RMD rules and ideas for using RMD’s

RMD rules and ideas for using RMD’s

Clients need to start taking RMD’s by April 1st of the year after they reach age 72.  This is the new rule that is in effect.  For those clients that have accumulated a good deal of assets, this could mean taking required minimum distributions that they DON’T need.  As an example, a couple of age 72, who have a combined $2M worth of qualified plans, would need to take a gross distribution of $78,125. See the chart below. Based on how RMD’s are calculated, this generally means that a client’s qualified plan balance declines dramatically in their later years.  How can clients retain more of that value to leave to their loved ones?  A 2nd to Die policy would provide clients with a leveraged & tax-free approach to leave money to the next generation.  Here is a sample quote showing two 71 year old’s (male- standard plus non-tobacco & female- preferred non-tobacco).  read more
The Importance of Term Conversions & Tips

The Importance of Term Conversions & Tips

A term conversion is a contractual obligation a client has, to convert his or her term policy to that specific carrier’s permanent product(s) without having to go through underwriting again.  Each carrier has its own specific rules for term conversions, with some carriers having more favorable options over others.  For instance, some carriers will allow conversion to their entire permanent portfolio for the entire level term period, up to maximum age (could be anywhere from 65-75).   For those clients that value having these better conversion options, it important to take note of the term conversion guidelines when looking at term policies when first purchasing.  Typically, the carrier will allow the insured to convert to the permanent policy at the same rate class he or she was approved at the term policy.  However, we have seen carriers downgrade an insured’s rate class if the rate class on the term no longer read more
SECURE ACT – Eliminating the Stretch IRA and Solutions Using Permanent Insurance

SECURE ACT – Eliminating the Stretch IRA and Solutions Using Permanent Insurance

With the SECURE Act passed by Congress, there is a huge opportunity to talk to you clients about permanent life insurance.  The goal of the act was to encourage more businesses to offer a retirement plan to their employees.  However, in order to cover the costs of some of these benefits, the act also took away the Stretch IRA.  The Stretch IRA was a way for non-spousal beneficiaries to stretch out distributions over their life expectancy when inheriting an IRA/Qualified plan.  This would allow the beneficiary to maximize their lifetime distributions while minimizing taxes.  With the elimination of the Stretch IRA, non-spousal beneficiaries will now have to liquidate the account within 10 years.  Here is an example – PRE- SECURE ACT 60 year old male client has $500,00 in his IRA- assuming he takes appropriate RMDs at 70 ½ (5% growth), he would leave an account worth $663,000 at his read more
Why you should have a Contingent Beneficiary

Why you should have a Contingent Beneficiary

A contingent beneficiary is a beneficiary that is next in line if the primary beneficiary pre-deceases the insured.  If an insured does not have a contingent beneficiary and the primary beneficiary dies before the insured, then the insured’s estate will be next in line to receive to the death benefit proceeds.   This is assuming the insured does not make a change.  The issue of leaving death benefit proceeds to an insured’s estate is that the proceeds become susceptible to creditors of the estate.  Even if there are not creditors, the proceeds will be distributed through probate according to intestate law.  The state in which the insured’s estate is settled in will determine who gets the proceeds.  This may be entirely against what the insured wanted to happen when he or she took out the policy.  An example might of an undesirable beneficiary could be a son who is addicted to read more
Why Use Life Insurance to Supplement a Client’s Retirement?

Why Use Life Insurance to Supplement a Client’s Retirement?

Why would anyone use life insurance to supplement their retirement?  Life Insurance provides valuable death benefit protection.  But a properly designed cash value life insurance policy can also provide living benefits in the form of tax-free distributions.  Let’s look at some of the primary reasons why it is a valuable solution for many clients looking to save for retirement. Tax Diversification One of the primary reasons to use life insurance in one’s retirement planning strategy is for tax diversification. Before looking at why the tax-free advantage is important, let’s first look at what the options the client would have otherwise. A client has the option of three different traditional investments for funding of their retirement.  They can use a tax-deferred vehicle, like a 401(k).  They could fund a taxable investment like mutual funds, stock, and bonds.  And lastly, there are tax-advantaged assets like the Roth IRA and municipal bonds.  And read more
Disability Insurance: Why you Should Sell it

Disability Insurance: Why you Should Sell it

Sell the plan that works when your client can’t. Anyone gainfully employed has an asset worth protecting. That asset is his income. Disability insurance provides income in the event a worker is unable to perform the duties of his job. Workers take a big risk without disability insurance. It’s hard to fathom how much an impact it can have.  The one key question that should be asked is: “What asset or assets would you use to cover monthly expenses if you were to become disabled?”  If your client doesn’t have a valid asset to pull income from, then it cannot be emphasized enough how important it is to get them covered with disability insurance. A client’s entire financial plan can come crashing down in an instant without a steady income coming in. A disability policy will charge a specific premium based on: The insured’s occupation, health (including tobacco status), and income benefit read more