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Smart Start For Your Retirement Savings

When you imagine your retirement years, what do you see? Long walks on the beach, spending time with your grandkids, traveling the world, or fishing on the lake? Whatever your dream, retiring for the workforce in time to enjoy your golden years means you need to start planning now!

Here are some popular investment vehicles that can help you build your retirement nest egg and plan for a financially secure future.

401(k) or 403(b) Plan

A company-sponsored 401(k) or 403(b) plan is one of the most popular ways to fund your retirement. With automatic payroll deductions, pre-tax contributions, and tax-deferred growth, it’s a smart way to reduce your current tax liability and save over the long term. These plans typically offer a broad range of investment options with varying degrees of risk, and a loan feature. Many employers also offer a matching contribution, up to a certain percentage, which is essentially free money!

Traditional IRA

A Traditional IRA allows you to deduct the amount of your total annual contributions, in most cases, when you file the same year’s income taxes, with taxes taken in the year you withdraw funds from your account.

Most Traditional IRAs offer a variety of investment options, including stocks, bonds, mutual funds, and money market securities, and any earnings receive the benefit of tax-deferred growth. Contributions can typically be deducted from your taxable income, depending on your income level and whether you or your spouse have 401(k) or 403(b) accounts. You then pay taxes on the contributions and earnings when you withdraw the funds.

Ideally, distributions occur during your retirement years when you qualify for a lower tax bracket, benefiting from the tax deferment. With traditional IRAs, you must begin making regular withdrawals after age 70 ½, with the ability to withdraw up to $10,000 without any withdrawal penalty for qualifying expenses before the age of 59 ½.

Roth IRA

A Roth IRA also allows you to contribute after-tax dollars to an account. Your contributions, however, grow tax-free, which means that you won’t pay any income tax when you take a distribution. These accounts are especially attractive for young investors and those who expect to graduate into a higher tax bracket in the future. Since your contributions (excluding earnings) were made with after-tax dollars, you can initiate a withdrawal at any time. To withdraw earnings without penalty, you must be 59 ½ years of age and have held the account for at least 5 years.

Permanent Life Insurance

One often overlooked retirement savings vehicle is an Indexed Universal Life Insurance policy (IUL). Not only can it protect your family’s financial security during your working years with a death benefit, but it also provides the potential for significant cash value accumulation. Depending upon the policy, the cash value can be invested in a fixed fund that offers access to higher credited interest rates and the protection of a guaranteed minimum, or in several different equity indexes. IULs do place a cap on your gains, but they reduce your risk by protecting your principle so that if the market performs poorly, none of your funds will be lost.

Upon retirement, you can take tax-free distributions of your cash value, and when you pass on, the tax-free death benefit will protect your beneficiaries against financial uncertainty. Unlike other forms of investment, these funds will be available immediately to the beneficiaries as tax-free income.

Take a Step

The secret to saving money for a comfortable retirement is to start early and contribute regularly.  Talk with your financial advisor to discuss the most appropriate investment vehicles and options to help fund your golden years!

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The Sooner The Better: Simple Ways to Save For College

Whether you’re rocking your sweet two-month-old baby to sleep or teaching your three-year-old to say please and thank you. Savor it, because they’ll be packing the car and heading to college in the blink of an eye. With the cost of a college education on the rise, your goal is to be thinking about how you’ll be spending their holidays, not how to pay for tuition.

With an early start and small, continuous investments, you’ll be better prepared to tackle the tuition costs. Here are some options that can help you get started:

529 College Savings Plan

A 529 College Savings Plan is a state-sponsored, tax-advantaged, education savings plan. It offers features and benefits that encourage early investing and helps families create a stronger financial strategy for continued education. Any citizen or taxpayer can open an account, and almost anyone can contribute funds—think birthday, graduation, and holiday gifts that will grow over time!

A 529 Plan also provides valuable tax benefits. Most every state offers at least one plan, and the majority of those states also offer full or partial state income tax deductions, so everyone wins!

Prepaid Tuition Plans

A prepaid tuition plan allows you to pay for tuition credits in advance and at a preset price. With the rising cost of tuition, the state generally assumes the market risk in exchange for your early investment. There are a few caveats, though. Not all states offer these plans and, if they do, you’ll need to be certain that your child will attend an in-state public school.

