You can't turn on the news today without hearing fresh reminders of the turmoil in the markets and the broader economy. In this uncertain climate, many people are anxious to try to find a safe place for their savings.
Two popular options are certificates of deposit (CDs) and deferred fixed annuities.# Both are considered low-risk vehicles for building wealth; yet they differ in important ways. Which choice is better? The answer depends on your goals and priorities. The following information will help you determine which of these two products is best suited for your needs at this time.
Safety of Principal: Both CDs and deferred fixed annuities are considered low–risk investments. CDs aregenerally issued by banks and, in most cases, are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000* per depositor. Should the bank fail, the FDIC guarantees CDs up to this amount.
Deferred fixed annuities are issued by insurance companies and are not insured by the U.S. government. They are backed by the financial strength of the issuing insurance company, regardless of the amount. Therefore, before purchasing an annuity, you should make sure the issuing insurance company is financially sound. You can determine financial strength by requesting the findings of independent rating companies such as Moody's, A.M. Best, Standard & Poor's and Fitch. These companies evaluate the financial strength of insurance companies and publish ratings that give their assessments of each company.
Short Term vs. Long: If you're saving toward a specific near-term objective — say, a down payment on a car or home — a CD may be the way to go. CDs offer a guaranteed** interest rate over a maturity period that could range from a month to a few years.
Deferred fixed annuities, by contrast, are generally designed for accumulating or protecting retirement savings. In later years, they usually offer more flexibility if you need access to your money.*** They can even be used to provide a legacy for your heirs.
Distribution Options at Maturity: When a CD reaches its maturity, you can take the CD's lump sum value in cash, renew the CD for the same or different maturity period or examine other investment alternatives (such as a deferred fixed annuity).
In a deferred fixed annuity, you may elect to withdraw your money in a lump sum*** or you may want to select a lifetime income option, which provides you with a flow of income that you cannot outlive. You could also elect to let your funds continue to accumulate until a need arises.
Taxes: Federal law treats these two savings options quite differently. If taxes are a concern, a deferred fixed annuity may be the more attractive choice. CD earnings are taxable the year the interest is earned, even if you don't withdraw the money at that time. In contrast, earnings from deferred fixed annuities are not taxed until they're withdrawn, giving you some control over when and how much tax you'll pay. For specific tax advice, consult your tax professional or advisor.
Tuesday, October 27, 2009
Even During Tough Times, Life Insurance Offers Peace of Mind
As you watch the value of your property, home or retirement investment savings struggle in the current economy, you may be wondering about ways to protect your family in the event of an unforeseen event. One option you may not have considered is the purchase of a whole life insurance policy.
It may not be something you’d automatically turn to, but whole life insurance offers guaranteed death benefit protection in addition to multiple tax advantages and flexibility. Owning a whole life policy can be a great financial alternative, not only for the protection of your loved ones but also a financial option for your living needs.
Invest in Your Loved Ones
The primary promise of life insurance, of course, is that your loved ones will be protected in the event of your death. And with a whole life policy, your death benefit is guaranteed,1 whether the payout comes in a matter of years or decades. This is an investment that provides protection in the long-term interests of those you care for most, as well as your own peace of mind.
Invest in Your Future
But, what you may not know is that a whole life insurance policy is much more than protection against the unknown. It also provides you with tax-deferred cash value that accumulates over time. In the event of sudden unforeseen or happily anticipated expenses, it provides a readily available source of funds. And in the long run, it can also supplement your retirement income.2,3
Any kind of financial strategy these days seems fraught with uncertainty, so it’s important to consider carefully what vehicles work best for your own circumstances.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
It may not be something you’d automatically turn to, but whole life insurance offers guaranteed death benefit protection in addition to multiple tax advantages and flexibility. Owning a whole life policy can be a great financial alternative, not only for the protection of your loved ones but also a financial option for your living needs.
Invest in Your Loved Ones
The primary promise of life insurance, of course, is that your loved ones will be protected in the event of your death. And with a whole life policy, your death benefit is guaranteed,1 whether the payout comes in a matter of years or decades. This is an investment that provides protection in the long-term interests of those you care for most, as well as your own peace of mind.
Invest in Your Future
But, what you may not know is that a whole life insurance policy is much more than protection against the unknown. It also provides you with tax-deferred cash value that accumulates over time. In the event of sudden unforeseen or happily anticipated expenses, it provides a readily available source of funds. And in the long run, it can also supplement your retirement income.2,3
Any kind of financial strategy these days seems fraught with uncertainty, so it’s important to consider carefully what vehicles work best for your own circumstances.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
529 Plans Make College Funding Easier Than Ever
College education can be the key to a child’s or grandchild’s future, but the cost of that education can be astronomical. The average annual cost of college is expected to be three to four times current prices — $6,185 for a public college; $23,712 for a private college – when today’s newborn starts college. Feeling overwhelmed?
