Tools and Strategies for Life's Financial Decisions


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Tools and Strategies for Life's Financial Decisions

  1. 1. Tools and Strategies for Life’s Financial Decisions Presented By: Brian H. Grant, CLU, ChFC, MSFS Certified Financial Planner ™ President
  2. 2. Hypothetical Case Study <ul><li>Maxine T., MD </li></ul><ul><li>26 years old </li></ul><ul><li>Single, female </li></ul><ul><li>Second-year, Rheumatology Resident </li></ul><ul><li>Annual income $38,000 </li></ul>
  3. 3. Financial Planning <ul><li>Develop a budget – control spending </li></ul><ul><li>Have an emergency fund </li></ul><ul><li>Build strong personal savings base </li></ul><ul><li>Consider buying vs. renting a home </li></ul>
  4. 4. Financial Planning (cont.) <ul><li>Leasing vs. purchasing a car </li></ul><ul><li>Investing vs. paying off loans </li></ul><ul><li>Risk management / insurance needs </li></ul><ul><li>Saving for retirement </li></ul><ul><li>Education planning </li></ul>
  5. 5. Financial Calculators <ul><li>Available on our website: </li></ul><ul><li>Retirement </li></ul><ul><li>Savings </li></ul><ul><li>Taxes </li></ul><ul><li>Loans and mortgages </li></ul><ul><li>Business </li></ul><ul><li>Auto </li></ul><ul><li>Insurance </li></ul><ul><li>(See last handout for additional detail) </li></ul>
  6. 6. What is a Mutual Fund? FUND Invest $$$$ Buy Shares Earnings Potential Profits
  7. 7. Variety of Mutual Funds Money Market Fixed Income Balance Growth & Income International Aggressive Growth Higher Risk Lower Risk Higher Potential Return Lower Potential Return
  8. 8. Why Invest in a Mutual Fund? <ul><li>Diversification and stability </li></ul><ul><li>Collective buying power </li></ul><ul><li>Professional management </li></ul><ul><li>Convenience </li></ul>
  9. 9. Investment Strategies <ul><li>Remember that past performance doesn’t guarantee future returns </li></ul><ul><li>Buy selectively with a purpose </li></ul><ul><li>Know your fund’s portfolio objectives </li></ul><ul><li>Disciplined savings program </li></ul>
  10. 10. Investment Strategies <ul><li>Maintain long holding periods </li></ul><ul><li>Diversify </li></ul><ul><ul><li>Asset allocation </li></ul></ul><ul><li>Dollar cost averaging </li></ul><ul><ul><li>Purchase more in down markets; less in higher markets </li></ul></ul>
  11. 11. What Affects Portfolio Return? <ul><li>1.8% Market timing </li></ul><ul><li>4.6% Security selection </li></ul><ul><li>91.5% Asset allocation </li></ul><ul><li>2.1% Other factors </li></ul>Source: Financial Analysts Journal
  12. 12. 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
  13. 13. Reduce Taxes <ul><li>Qualified retirement plans </li></ul><ul><li>Mutual funds </li></ul><ul><li>Nonqualified strategies using life insurance </li></ul><ul><li>Nonqualified strategies using annuities </li></ul>* 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.
  14. 14. The Power of Tax Deferral Tax deferral means you don’t reduce your investment by income taxes during accumulation.
  15. 15. Disability Insurance <ul><li>Insure the goose or the eggs? </li></ul><ul><li>Ensure your future insurability </li></ul><ul><li>“ Own Occupation” definition </li></ul><ul><li>Cost of living rider </li></ul><ul><li>Residual Benefit Rider </li></ul><ul><li>Non-cancelable policy </li></ul>
  16. 16. Power of Life Insurance <ul><li>Tax deferred growth </li></ul><ul><li>Tax free retirement income </li></ul><ul><li>Income tax free death benefit </li></ul>* 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.
  17. 17. Life Insurance <ul><li>Four basic reasons </li></ul><ul><ul><li>Income replacement </li></ul></ul><ul><ul><li>Final expenses </li></ul></ul><ul><ul><li>You love someone </li></ul></ul><ul><ul><li>Giving to charity </li></ul></ul>The need and why…
  18. 18. Life Insurance <ul><li>Four Types </li></ul><ul><ul><li>Whole life </li></ul></ul><ul><ul><li>Term </li></ul></ul><ul><ul><li>Universal life </li></ul></ul><ul><ul><li>Variable universal life </li></ul></ul>
  19. 19. Life Insurance <ul><li>What financial formula was used to estimate your need? </li></ul>How much is enough?
  20. 20. Life Insurance <ul><li>The amount you need at a price you can afford. </li></ul>What is the best type?
  21. 21. FAQ’s About Wills <ul><li>What is the effect of a will on life insurance? </li></ul><ul><li>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. </li></ul>
  22. 22. FAQ’s About Wills <ul><li>Can taxes be saved by a will? </li></ul><ul><li>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. </li></ul>
  23. 23. FAQ’s About Wills <ul><li>When should a will be made? </li></ul><ul><li>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. </li></ul>
  24. 24. FAQ’s About Wills <ul><li>Who should prepare the will? </li></ul><ul><li>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. </li></ul>
  25. 25. <ul><li>1522 Old York Road </li></ul><ul><li>Abington, PA 19001 </li></ul><ul><li>(215) 887-4750 </li></ul><ul><li>E-mail: [email_address] </li></ul><ul><li>Member </li></ul><ul><li>Trinity Financial Partners </li></ul><ul><li>Visit our websites: </li></ul><ul><li> </li></ul><ul><li> </li></ul>Premier Financial Group, Inc.