Prepaid tuition plans offer the same tax benefits as 529 Plans, and you’re able to change beneficiaries, or possibly be reimbursed for all or a portion of your investment if your child opts for another path.

Before you invest, be sure to get the full details on these plans since they can vary wildly from state to state.

UGMA and UTMA Accounts

The Uniform Gift To Minors Act (UGMA) or Uniform Transfer To Minors Act (UTMA) accounts enable parents to establish an account and name the minor child and soon-to-be student as the beneficiary. These accounts offer significant tax benefits. Under the Federal Gift Tax treatment, the first $1,050 in unearned income is tax-exempt. For certain children under 24 years of age, unearned income over $2,100 is taxed at the estate and trust rates.

When the child reaches the age of majority, 18 or 21, depending on the state, he or she can withdraw the funds to pay for college, or any other purpose. If he or she doesn’t decide to earn a degree, there’s no need to transfer it to another beneficiary, which is a common concern with 529 and prepaid tuition plans.

Permanent Life Insurance

One frequently overlooked option for college savings is an Indexed Universal Life Insurance policy (IUL). Not only can the cash value accumulation be withdrawn to fund your child’s education, it also provides a death benefit, which offers your family financial security in the event of your untimely death.

Depending upon the policy, the cash value can be invested in a fixed fund that offers access to higher credited interest rates and the protection of a guaranteed minimum, or in several different equity indexes. IULs do place a cap on your growth, but they also provide valuable principle protection that offers you more financial security for the future.

Start now!

Whichever option you choose, start early and save on a regular basis. Be sure to meet with your financial professional to discuss the most appropriate options that can help you reach your college funding goals.

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Should You Be Happy With Group Life Insurance?

When you get a new job, you’re going to have to answer a lot of questions right off the bat. What’s your direct deposit information? Are you going to join the dental or vision plans? Which slot would you like on the kitchen duty roster? Chances are you’ll be asked how much life insurance you’d like through your employer. As part of their benefits package, many employers offer free life insurance known as group life. Sometimes you don’t have to do anything, and you’re automatically enrolled.

While some employers offer free life insurance, it’s often nowhere near the recommended amount to insure your family effectively. The basic group life plan could be a round figure, often between $25,000 and $50,000, or it could be your annual salary rounded to the nearest $1,000.

Should You Accept this Group Life plan?

Absolutely. There is no reason not to accept a group life plan through your employer, as coverage is generally free up to a certain point and guaranteed. To participate, be sure to fill out any necessary forms by the deadline provided; you may have to wait until the next year to enroll again if you miss it. You will need to select one or more beneficiaries on the policy so that it’s not left up to the courts to determine who will receive the benefits in the event of your death.

Buying Additional Group Life Insurance Through Work

You may be able to buy up to three or four times your annual salary in supplemental group life insurance through your employer. While the free group life may be guaranteed, higher levels of insurance could require you to show “evidence of insurability” by filling out a health questionnaire. Depending on your health or other risk factors, you may be required to provide access to medical records as well as submit to a physical exam and other medical tests. This further coverage is not guaranteed and can be rejected based on your test results.

Buying into a group life plan through work can give you great insurance rates and incredible convenience. Any insurance is better than no insurance at all, and a group plan is one of the easiest ways to get coverage. If you have health conditions that may affect your qualification for life insurance, group policies may give you better rates than going it alone.

Should You Rely Only on Group Coverage?

While having group coverage is a useful foundation, it’s not your best bet if you want lifelong security. The advantages of a group policy—convenience, cost, and guaranteed coverage—can also become disadvantages if you move employers. Great rates and an easy process come from limiting your options. When there are no decisions to make, it makes things simple: say “yes” and move on. While term life insurance could be working for you, a more complex product like whole life or universal life might be a better fit for your needs. Talk to your agent to see what options would be best to consider.

Though the price of coverage may be cheap when you start a job, it’s not likely that you’ll be with that employer for the entire time you need coverage. According to the Bureau of Labor Statistics, the average American holds 12 jobs before the age of 50. The odds of holding the same job for longer than 4 years get slimmer as our working habits change. You may be able to convert your group policy into individual life insurance, but the cost could be significantly higher. If you can’t, you may find it difficult to qualify for new coverage due to changing health circumstances. Rates increase as you age, so no matter what, insurance is going to be more expensive when you leave an employer than when you started.