Luckily, now there are more ways than ever to start saving for college. The Uniform Gifts to Minors Act (UGMA), The Uniform Transfers to Minors Act (UTMA) Accounts, and Coverdell Education Savings Accounts (formerly known as Education IRAs) are just some of the traditional ways to fund college. In recent years, tax-advantaged Section 529 plans have become increasingly popular — helping to make saving for college easier than ever.
Section 529 Plans: State-Sponsored Saving Programs
All 529 plans are run by individual states in association with investment management companies. Depending on the plan, parents and other individuals may be able to contribute more than $250,000 per beneficiary, including earnings, toward the future tuition of a child. All assets, including earnings, under all 529-plan accounts established for the benefit of a particular beneficiary must be aggregated when applying the limit. While new contributions will not be allowed once this limit is reached, earnings, however, will continue to accrue. Maximum contribution limits are adjusted periodically.
Money in the account can be invested in more aggressive investments when the child is younger and moved to cash or more conservative investments as the child nears college age. Remember there are fees, charges and tax ramifications associated with a 529 plan, and the underlying investment options are subject to market risk and will fluctuate in value. Many plans require a $250 minimum to open an account, and accounts can be set up for monthly contributions. Plus anyone can contribute — and the money can be withdrawn to pay for tuition or fees at any accredited post-secondary public or private school in the U.S.
“Over a lifetime, the gap in earnings potential between a high school diploma and a B.A. exceeds $800,000.”
Benefits of 529 Plans
First, the contributor to a 529 plan retains control over it — which means that, unlike with some other college savings vehicles, the child cannot use their college money for other purposes.
Second, although contributions are not federal-income-tax-deductible, assets in a 529 account — including gains or earnings — can be withdrawn federal-income-tax-free for qualified educational expenses such as tuition, fees, room, board and some supplies. Some states offer residents favorable tax benefits for investing in their state plan. Consult your tax advisor about your particular situation. (However, keep in mind there are fees and charges associated with investing in a 529 plan.)
Start Saving Today
According to a 2007 College Board Study, Education Pays, people with a bachelor’s degree earn more than 60% more than those with only a high school diploma. Over a lifetime, the gap in earnings potential between a high school diploma and a B.A. exceeds $800,000. In other words, whatever sacrifices you make for your child’s college education in the short term will be more that repaid in the long term.
Luckily, now there are more ways than ever to start saving for college. The Uniform Gifts to Minors Act (UGMA), The Uniform Transfers to Minors Act (UTMA) Accounts, and Coverdell Education Savings Accounts (formerly known as Education IRAs) are just some of the traditional ways to fund college. In recent years, tax-advantaged Section 529 plans have become increasingly popular — helping to make saving for college easier than ever.
Section 529 Plans: State-Sponsored Saving Programs
All 529 plans are run by individual states in association with investment management companies. Depending on the plan, parents and other individuals may be able to contribute more than $250,000 per beneficiary, including earnings, toward the future tuition of a child. All assets, including earnings, under all 529-plan accounts established for the benefit of a particular beneficiary must be aggregated when applying the limit. While new contributions will not be allowed once this limit is reached, earnings, however, will continue to accrue. Maximum contribution limits are adjusted periodically.
Money in the account can be invested in more aggressive investments when the child is younger and moved to cash or more conservative investments as the child nears college age. Remember there are fees, charges and tax ramifications associated with a 529 plan, and the underlying investment options are subject to market risk and will fluctuate in value. Many plans require a $250 minimum to open an account, and accounts can be set up for monthly contributions. Plus anyone can contribute — and the money can be withdrawn to pay for tuition or fees at any accredited post-secondary public or private school in the U.S.
“Over a lifetime, the gap in earnings potential between a high school diploma and a B.A. exceeds $800,000.”
Benefits of 529 Plans
First, the contributor to a 529 plan retains control over it — which means that, unlike with some other college savings vehicles, the child cannot use their college money for other purposes.
Second, although contributions are not federal-income-tax-deductible, assets in a 529 account — including gains or earnings — can be withdrawn federal-income-tax-free for qualified educational expenses such as tuition, fees, room, board and some supplies. Some states offer residents favorable tax benefits for investing in their state plan. Consult your tax advisor about your particular situation. (However, keep in mind there are fees and charges associated with investing in a 529 plan.)
Start Saving Today
According to a 2007 College Board Study, Education Pays, people with a bachelor’s degree earn more than 60% more than those with only a high school diploma. Over a lifetime, the gap in earnings potential between a high school diploma and a B.A. exceeds $800,000. In other words, whatever sacrifices you make for your child’s college education in the short term will be more that repaid in the long term.
