Wednesday, September 06, 2006

September is Life Insurance Awareness Month

“Time for your life insurance check-up!”

What would happen to your family if you died tomorrow? Sure, it’s not a pleasant question to ponder—but if others depend on you, it’s one you can’t avoid. If you were suddenly out of the picture, where would the money come from to pay for:

  • Your funeral and final expenses?
  • What about everyday bills?
  • How would longer-range goals get funded like a college education for your kids
  • Retirement security for your spouse?

If you don’t have good answers to these questions, then it’s definitely time that you sat down with an insurance professional for a review of your life insurance needs. And what better time than now--September is Life Insurance Awareness Month!

Look at these numbers from the Life Insurance Marketing Research Association (LIMRA) published in the August 2006 Agent’s Sales Journal:

  1. 29% - Americans who would like to discuss life insurance with a financial professional
  2. 33% - Americans who say no one has approached them about life insurance coverage
  3. 22% - Percentage of households that have no life insurance at all
  4. 40% - American households that have life insurance but believe they don’t have enough
  5. 70% - Agree it would be useful to periodically review their current life insurance policies
  6. 25% - Feel they have not received any information about life insurance that relates to their needs
  7. 75% - Households that do not have a personal life insurance agent or broker
  8. 75% - Households that do not have a personal financial advisor or planner
  9. 50% - Americans who admit they haven’t gotten around to buying a life insurance policy

If you have no one else to talk to about life insurance or would like a second opinion, call me toll-free at 1-877-711-1264 or send me an email! I promise I won’t be pushy.

P.S. If you want to learn more about Life Insurance Awareness month, just visit the Life and Health Insurance Foundation for Education on the web at

Saturday, November 26, 2005

Changing Jobs: Life Insurance

Life insurance isn’t always a topic of fun conversation, but it is a necessary issue for many people. Many employers provide a small amount of life insurance as a benefit to their employees. Your choices when you change jobs?

  1. Go without coverage
  2. Convert the group plan to an individual policy from the same company
  3. Purchase an individual policy

Converting to an individual policy from the group plan can be a good option provided that you are uninsurable otherwise. The problem is that the rates may not be as competitive as you may desire.

If you desire life insurance, your best bet is to purchase an individual policy for the amount that you need directly from an insurance company or agent. This way, you control the benefits and can take it with you from one job to the next. Treat the extra insurance from work as an added benefit.

Changing Jobs: Retirement Plan Options

One of the toughest challenges we face is building and maintaining a retirement account that will help us to meet our financial goals. The money you save for retirement has a certain amount of protection—when your financial situation changes, you can continue to protect your investment by “rolling over” your qualified retirement plan into an Individual Retirement Account (IRA). It is critically important to learn how you can guard your money against penalties, taxes, and other implications associated with income and employment changes.

The Four Basic Options:

  1. Take it out for immediate use
  2. Leave it in your current employer’s retirement plan
  3. Move it to your new employer’s retirement plan
  4. Roll it over.

Let’s take a closer look at these four options.

Option 1: Take it out for immediate use. If you’ve participated in a retirement plan for a while, you may be surprised at the amount you’ve saved. You may be tempted to spend it to pay down a debt or make a signification purchase. There are serious consequences for your money:


  • Money is immediately available


  • Pay federal income tax and possibly state and local taxes
  • If you are under 59 ½, you must pay a 10% early withdrawal penalty if no exception is applicable
  • Endanger your retirement plan
For example, let’s assume you’re 35, changing jobs, and say you’ve saved $50,000—enough for that little purchase you’ve always wanted to make. If you withdraw the money now, you’ll actually receive, after taxes:

- 5,000Early withdrawal penalty
- 14,00028% federal income tax *
-2,5005% state tax *
$28,500After taxes and penalties

(*) Federal and state tax brackets are assumed and very from person to person, and state to state

In a flurry of sudden taxes and penalties, that dream purchase may revert from reality to dream once again.

Option 2: Leave it in your current employer’s retirement plan. Your employer may offer you the option of leaving your money in its present retirement plan. For reasons of convenience, you may decide to leave it with that employer.

· Continue earning the same tax-deferred benefits
· No administrative paperwork hassles
· No change in portfolio

· You may forgo increased investment flexibility
· Access to future withdrawals and cash distributions may be restricted
· Control over your investment choices may be reduced
· You may actually lose track of your funds

Option 3: Move it to your new employer’s retirement plan. If you’re moving to another job, your new employer may offer an alternative qualified retirement plan. You should review this new option and consider whether new features may enhance the value of your account.

· Tax-deferred accumulation will continue
· Your new plan may offer more flexible loan and distribution options
· You may be able to pool all of your retirement funds together.

· Assets from the old plan may not be transferable to the new plan
· May experience restricted withdrawal and distribution options
· Investment options may not be as attractive or broad
· May have a less flexible fee structure

Option 4: Roll it over. An Individual Retirement Account (commonly known as an “IRA”) is an option many individuals choose for their retirement plan assets. You can roll over your savings from a qualified retirement plan to an IRA, maintaining their tax-deferred status. with this option, there are even fewer potential drawbacks.