Finally, group life is generally capped at a certain amount. If you need more than that—and you probably do—you might need to consider buying insurance on your own in addition to group life.

Weighing Your Options

While navigating all your employment benefits may seem daunting, life insurance can be the simple part. Take advantage of the group life policy if your employer offers it but know that this coverage is likely not enough. Meet with an FFS agent to discuss your options—from group life through your employer to individual policies—and ensure that you’re safeguarding your family’s future today.

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Maximize Your Savings When You Start Early

Saving for the future can be overwhelming. With so many competing priorities it feels like most of us just don’t have enough money to go around. When we have bills to pay, children to raise, and other obligations, our budgets can get tight fast.

Immediate financial responsibilities start crowding out important financial opportunities, and it’s tempting to put saving on hold.

We tell ourselves that planning for the future can wait. But that’s a mistake. In fact, if you wait to save for the future, you’re leaving money on the table.

When it comes to saving, there are 3 important things you need to do.

1. Start saving now.

The sooner you start saving, the more you can leverage the power of compound interest. Let’s say you have an investment account with a $5,000 balance that earns 8% annual interest. At the end of the first year, the account balance will be $5,400. At the end of the second year, it’ll be $5,832, earning you $32 more than you earned in year one. That’s because, in year two, you earned interest on your principal plus the $400 in interest from year one.

That may not sound like much, but the magic of compound interest is that its growth becomes more dramatic over time. The longer you save, the quicker your balance grows. That’s why, no matter what stage of life you’re in, it’s important to start saving now.

2. Don’t get discouraged.

Maybe you’re just beginning your career and it seems like the amount you can save isn’t enough to make an impact. Or you might be well-established but didn’t prioritize saving when you were younger and now it seems too late.

Whatever your situation, don’t get discouraged. Don’t get caught up in the mistakes you’ve made or the limitations of your available resources. Do what you can right now by saving any extra money you have.

3. Stick with it.

Once you start saving, be consistent. That consistency will pay off over time as compound interest multiplies.

Let’s go back to that account that started with a $5,000 balance and earned 8% interest annually. If you consistently contributed $150 each month, it would be worth $171,468 after 25 years. Only $50,000 of that is money you put into the account. That means that 70% of that final $171,468 is interest generated on the account.

Wherever you are in life, start saving for the future now. You may look at your budget and think that you can’t afford to save. But the truth is, you can’t afford not to.

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How To Catch Up On College Savings

If you’ve fallen behind on college savings, don’t panic. Know that you’re not alone – it’s easy to put off saving for college when you’re more worried about teaching your children the ABC’s than the SAT’s. We’ve already looked at how much you should have saved – roughly $2,000 per year after your child is born – to have a healthy college fund. Once you’ve figured out how much you need to save, take immediate action to start putting money aside for the future. Even if you can’t catch up completely, whatever savings you can generate between now and when your kids go off to college is better than no savings at all.

The most important thing to do is simply begin. There are three things that can get you started even when you don’t have a lot of time left to save.

1. Set up a 529 Plan.

When people think about investment tools for saving for their children's college education, a 529 plan is usually the first thing that comes to mind. There are some obvious reasons why 529 plans are so popular:

  • These qualified tuition plans are specifically designed for education savings, so they’re better optimized for those expenses than Roth 401(k)s or IRAs.
  • Earnings are tax-free and can be withdrawn for educational purposes without a tax penalty.
  • Many states allow you to deduct 529 plan account earnings from your state income taxes.

While a 529 plan does have its benefits, it isn’t your only option. There are other creative ways to get that college nest egg started.

529 Plans are qualified tuition plans specifically designed for education savings.

2. Consider a Universal Life Insurance Policy.

The great benefit of a Universal Life Insurance policy is that you can borrow against its cash value, often tax-free. This can be a great way to augment a 529 plan that’s underfunded because you got a late start.

Money drawn from a Universal Life Insurance policy does not affect financial aid eligibility, whereas money drawn from a 529 plan can reduce the amount of financial aid your child is eligible to receive. Because Universal Life Insurance is a cash value policy, it can be a good way to maximize financial aid from other sources.

