Tools and Strategies for Life's Financial DecisionsPresentation Transcript
Tools and Strategies for Life’s Financial Decisions Presented By: Brian H. Grant, CLU, ChFC, MSFS Certified Financial Planner ™ President
Hypothetical Case Study
Maxine T., MD
26 years old
Second-year, Rheumatology Resident
Annual income $38,000
Develop a budget – control spending
Have an emergency fund
Build strong personal savings base
Consider buying vs. renting a home
Financial Planning (cont.)
Leasing vs. purchasing a car
Investing vs. paying off loans
Risk management / insurance needs
Saving for retirement
Available on our website: trinityfp.com
Loans and mortgages
(See last handout for additional detail)
What is a Mutual Fund? FUND Invest $$$$ Buy Shares Earnings Potential Profits
Variety of Mutual Funds Money Market Fixed Income Balance Growth & Income International Aggressive Growth Higher Risk Lower Risk Higher Potential Return Lower Potential Return
Why Invest in a Mutual Fund?
Diversification and stability
Collective buying power
Remember that past performance doesn’t guarantee future returns
Buy selectively with a purpose
Know your fund’s portfolio objectives
Disciplined savings program
Maintain long holding periods
Dollar cost averaging
Purchase more in down markets; less in higher markets
What Affects Portfolio Return?
1.8% Market timing
4.6% Security selection
91.5% Asset allocation
2.1% Other factors
Source: Financial Analysts Journal
The Power of Time Start Saving for Retirement TODAY! * These are hypothetical examples and are not intended to portray the results of any particular investment. $1,532,183 $1,567,501 At age 65 $78,000 $8,000 Total Contributed 39 x $2,000 4 x $2,000 Contributions 12% 12% Rate of return * 65 21 Age ended 27 18 Age started TOMMY CINDY
Qualified retirement plans
Nonqualified strategies using life insurance
Nonqualified strategies using annuities
* Early withdrawals may be subject to a surrender charge. In addition, distributions prior to age 59 ½ may be subject to a 10% tax penalty. ** Tax free income is achieved by withdrawing from the policy cash value an amount equal to the total premiums paid (cost basis), then using policy loans for the balance. Outstanding policy loans at death, and withdrawals, will reduce the policy death benefit and cash values. If the policy is allowed to lapse with a loan outstanding, the amount of the loan in excess of your cost basis will be taxable as ordinary income to the extent of the gain in the policy and may be subject to a 10% income tax penalty prior to age 59 ½.
The Power of Tax Deferral Tax deferral means you don’t reduce your investment by income taxes during accumulation.
Insure the goose or the eggs?
Ensure your future insurability
“ Own Occupation” definition
Cost of living rider
Residual Benefit Rider
Power of Life Insurance
Tax deferred growth
Tax free retirement income
Income tax free death benefit
* Tax free retirement income is provided by first withdrawing premiums you have paid then taking any additional funds by using policy loans. Under current law, policy loans are income tax free provided this policy remains in force and is not a modified endorsement contract as defined by IRC7702A. If the policy is allowed to lapse with a loan outstanding the amount in excess of your cost basis will be taxable. Policy withdrawals or outstanding loans will reduce the cash value and death benefit to your beneficiaries.
Four basic reasons
You love someone
Giving to charity
The need and why…
Variable universal life
What financial formula was used to estimate your need?
How much is enough?
The amount you need at a price you can afford.
What is the best type?
FAQ’s About Wills
What is the effect of a will on life insurance?
If a life insurance policy is payable to an individual, then the will of the insured has no effect on the proceeds. If the life insurance policy is payable to the estate of a person, then the disposition of the proceeds can be directed by will in the same manner as any other kind of property.
FAQ’s About Wills
Can taxes be saved by a will?
Under certain conditions, definite savings can be made by the carefully planned disposition of a family estate in accordance with provisions of a skillfully drafted will. In this regard, the will may provide especially for the surviving spouse (by trust or otherwise) to minimize or eliminate taxes payable on the death of the survivor.
FAQ’s About Wills
When should a will be made?
A will should be made while the maker is in good health and free from emotional stress. A will that is hastily planned and drafted under pressure seldom does credit either to the maker or the draftsman. The “deathbed” will is often the subject of long, expensive, and sometimes bitter litigation. Because of changing conditions in family, in size of estate, and in tax laws, a will should be reviewed periodically. A will should always be reviewed when there is a change in marital status.
FAQ’s About Wills
Who should prepare the will?
Generally, a will must be written and witnessed in a special manner provided by law. The drafting of a will requires learning, skill, and experience obtained only by study, training, and practice. Only a practicing lawyer can perform this service.