Serving The Salisbury MD & Harrington DE Area
For many years people have used life insurance as the foundation for their financial protection. This foundation can be built to support strategies such as income replacement, educational funding, mortgage protection, and wealth transfer to name a few. With various types, coverage amounts, and riders, today’s policy can be tailored to meet specific needs. Business owners can use life insurance to protect against the financial burden from the loss of a key employee or to provide the funding for a buy/sell agreement. Below are three types of life insurance that are available:
Term Life – Term may be the most popular due to its low cost and simplicity. These policies are generally good for 10, 15, 20, or 30 years and pay a death benefit if you die within that period. Term life provides for the ability to purchase a large amount of coverage that is cost effective since it only lasts for a specified amount of time. Term is typically the most effective of all life insurance types.
Think of Maria, a 25 year old nurse that just bought her very first house with a 30 year mortgage. She also has her wedding planned for next year and hopes to have two children by the time she is 30. Term life would be a great solution for Maria to cover her immediate financial needs – loss of income, paying off the mortgage, and providing funds to pay for college.
Whole Life – As its name implies, whole life insurance is intended to last for the whole, or entire, life of the insured. This provides a permanent benefit whether the insured is only weeks old or 70 at the time of issue. Traditional whole life policies will also accumulate a cash value that will grow over time. This value grows tax deferred and is an asset of the policy owner. The cash value can be borrowed as a loan against the policy. The premiums for whole life remain level, and some policies even offer an accelerated premium period so that the policy can be paid in full over a short period of time. An income-tax free death benefit will be paid to beneficiary. The premiums for whole life are greater than term due to a combination of the length of coverage and guaranteed cash value. While it can serve many needs, whole life is a great solution to provide the funds needed for final expenses.
Universal Life – Universal policies, or UL as they are often referred to, can be tailored to meet the needs of the insured. Unlike term and whole life policies that offer fixed benefits, UL’s offer flexibility in various parts of the policy – the guaranteed benefit, length of policy, and premiums paid. As with the other term and whole life, the death benefit of a UL is paid income tax free. Cash accumulation is possible in this type of policy, but unlike whole life it is not guaranteed. Universal life is typically structured to meet one of three needs – permanent death benefit, cash accumulation, or a combination of both. With the help of a trusted agent, you can see if a Universal policy provides the best solution for you and the needs of those you are protecting.
As your personal situations change (i.e., marriage, birth of a child or job promotion), so will your life insurance needs. Care should be taken to ensure this product is suitable for your long-term life insurance needs. You should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and has additional charges for riders that customize a policy to fit your individual needs.
Guarantees and protections are subject to the claims paying ability of the issuing insurance company.
Long Term Care
Long term care insurance (LTC) is designed to pay for some or all of the cost associated with a chronic medical condition, or one that is not likely to improve over time. Coverage will typically begin after there is an inability to perform certain activities of daily living or after a cognitive disorder has been developed. Health insurance does not cover long term care needs, Medicare can pay under certain conditions but only for a very limited amount of time, and Medicaid is only for the impoverished. These reasons intensify the need to evaluate ones need for long term care insurance. The savings and retirement fund that has built up over decades can be depleted in a short amount of time without a proper plan in place. Aside from providing the funds to offset the care provided, long term care insurance limits the obligation of family members to be caregivers. Policies will now allow for care to be provided in one of several facilities, including the insureds own home, adult day care, nursing home, and hospice.
Today’s market offers coverage is several ways, a few of which are listed below:
- Traditional – this type of policy is the original that was designed to specifically provide benefits for long term care coverage
- Linked Benefit – using a single premium or a series of smaller deposits, a predetermined amount of coverage is provided to cover the potential cost of care. If care is not needed, the premiums may be returned to the beneficiary in the form of a death benefit
- LTC Rider – a rider is placed on a life insurance policy to allow the insured the ability to take early distributions of the death benefit to cover LTC cost. Once the death benefit reaches zero, payments stop, and any amount not paid as LTC will be paid to the beneficiary as originally designedSince each policy will contain its own eligibility criteria and may limit what/how much benefit can be provided, we recommend that you contact us to review each option to see which one will be the best fit for your situation. There are also limits on the amount of benefit that can be provided in one day, and any amount received in excess of that limit may be taxable.
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. Policy guarantees and benefits are not backed by the broker/dealer and/or insurance agency selling the policy, nor by any of their affiliates, and none of them makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company.
In it’s original form, an annuity is designed to provide benefits that you cannot outlive, or lifetime income. A deposit(s) is made with an insurance company – the accumulation phase – and at a later date the accumulated account can be converted into period payments – the annuitization phase – for the life of the owner. Annuitization is not an obligation of the account owner, so in essence an account could remain in the accumulation phase indefinitely.
Several annuity platforms exist for deposits to be made in:
- Fixed – Deposits are credited with a fixed interest rate
- Fixed Indexed – Returns are based on the performance of a specified index, such as the S&P 500
- Variable – You can pick from a selection of investments, or sub-accounts, and the performance of the investment will determine your returns
- Immediate – Income will begin after a single lump-sum deposit is madeDeposits in annuities are designed to be long term investments that can help supplement retirement income or increase wealth. Annuities can be complex and fees may apply, which is why we recommend that you work only with a trusted advisor and understand the contract before investing.