Universal Life Insurance policies also provide flexibility. While it’s good to have a 529 plan, there are some reasons not to put all of your college savings eggs into that one basket. If your child chooses not to go to college, withdrawing those funds or transferring them to another investment account will result in a tax penalty. With Universal Life, you can access the policy’s cash value for a variety of reasons, including education expenses. The good news is, if you don’t end up needing that money for college, it’s still there and at your disposal for other needs.

Money drawn from a universal life insurance policy does not have to affect your financial aid eligibility, unlike a 529 Plan.

3. Make Savings Automatic.

If you’re aggressively trying to save for college, setting aside large lump sums is a given – tax returns, bonuses, and gifts from grandparents should all go into your 529 account or other fund dedicated to college savings. Those larger contributions may not come often, so find ways to make savings automatic. Continually contributing to your college savings means you’re getting as much compound interest as possible.

Set up automatic payments to your 529 account, budgeting what you can normally afford each month. Find ways to save elsewhere – couponing, eating out less, making coffee at home – and put what you would have spent into your 529 instead. Anytime you get a deal, consider moving those savings to your 529.

Get a 529 credit card that contributes a percentage of each purchase to your 529 automatically – like airline miles or rewards. If you don’t want the hit to your credit score that opening a credit card will bring, move all of the cashback earnings you get from existing cards to your 529 account.

Find ways to continually contribute to your college savings, instead of waiting for one lump sum.

If you’re behind on college savings, it’s not the end of the world. Don’t beat yourself up over what you could have or should have done in the past. Find creative ways now to start building your college savings now and you will be able to send your kids to college with less debt.

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How Much Do You Need to Save for Retirement?

Imagine running a long-distance race, but you don’t know how far you have to run. How do you pace yourself? How do you strike the right balance between running fast enough to win, but not so fast that you run out of gas before you reach the finish line?

This is the issue we face when thinking about retirement. How can we know how much we’ll need to retire when we don’t know how many years retirement will last? How do you balance today’s needs with an unknown future? What is enough to ensure our comfort during retirement when we don’t know what our needs will be as we age?

If the thought of saving enough for retirement stresses you out, here are five principles to follow:

1. The 80% Rule

When it comes to evaluating how much you’ll need to retire, don’t just think in terms of an overall dollar amount. Think in terms of income. This is where the 80% rule comes into play.

If you want to maintain your pre-retirement lifestyle throughout retirement, your monthly income from sources like Social Security, pension, and savings withdrawals will need to add up to 80% of your working income.

2. The 4% Rule

The median life expectancy in the U.S. is 78.6 years (Arias E, 2017). If you’re married, there’s a 45% chance one of you will live to 90 (Retirement Plans Executive Committee, 2014). With such long life expectancies, it’s more important than ever to plan for retirement early and prepare for a long retirement. Following the 4% rule will ensure that your nest egg will last.

If you withdraw only 4% of your savings in the first year of your retirement and adjust that amount each year to account for inflation, your savings should last about 30 years.

If you retire at 67, the 4% rule will fund you well into your nineties. Combined with the 80% rule, you should be able to maintain your quality of life throughout your retirement.

3. Account for Inflation

Whatever dollar amount you currently think you’ll need at retirement, it’s probably not enough. Why? Because it’s important to take inflation into account. It’s not enough to think of the dollar amount you need each year and multiply it out for thirty years because living will get more expensive over time.

To protect your retirement, assume a 3% annual rate of inflation. If you think you’ll need $1 million to retire, you’ll actually need closer to $2 million to account for the increased cost of goods and services over time.

4. Debt-free Retirement

There will be a lot less pressure on your retirement savings if you’re debt-free when you leave the working world behind. Imagine how much more money you’ll have each month if you don’t have to worry about a mortgage, car payments, credit card debt or student loans. Create a plan with your financial advisor to be debt-free before retirement and lessen the burden on your retirement accounts.

5. Prepare for the Unexpected

Following the four principles above ensures that you’ll be prepared for a comfortable retirement, but those funds can dwindle quickly if tragedy strikes. If you face a chronic or critical condition during your retirement, you may not have the funds to cope with medical bills and keep up your standard of living. Disability can limit your mobility and require long-term care that gets expensive quickly. Protecting your retirement investment means preparing for the unexpected. A life insurance policy that offers living benefits can offset the costs of care while you’re alive so that you can maintain your quality of life.

