Celebrating Life Insurance Awareness Month with love

We’re celebrating Life Insurance Awareness Month with love and we’re encouraging you to do the same. Take a look at the people you love and ask yourself if you’ve done enough to protect them from the “what ifs.”  What if something happened to you? Will your life insurance policy provide enough coverage for the family you leave behind? When is the last time you reviewed your policy? Now is a great time for a life insurance review. We can walk you through the options available to you to make sure you’re fully covered without overpaying for something you don’t really want or need. Life insurance planning needs to be done with a goal-based approach.  For example if you are only looking to cover a portion of time, maybe while you have dependent children, you shouldn’t over pay for lifetime coverage. Know your goal for any coverage that you are buying and then find the product that best fulfills that goal.  There are several types of life insurance including: Term insurance, which is cheap and meets short-term goals. Return of premium term, which is a little more expensive but gives you the option to take a paid-up death benefit or get a full refund of your premiums paid at the end of your level term. Universal Life in all of its variations can make sense for someone wanting coverage, flexibility, and the ability to grow tax friendly money within the policy. Whole Life insurance can be a good fit for the person who wants both permanent coverage and tax friendly growth ability. If you are worried about being a burden to your family because of Long Term Care needs and expenses there are even LTC riders (options) you can add to many types of life insurance. Group life insurance is a valuable asset and I believe, if you have it available, you should utilize it to a degree. I like group… | Read More »

Be careful where you retire. Not all Partnership programs are equal.

In an effort to encourage more people to purchase long-term care insurance, the Deficit Reduction Act of 2005 (DRA) created the Qualified State Long Term Care Partnership program. The program offers special long-term care policies that allow buyers to protect assets and still qualify for Medicaid when the long-term care policy runs out. If your LTC policy qualifies for this program it essentially doubles the amount of possible protection from that LTC policy; you not only receive the policy payout to cover the cost of your care, but you also avoid having those assets count against your estate if your policy runs out and you have to apply for LTC through Medicaid. Because these programs run through the state government, it is critical to consider where you intend to retire. Not all states have this program, and even some that do will not honor a policy sold in a different Partnership Qualified state. For instance, these eight states have no Partnership LTC program: New Mexico, Alaska, Hawaii, Mississippi, Illinois, Michigan, Vermont, and Massachusetts.  Not only do they not have the program, they also will not honor a Partnership qualified LTC policy sold in another state if you move there and apply for Medicaid LTC services. California has a Partnership program but doesn’t have reciprocity with other states and will not honor a policy from another Partnership state. All the other states have Partnership programs and have reciprocity with other Partnership states and will honor qualifying policies sold in those states. It is possible that the states listed above without Partnership LTC programs could develop them in the future.  As always things change in the government on a state and federal level frequently. Part of our job here at Winch Financial is to keep up with those changes to give the best advice our clients.  If you have a LTC policy that qualifies for the Partnership program in the state you… | Read More »

Hybrid LTC Solutions offer great options for custodial care funding

Planning for the possibility of being disabled and needing custodial long-term care services isn’t by nature a fun topic of discussion.  However, it is a critically important topic.  Even with the most careful retirement planning, LTC costs can devastate retirement portfolios if you haven’t come up with a strategy for disability in retirement.  Traditional LTC insurance is a very strong option for those who want to protect themselves or a spouse.  However, this product can have inherent flaws that many people can’t seem to get past. One of the main objections to traditional LTC Insurance is, “If I never need care, I have spent thousands of dollars and gotten no form of return on my money.”  This is absolutely true. Too many people think of traditional LTC as an investment when in actuality it is purely insurance protection. Another objection to traditional LTC is that premiums are not fixed and there is a high likelihood that premiums will be raised in the future. Even for those who are fine with the fact that the policy may never pay out a benefit, and with the relative certainty that the premium will increase, underwriting (medical records review) has been and will continue to be more difficult to pass. The LTC companies don’t want to subject themselves to undue risk.  What can a person do to get around these issues? Hybrid Life/LTC Insurance and Annuity/LTC solutions, in my opinion, are great alternatives to traditional LTC Insurance.  I have found some great hybrid options to offer our clients.  We have one product that functions like traditional life insurance but has a chronic illness rider that allows the insured to access the death benefit for LTC needs while living, as long they are deemed chronically ill and needing help with two activities of daily living by a medical professional.  This product is great because it doesn’t require the care to be provided by a professional… | Read More »

Fixed annuities can be a great alternative to CDs

Many conservative investors choose Certificates of Deposits (CD’s) as the go-to safety component of their portfolio. However, we are in uncharted territory in recent history with interest rates being at sustained, historic lows. This environment has made finding safety and decent growth potential the hardest it has ever been. For short duration (three years or under), CD’s are still a good option for a high degree of safety and guaranteed return. To get that guaranteed rate of return, you need to keep your money with the institution you purchased the CD with for a set period of time. If you take your money before that set amount of time, you may have to pay an early withdrawal penalty. Fortunately, when you look at longer term lengths (three and five years), there are better investment options available. Fixed annuities act much like a CD and have guaranteed rates of return for a specified period. They are tied to the low interest rate environment as well, but the three and five-year time frames are paying on average .5% to .9% higher than CD’s, depending on the company. Some companies will give slightly higher interest rates if you put in a minimum amount, i.e. $250,000 or more. Fixed annuities are backed by the strength of the issuing company, and the more risk you are willing to accept i.e. the companies rating, the higher interest rate you will be able to get. When we look for options for our clients we like to look at B++ or better on the AM Best ratings scale. Just like banks, insurance companies have to protect themselves against investors taking money sooner than anticipated. CD’s have early withdrawal penalties and annuities have surrender charges, which are calculated as a percentage of the value at time of cashing in. Unlike CD’s, some fixed annuities will allow you access to some of your money without penalty. For instance, some companies… | Read More »

Avoid tax surprises related to the Affordable Care Act

As we approach the five-year anniversary of the day President Barack Obama signed the Affordable Care Act into law, we are still seeing some challenges related to the way people are navigating their way through that historical healthcare overhaul. One significant change that is posing major challenges to American taxpayers is that, for the first time, upfront tax subsidies/credits related to individual health insurance are tied to income projections. The trick is that subsidies and credits are calculated on an income projection for an entire year. Since most people elected to take the subsidy/credit upfront and lower premiums throughout the year, they are finding that they have to pay back part or all of their subsidies on their 2014 returns, because when they estimated their income for 2014 in 2013, they didn’t take into account all sources of income that will count towards their modified adjusted gross income. In some cases, it was extra withdrawals from retirement accounts that they didn’t plan on taking.  For others it was picking up more hours at work, bonuses at work, or a pay raise.  Even an unexpected inheritance from a family member can throw off even the most carefully planned income estimate. One way to take the guess work out of the equation is to elect the option to take any subsidy/credit when you file your taxes, instead of upfront. If you don’t want to wait to get your subsidy/credit, here is the big take away: you can adjust your income level used to calculate your subsidy/credit amount at any time during the year.  If you are computer savvy and used the healthcare.gov website Marketplace to enroll for coverage you need to report a life change and follow the steps until you can edit your income projection for the year.  If you would rather call the Marketplace, you have that option as well, the phone number is 1-800-318-2596 and it is available 24… | Read More »