For more than 30 years we’ve been strong proponents of financial success through education. We teach classes, host seminars, run an active blog and write a weekly market commentary. We hold the industry’s highest credentials, including the CFP®, CFA®, CMT®, and CPA because we respect both our clients and our fiduciary relationship with them. That’s why we’re so appalled by item 61 in the Wisconsin state budget, which expands the types of financial products a payday lender can sell, including insurance, annuities and other financial products. It is hard to imagine a more complicated financial product than an annuity and a less suitable person to break it down for consumers than a pay day lender. Consider the nature of the pay day loan business model, which lures clients in with the promise of immediate cash inflow, charges exorbitant interest for that privilege, and then hopes for a cycle of repeated loan requests. According to a report from the Consumer Financial Protection Bureau, over 80% of payday loans are rolled over or followed by another loan within 14 days. This results in a digital debtor’s prison in which consumers have little hope of breaking free. Clearly, the very first piece of advice any reputable financial advisor might give a client is to avoid doing business with a payday lender. That these same lenders should offer financial advice, sell insurance products, and vet investment opportunities strikes us both absurd and dangerous. We urge the Wisconsin legislature to reconsider this proposal and, should this budget remain intact, we stress again the importance of seeking financial advice from a reputable professional, preferably one with a fiduciary responsibility to his or her clients.
Risk Management / Insurance
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 »
Group benefits are important but not cure-all
When people select insurance coverage often they are fortunate enough to select from options available to them at their or their spouse’s workplace. Group benefits are great opportunities to provide protection to you and your loved ones via health insurance, life insurance, disability insurance, and even long term care (LTC) insurance. If some or all of these types of insurance are available to you in a group benefit setting you need to take the time and consider all of the options available to you for a couple of reasons. Group benefits often have limited or even no underwriting when it comes protection like life insurance and LTC. Why is this important you may ask? In the individual sales market, life insurance and LTC insurance is fully underwritten, meaning the insurance company can look at your health and charge you more for desired coverage or even deny coverage entirely. It is this less restrictive access to benefits that makes group life and especially LTC coverage a necessary consideration in your overall risk management portfolio. Also because group benefits spread the risk out among many employees, they are more than likely more affordable than comparable individual benefits. However nothing is perfect. More often than not when the person carrying the insurance protection leaves or is terminated from employment the group benefits are no longer available. Sometimes ownership of life insurance or LTC polices can be transferred and the insured would take on the full burden of premiums if they didn’t pay it all already. What’s the problem with that you may ask? Let’s say having life insurance on yourself is important to you. You have access to affordable group life insurance and take it out on yourself. Unfortunately your company has to downsize its workforce and you are let go. During the time you were employed you were diagnosed with diabetes. The life insurance on yourself at your old employer is not… | Read More »
Guarantee life insurance for the next generation
If you are a parent or grandparent you may not even think about your little one’s ability to purchase life insurance. But the fact remains that when they decide to purchase life insurance for themselves at a later date, they may not be eligible. Life insurance is written and priced based on health and age. With our nation’s health as a whole declining rapidly, the next generation’s ability to purchase affordable life insurance may be threatened. A great example of this would be diabetes. If you as a family member want to take the “what if” out of your little one’s ability to purchase life insurance in the future, you do have that right and option because you have insurable interest. When you do this for your loved one, it should be with a form of permanent insurance. Some options would be Whole Life (WL), Universal Life (UL), and Guaranteed Universal Life (GUL). WL is the most expensive up front but it does lock in a level premium for the remainder of the insured’s life. Universal life would be the least expensive of the three permanent options, but if market conditions change drastically after the policy is written, the planned premiums might not be enough to carry the death benefit for the insured’s entire life. The premiums with UL are adjustable and, if needed, more money in the future can be paid in to keep the policy alive. GUL is a very simple permanent option. It has a level premium and level death benefit for the life of the contract. This type of insurance is also guaranteed to stay inforce as long as the planned premiums are paid. Examples of guaranteed lengths are ages 95-126 depending on the company. With any one of these options, a crucial question to ask is, are there guaranteed future purchase options for the insured? This would allow the insured, regardless of health, to purchase… | Read More »
How retirees can make a smooth health insurance transition
Finally retiring? Congratulations! Have you thought about where your healthcare coverage is going to come from until you hit that magical age of 65 when you are Medicare eligible? Healthcare, for many, is one of the most important factors in determining when to retire. Make sure to do some homework and work with someone with a fiduciary standard to help you make sense of the sometimes confusing health insurance environment we live in today. If you are already 65, your employer may offer a retiree Medicare insurance benefit. If they do, in many cases it is offered at no cost or reduced cost to you. If your employer doesn’t offer a retiree benefit, there are multiple options available to you in the Medicare world. We can explain each option to you in simple terms so that you can make an educated decision on what option is best for you. If you are under 65, the first thing you should do if you are retiring and currently have group benefits is ask your HR department what the continuation options for health insurance are. Sometimes, as a retiree benefit, your employer will still continue to offer coverage at no cost or a lower cost to you. If your employer doesn’t allow you to continue your current coverage as a retiree benefit, he or she must give you the option of COBRA continuation coverage. This is a mandated benefit and it allows you to keep your current coverage from your employer for 18 months. The main difference from COBRA to retiree benefit health insurance is that with COBRA, you will be responsible for the entire cost of insurance. This in many cases is the simplest and most affordable option available to someone looking to retire. With that being said, it is always in your best interest to do your due diligence and compare with the individual market. The individual market for major medical… | Read More »