If thinking about retirement savings is stressful, you’re not alone. But it doesn’t have to be overwhelming. The first step to creating a workable savings plan is to understand exactly how much you’ll need in savings when the time comes to put your work-life behind you.

Interested in assessing your finances and preparing for retirement? Complete a Free Needs Analysis by clicking the button at the top of this page or contact me about your specific concerns.

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Why Life Insurance Awareness Month is Important for You

Life insurance is less expensive—and more necessary—than you may realize.

Our brains are not well-equipped to picture just how much our circumstances are going to change over time. As a result, we tend to underestimate risk and take our current lifestyle for granted. Change, however, is inevitable, and the sooner we plan for the future, the better it will be when it finally arrives. Life insurance is an important part of this plan—it gives us the peace of mind in knowing that our loved ones will be secure after we’re gone.

Sadly, almost half of us are living without it. According to Life Happens, only 57% of Americans in 2019 own life, meaning four out of every ten households would struggle to pay living expenses at the loss of a family member.

Most of this is due to a lack of awareness. When quizzed, Life Happens found that only 46% of people knew enough about life insurance to pass. People also largely overestimated the annual cost of a policy; most people guessed around three times more than the average annual premiums.

This lack of knowledge is understandable—life insurance is not exactly enthusiastically discussed at every dinner table in America. That’s why Life Insurance Awareness Month was established: to help you get the information you need about life insurance that you rarely meet in your daily life.

What is life insurance?

Life insurance comes in many shapes and sizes, from term policies meant to get you through your highest-earning income years to whole life policies that last throughout your lifetime.

With a life insurance policy, your family will be insured with what is called a death benefit, a lump sum that is paid upon your passing to help them get through the expenses of the coming years.

In addition to the death benefit, certain policies come with extra features such as the ability to accumulate cash value over time or living benefits to cover medical costs while you’re still alive.

The type of policy needed varies per person, but this outline will help you know what to look for.

Do I need life insurance?

It’s never too late to get a handle on your financial future, and it’s never too early to get yourself covered. The best time to start is always now. No matter where you are in life, there’s a policy that will meet your needs.

If you have a family, your insurance needs are direct: you want to make sure they have money after you’re gone. Your life insurance will cover their immediate, ongoing, and future expenses.

If you’re single, you won’t need life insurance right away, but that doesn’t mean you should wait. You’re currently at peak insurability, which means you’ll have the lowest rates. If you start saving now, you’ll already have coverage for when you do start a family.

When should I get life insurance?

If you aren’t covered already, here are some life events and stages where you’ll want to consider getting life insurance:

  • Marriage: Owning a policy will protect your spouse from having to pay the mortgage alone or scrambling to pay for the funeral during the grieving process.
  • Parenthood: If you already have an established family, you’re protecting your children’s futures and their college savings. Life insurance can also shield your spouse from having to double their work as a caregiver.
  • Buying a house: Life insurance can help your family pay down or retire your mortgage after you’re gone.
  • Retirement: You’ll want a policy to protect your spouse’s retirement savings, and to ease their financial burden in their remaining years.

What policy is right for me?

The right choice depends on what you value most in your policy.

Looking for the lowest possible rates? Term insurance is for you. It covers you for a finite amount of time from one to thirty years, with twenty being the most common. After this time has ended, the policy will lapse, and you will no longer be covered.

Want longer coverage? Try permanent insurance. This is a long-term form of coverage that doesn’t expire as long as you pay premiums on it. These policies can accumulate cash value over time and can offer features like living benefits.

Other types of permanent insurance include whole life, universal life, variable life, and variable universal life. Do you want predictability? Whole life is for you, where all your premiums are a fixed amount. If you want the flexibility of adjustable premiums, ask for universal life.

Finally, if you’re looking for greater returns on your investment and are willing to incur a little risk, a variable plan is for you. These are offered via prospectus and are built from an investment portfolio, giving you the opportunity to earn more over time.

Of course, this is only a broad overview of your options. For a more in-depth analysis of your needs, an insurance agent will better help you evaluate your situation.

It’s easier than you think

When you know what your options are, getting life insurance coverage is actually quite simple. Once you face the difficult facts of death, you’ll be able to put it out of your mind and live safely knowing your family has protection after you’re gone.

Like a trip to the doctor