Before investing, understand that annuities are not insured by the FDIC, NCUSIF or any other federal government agency, and are not deposits or obligations of, guaranteed by, or insured by the depository institution where offered or any of affiliates. Annuities that involve investment risk may lose value and are designed for long-term retirement goals. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% tax penalty.
You have probably heard the phrase “Don’t put all of your eggs in one basket” right? That is exactly what mutual funds are designed to do – spread your investment among several companies, sectors, and asset classes. Mutual funds use professional fund managers that monitor the performance of the holdings in a mutual fund and make changes as necessary to stay in line with the objective of the fund. Mutual funds can also be designed to target a retirement date, so that as you approach the date, the fund will rebalance itself accordingly.
Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.
A 401(k) plan is a retirement savings account that allows an employee to divert a portion of their salary into long-term investments. The employer may match the employee’s contribution up to a limit. A 401(k) is a qualified retirement plan, meaning it is eligible for special tax benefits under IRS guidelines.
Traditional and Roth IRA
Go ahead and treat yourself to the retirement that you have been dreaming of. Investing in an IRA is another way that you can achieve your goals. The two most popular IRA’s are Traditional and Roth.
- Traditional – Accounts can be opened by anyone that has earned income up to the age of 70 ½. All of the moneys in the account are “pre-tax” dollars, meaning that when you withdraw funds they will be taxable at that point. You are able to contribute on an annual basis using after-tax dollars and then claim the contribution on your next tax return. Currently the annual contribution limit is $5500. For those over the age of 50, catch-up contributions are allowed bringing the annual limit to $6500. A traditional IRA is subject to Required Minimum Distributions once you have reached the age of 70 ½, and distributions taken prior to age 59 ½ may be penalized as an early withdrawal.
- Roth – Roth IRA’s are funded using after-tax dollars and no deductions are allowed when filing taxes. The benefit to a Roth is that all earnings will grow free of income tax. The contribution limits of a Roth are the same as above – $5500 per year and $6500 per year for age 50 and over. Withdrawals will be subject to penalties on earnings if taken prior to age 59 ½ and accounts that are less than 5 years old. There are no age based distributions required with a Roth IRA.
Federal income tax laws are complex and subject to change. Neither Nationwide nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.Financially preparing to send a child to college can understandably be a stressful process. 529 savings plans were developed to offer tax advantages to help reduce the burden of paying for a child’s education. These plans will allow you to invest the money you are saving for college in an account that will grow free of taxes on all the earnings. As a quick example – if you invest $50,000 over 10 years that grows to be worth $75,000, the $25,000 will not be taxed if it is used for qualified expenses1. Anyone can contribute to an account including parents, grandparents, friends, or other family, although $14,000 per year per child is the most that any one person can contribute. Contributions are used to purchase mutual funds. 529 funds can be used to pay for most institutions with very few exceptions. The list of qualified expenses is vast so always check to be sure that what you are purchasing qualifies, but does include room, board, and tuition. Any funds not used or spent on ineligible items will be subject to penalties.
Some states do offer tax advantages to residents of that state for investing in a plan that is sponsored by that state. Be sure to check with an advisor to see what is offered where you live.
¹This is example is for illustrative purposes only and is not a result of any specific situation.Providing your employees with quality benefits creates a more healthy and productive workforce. For the typical employee, their largest source of retirement funds can be accumulated in a plan that they participate in at work. There are several benefits to establishing a plan for your business:
- Great ability to attract/retain employees
- Help employees prepare for retirement
- Help business owners prepare for retirement
- Contributions are tax-deferred
- Employers matching contributions are deductible to the employerThere are several plan types available to match the needs of a single employee business to one with several thousand employees. Typical plan types are 401(k), 403(b), Profit-Sharing, SIMPLE, and SEP. It will vary by type of plan, but in a standard 401(k) plan there are four parties.
- Plan Sponsor – the employer
- Financial advisor –Provides employee education and conduct plan reviews
- Recordkeeper – Provides access to investments, fiduciary support, and provides participant account statements, as well as on-line tools for account management
- Third-Party Administrator – Provides plan design, handles IRS filings and compliance issues, administers and processes participant loans
No two businesses are the same, and their retirement plans should not be either. Let us consult with you to tailor a plan to your goals.
Federal income tax laws are complex and subject to change. Neither Nationwide nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.Another effective way to keep your employees happy is with a plan that can provide benefits to them through a single business policy. A policy is issued to the business as a Master policy and provides coverage to all eligible employees. Depending on the coverage item, it may even cover their family. Since these plans are issued on a group level, the cost is considerably lower than if it was issued individually. Some benefits can be provided by the employer, and others may be voluntary so that employees can choose what they would like to have.
Employees benefits can provide:
- Life insurance
- Accidental death and dismemberment
- Short term disability
- Long term disability
- VisionWe will work with you to develop a benefits package tailored to your business and employees that you both will feel secure about.
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