Protecting Your Business and Your Family with a Buy-Sell Agreement
The successful business you and your partners built together took years of hard work and a great deal of capital. You certainly want your business to remain prosperous long into the future. Preoccupied with the day-to-day details of running the operation, you probably haven’t given much thought to what would happen if circumstances abruptly took an unexpected turn. What happens if you or your partner becomes disabled? Worse yet, what if one of you died suddenly? Could your business survive such trauma? Would your heirs be able to take over or would they be forced to sell the business?
Partnerships Are Not Eternal:
Unlike a corporation, a partnership does not have an unlimited life. When a partner dies, the remaining partners legally become liquidation trustees. This obligates them to sell off the deceased owner’s share of the business. But to whom? At what price? That’s why business succession planning is so important. You’ll want to put into writing a formal plan of action that will allow a smooth transition of ownership and protect your family’s interest as well. A buy-sell agreement is one way to help assure the continuity of your business and give your family peace of mind.
Benefits of a Buy-Sell Agreement:
Sometimes called a “business will,” a buy-sell agreement is a legal contract among business owners that states what will happen should a partner leave the business due to death, disability, or a lifetime situation such as retirement. The agreement obligates the remaining owners to purchase the business interest of the partner who has left the business, and the departing partner (or heirs) is obligated sell. This type of arrangement benefits your family in a number of ways: it will help free them of business worries at a time of crisis, guarantee a purchaser, and, if kept up-to-date, ensure a fair price for your business interests. Remaining owners also benefit from a buy-sell agreement: they know the purchase price of the business interests in advance; they don’t have to worry about new, perhaps unwanted partners; and the smooth transition will help the company retain the confidence of clients and creditors. With the help of an attorney, these agreements are easy to draft and flexible, allowing for alterations with the consent of all parties involved.
How You Can Fund Your Plan:
Once a buy-sell agreement is in place, the next challenge is funding it. Where will remaining partners get the funds to purchase the business interest in question? There are a number of available options:
Pay Cash - If sufficient funds are on hand, cash may be used to purchase the business interest in question. However, using savings that were earmarked for future ventures could endanger the long-term goals of the business.
Take A Loan - If cash is not readily available, funds could be borrowed. The downside is that the extra expense of loan repayments may put a strain on cash flow and the debt increase may negatively affect the company’s credit rating.
Sell Assets - Another alternative is liquidating assets to raise the money. This method could have a devastating effect on the business’s future, and should be considered only as a last resort.
The Sensible Solution:
It becomes clear that a proper funding vehicle is needed to make a buy-sell agreement as effective as possible. With its many advantages, insurance can be a convenient means to fund the agreement without incurring a large financial burden. Insurance creates a guaranteed source of funds to purchase the business interest in question. Proceeds are immediately available exactly when they are needed: in the event of the death or disability of the insured. In effect, it could be said that the cause that creates the need also creates the funding. Those proceeds are, in most instances, free from federal income tax, and may help avoid the delays of probate. A buy-sell agreement funded by insurance may be structured in a number of different ways to suit particular needs.
Now’s the Time:
It’s best to consider your options now while you’re still in the position to direct your business. Speak with your partners and your family, as well as your legal and tax advisors and your insurance agent. If you’re like most business owners, your business and your family are the two most important things in life. You don’t want to gamble with the future of either one. A buy-sell agreement funded by insurance is a convenient way to put your business affairs in order while protecting your family’s interests. It can give you the peace of mind you need to focus your energies on the continued success of your firm.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
Partnerships Are Not Eternal:
Unlike a corporation, a partnership does not have an unlimited life. When a partner dies, the remaining partners legally become liquidation trustees. This obligates them to sell off the deceased owner’s share of the business. But to whom? At what price? That’s why business succession planning is so important. You’ll want to put into writing a formal plan of action that will allow a smooth transition of ownership and protect your family’s interest as well. A buy-sell agreement is one way to help assure the continuity of your business and give your family peace of mind.
Benefits of a Buy-Sell Agreement:
Sometimes called a “business will,” a buy-sell agreement is a legal contract among business owners that states what will happen should a partner leave the business due to death, disability, or a lifetime situation such as retirement. The agreement obligates the remaining owners to purchase the business interest of the partner who has left the business, and the departing partner (or heirs) is obligated sell. This type of arrangement benefits your family in a number of ways: it will help free them of business worries at a time of crisis, guarantee a purchaser, and, if kept up-to-date, ensure a fair price for your business interests. Remaining owners also benefit from a buy-sell agreement: they know the purchase price of the business interests in advance; they don’t have to worry about new, perhaps unwanted partners; and the smooth transition will help the company retain the confidence of clients and creditors. With the help of an attorney, these agreements are easy to draft and flexible, allowing for alterations with the consent of all parties involved.
