, but there is no footnote or statement stating that the actual money you will receive will be after your tax liability. The government will be getting their share when you start your withdrawals. Uncle Sam has a big stake in your retirement assets, and he also will determine your share based on the tax code at the time of withdrawals.
6. What are the best financial products in the market? They are the ones that produce the most benefits, and create the least amount of taxation. Three things you should consider when looking at the taxation of these instruments:
- Has the money already been taxed before you purchase the product or instrument?
- What happens once the money is inside the account? Is it taxed, postponed or tax free?
- What happens when you decide to make withdrawals? Is it taxed at ordinary income, capital gain rates, or is it tax free?
The Health Savings account combined with a high deductible health plan is the only financial product that contains all three of these benefits. Don’t overlook its value.
7. More rates continue to remain near record lows. A 30 year fixed rate remains at or below 4%. Remember, when you purchase a fixed rate mortgage the payment is fixed for the duration of the loan. The real loan rate if you qualify for a mortgage interest deduction and you are in the 25% federal income bracket, is just 3% assuming the loan rate is 4%.
8. Are you having this conversation with your Banker in this low interest rate environment? “Mr. Banker, here is an extra $100 principal payment on my mortgage. I am planning on sending this to you each month. Don’t pay me any interest on the extra money I am sending. I have been taught that having a mortgage is a bad thing although I have enough cash sitting in a side fund to pay satisfy the mortgage with a stroke of a pen. I will pay you an additional fee if I need any of the money back in the future. I hope I can qualify at that time for the monies. And, thanks for the toaster.”
9. Is it more important to focus on how much money you have on hand or the rate of return on assets? Ask a 75 year-old who has an active life, and see the response you get. Our lives are governed by cash flow not rate of return. It is important our money lasts as long as we do, and to have sufficient cash on hand to handle our lifestyle expenses. Liquidity, use, and control of our money are paramount.
10. Don’t under estimate the value of Permanent Life Insurance according to many top-notch Banks! The latest BOLI (Bank Owned Life Insurance) figures came out. And they’re up; A lot.
According to the latest research, BOLI grew 4% from the year before to $149.6 billion in total assets. For banks with less than $10 billion in assets, the BOLI growth rate was 7.1%. So, why do banks use BOLI for their own assets? Answer: for the very same reasons we recommend it to our clients. According to BankDirector.com:
- It provides tax advantaged investment income not available with traditional bank investments, as well as attractive yields compared to alternative investments of a similar risk and duration.
- The growth in the cash value of the BOLI policies generates income for the bank and its shareholders.
- The bank receives the life insurance proceeds tax-free upon the death of an insured employee who elected to participate in the plan.
- The bank may, at its discretion, enhance the benefits it provides to the insured employees.
- Thus, each year, an increasing percentage of U.S. banks hold BOLI assets and use the income to help offset and recover employee benefit expenses such as healthcare and retirement.
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