what’s new at marshall insurance and financial?
join us for the latest local and national news pertaining to our clients and our firm
What are you most thankful for this Thanksgiving? Time spent with family and friends? Good health? Perhaps a positive career development? This is the season to reflect on the past year and appreciate all of life’s good fortune.
You probably have a number of blessings for which to be thankful. One that may not be so obvious is your financial strategy to protect your loved ones from risk. Specifically, you might be thankful for your life insurance policy, which protects your loved ones from one of life’s most catastrophic risks.
Granted, you probably won’t mention “life insurance” at the Thanksgiving table when your it’s your turn to say why you’re thankful. However, this may be the time to review and reflect on your family’s needs and your protection strategy. Below are four reasons to be thankful for life insurance coverage:
Life insurance can serve many purposes, but the primary purpose is usually protection. When you purchase life insurance, you name one or several individuals as beneficiaries. Upon your death, your beneficiaries file a claim with your insurer. The insurer then pays them their portion of the death benefit, either as a lump-sum or in regular installments.
Your beneficiaries can use their benefit in any way they see fit. If you’re a breadwinner and provider for your family, they may use the funds to pay off debt, cover living expenses, or simply stabilize their financial situation. Your kids or grandchildren could use the funds to pay for college. Your surviving spouse could use his or her benefit to pay for retirement. Life insurance can help your family reach their financial goals even after your death.
Probate-Free and Tax-Free Legacy
Life insurance death benefits are unique in that they are tax-free and probate-free. Your beneficiaries don’t pay income taxes on life insurance benefits.
The benefit also avoids probate. When you pass away, your estate may have to go through probate, which is the legal process for resolving outstanding estate issues. During this time, your estate executor files a final tax return, pays off debts, and distributes assets to heirs. It can be time-consuming and costly.
However, life insurance proceeds avoid probate. That means your beneficiaries can receive their share of the death benefit, even if your estate is still in probate.
Permanent life insurance policies have something called a cash value account. When you make a premium payment, a portion pays for the cost of insurance and the remainder goes into the cash value account.
Your cash value can grow over time. The method of growth depends on your type of policies. Some pay interest or dividends. In other policies, your cash value is invested directly in the financial markets. In all permanent policies, though, your cash value grows on a tax-deferred basis. That means you pay no taxes on your growth as long as the funds stay in the life insurance policy.
What can you do with your tax-deferred growth in your life insurance policy? One option is to use it as a source of tax-efficient income. When you take a withdrawal from your life insurance policy, the premiums come out first and growth comes out last. As long as you only withdraw your own premium payments, withdrawals are tax-free.
You can also take loans from your policy. Loans are also tax-free. You can borrow from your policy’s cash value and then repay the loan through premium payments over time. If you don’t repay the loan before your death, the balance is taken from the death benefit. Your cash value could serve as a helpful supplemental income source, especially in retirement.
Ready to evaluate your life insurance strategy? Let’s talk about it. Contact us today at Marshall Life and Financial Solutions, Inc. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
19433 - 2019/10/28
More Americans than ever are including annuities in their retirement planning. According to the Limra Secure Retirement Institute, there were more than $132 billion in fixed annuity purchases in 2018. That’s a 25 percent increase over the previous year and an all-time record.1
Fixed annuities are retirement income vehicles that allow you to earn tax-deferred accumulation, often with some kind of downside protection. For example, you might earn a fixed interest rate over a set period of time. Or you could have the potential to earn interest based on the performance of an external market index, like the S&P 500.
Why have these vehicles surged in popularity? It often depends on a person’s specific retirement income goals and needs. However, there are a few common factors that could make a fixed annuity appealing for someone who is approaching retirement.
So far in 2019, the S&P 500, which is a broad-based index representing American stocks, is up more than 20%. However, that hasn’t come without some sizable ups-and-downs, including a market downturn over the summer.2
If you’re nearing retirement, you may not be as comfortable with those “ups-and-downs” as you were in the past. It’s natural for people to grow less comfortable with risk as they get older. After all, if you’re retiring soon, you don’t have as much time to recover from a loss as you did when you were younger.
Most fixed annuities offer some level of downside protection, such as a principal guarantee*. While you may not earn as much as you would in the market, you also aren’t exposed to downside loss. You simply earn interest based on the terms of your contract. If the market goes down, your premium doesn’t. A fixed annuity can often be a stable portion in an overall allocation.
Many fixed annuities also offer guaranteed* lifetime income features that can give you certainty and predictability in retirement. For instance, in many of these benefits you’re allowed to withdraw up to a certain percentage of your value each year. As long as your withdrawal stays within the limit, your income is guaranteed* for life, no matter how long you live or how the annuity performs in the future.
Many retirees can only rely on Social Security or possibly a defined benefit pension for guaranteed*, predictable income. An annuity with a lifetime income benefit can provide an additional source of guaranteed* income in retirement.
Growth in fixed annuities is tax deferred. You potentially earn interest each year, but you don’t pay taxes on that growth as long as the money stays in the annuity. That deferral could help your assets compound at a faster rate than they would in a comparable taxable vehicle. You eventually pay taxes on the growth when you take withdrawals or when you pass away.
Ready to evaluate your retirement strategy? Let’s talk about it. Contact us today at Marshall Life and Financial Solutions, Inc. We can help you develop and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy.
19436 - 2019/10/28