  • Tax-deferred compounding continues
  • No current income tax consequences
  • Broad range of investment choices
  • Ability to consolidate your retirement assets
  • Roth IRA conversion may be possible


  • No possibility of loans
  • No Employment Retirement Income Security Act (ERISA) creditor protection (but there may be protection under state laws)

Next Steps: Rolling Over your IRA

The Direct Rollover. In a direct rollover, your 401(k) assets are transferred directly by your plan sponsor to your new IRA custodian. You avoid paperwork, phone calls, unnecessary hassle and the mandatory 20% federal tax withholding you otherwise must pay when withdrawing money from a retirement plan.

Beware. Alternatively you can chose to complete an indirect rollover. It is more cumbersome and may result in the payment of taxes and penalties. In an indirect rollover, the distribution is paid to you and 20% is automatically withheld for income tax. Not only do you become responsible for paying the distribution to your Rollover IRA within 60 days, but you must provide cash from your own savings to cover the 20%$ withheld for taxes. If you don’t roll over the distributions within 60 days, it becomes subject to income taxes; and if you’re under 59 ½, you’ll have to pay a 10% penalty tax on top of that if no exception to the penalty is applicable to you.

To learn more about your options or to complete a direct rollover, return the enclosed form or call my office at 1-877-711-1264.

Changing Jobs: Health Insurance, COBRA, and Other Options

Sometime during the past 50 years, it has almost become assumed that having a job meant having health insurance. But what happens if you are retired, out of work, or changing jobs? What if your new employer does not offer health insurance? There are a few options:

  1. Go without health insurance for a period of time
  2. Purchase a short-term or long-term individual health insurance supplemental plan
  3. Purchase COBRA insurance
  4. Join a consumer-driven discount medical plan

Option 1: Go without insurance. Naturally, the problem with this option is that an event could occur during that time that would require serious medical insurance, or could make you uninsurable for future insurance. While this is certainly the lowest cost if something bad does not happen, the risk involved is very high.

Option 2: Purchase an Individual Policy. This option is preferred by people who expect a long period of unemployment, are retiring, change employers frequently, or are in an industry where health insurance benefits are not normally offered to employees. The advantage to this option is that you will know exactly what your health insurance benefits are and what they cost. The disadvantage is that the premiums are usually somewhat higher.

Option 3: Purchase COBRA. In layman’s terms, COBRA coverage is an extension of your employer-sponsored plan that you pay for once you leave the job for any reason.

COBRA was passed in to law in 1986 by the US Congress and the law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments.{2} The law does not, however, apply to plans sponsored by the Federal government and certain church- related organizations. Check with your employer to learn if you have the option to use COBRA coverage.

Option 4: Join a Consumer Plan. These groups are not insurance, but they do provide the bargaining power of dramatically reducing the cost of medical expenses by “pre-negotiating” a rate. Medical providers like the plan because there is no paperwork and the user usually pays in cash so the overhead is low. These programs can greatly reduce the cost of insurance and work with non-covered events.

Saturday, November 19, 2005

Your Mutual Funds Aren’t Doing Great? But Compared to What?

Generally people love to talk about their investment successes. You may overhear them in the grocery store, while you are trying to eat lunch at the coffee shop, or even as you’re relaxing around the pool. However, learning about someone else’s mutual fund earning double-digit returns, while the fund you own does not have such bragging rights can be disturbing. But should you really take what you hear to heart and dump your fund?

You need to put a fund’s returns into the proper perspective with an index of relevant stocks or bonds. These investment benchmarks are valuable tools to evaluate how well your investments weigh against the particular market they represent. And the Securities and Exchange Commission requires that mutual fund companies include comparable return information from an appropriate benchmark in fund prospectuses.

No one benchmark covers all investments. For instance, the S&P 500 is a widely-used gauge of large-cap, U.S.-based stocks. But if you own a small-cap mutual fund, you might want to refer to the NASDAQ Composite. This index covers approximately 5000 stocks but is skewed towards technology stocks. For the bond funds in your portfolio, the Lehman Brothers Aggregate Bond Index can be a good yardstick. It contains almost 7,000 U.S. government and investment-grade corporate bonds with maturities of 1 to 10 years, as well as mortgage and asset-backed securities.

But what if your fund owns stocks and bonds? For example, suppose your fund’s holdings are 60% large-cap stocks and 40% corporate bonds. The manager might put together a blended benchmark that is 60% S&P 500 and 40% Lehman Brothers Aggregate Bond Index to mirror the fund’s investments. They will also list the indexes’ separate returns for the same period.
Whichever index you use, make sure it represents the asset category you want to evaluate. And depending on your portfolio mix you may want to consider benchmarks that measure other asset classes, like international bonds and real estate investment trusts.

If you would like a free-evaluation of your mutual funds to see how they compare to their respective markets, contact me through the link provided in my profile. Please include the names of your funds.