How You Can Fund Your Plan:
Once a buy-sell agreement is in place, the next challenge is funding it. Where will remaining partners get the funds to purchase the business interest in question? There are a number of available options:
Pay Cash - If sufficient funds are on hand, cash may be used to purchase the business interest in question. However, using savings that were earmarked for future ventures could endanger the long-term goals of the business.
Take A Loan - If cash is not readily available, funds could be borrowed. The downside is that the extra expense of loan repayments may put a strain on cash flow and the debt increase may negatively affect the company’s credit rating.
Sell Assets - Another alternative is liquidating assets to raise the money. This method could have a devastating effect on the business’s future, and should be considered only as a last resort.
The Sensible Solution:
It becomes clear that a proper funding vehicle is needed to make a buy-sell agreement as effective as possible. With its many advantages, insurance can be a convenient means to fund the agreement without incurring a large financial burden. Insurance creates a guaranteed source of funds to purchase the business interest in question. Proceeds are immediately available exactly when they are needed: in the event of the death or disability of the insured. In effect, it could be said that the cause that creates the need also creates the funding. Those proceeds are, in most instances, free from federal income tax, and may help avoid the delays of probate. A buy-sell agreement funded by insurance may be structured in a number of different ways to suit particular needs.
Now’s the Time:
It’s best to consider your options now while you’re still in the position to direct your business. Speak with your partners and your family, as well as your legal and tax advisors and your insurance agent. If you’re like most business owners, your business and your family are the two most important things in life. You don’t want to gamble with the future of either one. A buy-sell agreement funded by insurance is a convenient way to put your business affairs in order while protecting your family’s interests. It can give you the peace of mind you need to focus your energies on the continued success of your firm.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
Designing a Safer, Smarter Retirement Strategy
You worked hard, saved your money, secured a company pension, built up a 401(k), and invested well. In short, you made all the right choices in planning for retirement. But that was then; this is now. The stock market's collapse since 2007 has pummeled Americans' retirement accounts, wiping out more than $3 trillion in value, by one estimate.1
If that weren't worrisome enough, retirement expenses are also growing by the year. Our life expectancycontinues to increase — 77.7 years and rising, according to the federal Centers for Disease Control andPrevention2 — while the cost of living keeps going up as well. This means your retirement years are likely to be longer and more expensive than you thought.
Facing these unnerving facts, people who once invested heavily in the stock market are now playing defense in their retirement planning. Many Americans appear to be fleeing stocks and shifting more of their nest eggs to cash and fixed-income instruments in response to the latest downturn.3
Most financial professionals agree that a prudent strategy for limiting vulnerability in volatile economicconditions is to spread one's assets among a range of investments with varying levels of risk. Yes, stocks may still be part of the mix, but so may bonds and fixed annuities.
For people that have a “rainy day fund” with no immediate need for it — and want death protection — is life insurance. A single-premium universal life insurance policy such as NYLIAC's4 Instant LegacyTMis designed to guarantee* a financial legacy for the policyholder's heirs, generally free from federal income tax, while also providing a number of “living benefits.” One of the living benefits such policies offer is access** to your money when you need it, provided that your death benefit protection needs have decreased. In uncertain times, you may want to consider this kind of flexibility.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
If that weren't worrisome enough, retirement expenses are also growing by the year. Our life expectancycontinues to increase — 77.7 years and rising, according to the federal Centers for Disease Control andPrevention2 — while the cost of living keeps going up as well. This means your retirement years are likely to be longer and more expensive than you thought.
Facing these unnerving facts, people who once invested heavily in the stock market are now playing defense in their retirement planning. Many Americans appear to be fleeing stocks and shifting more of their nest eggs to cash and fixed-income instruments in response to the latest downturn.3
Most financial professionals agree that a prudent strategy for limiting vulnerability in volatile economicconditions is to spread one's assets among a range of investments with varying levels of risk. Yes, stocks may still be part of the mix, but so may bonds and fixed annuities.
For people that have a “rainy day fund” with no immediate need for it — and want death protection — is life insurance. A single-premium universal life insurance policy such as NYLIAC's4 Instant LegacyTMis designed to guarantee* a financial legacy for the policyholder's heirs, generally free from federal income tax, while also providing a number of “living benefits.” One of the living benefits such policies offer is access** to your money when you need it, provided that your death benefit protection needs have decreased. In uncertain times, you may want to consider this kind of flexibility.
Contact: Jesse Maltzman, Financial Advisor of Maltzman Financial Strategies via phone at (914) 934-5612 or visit his website http://www.maltzmanfinancial.com
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