Safe Money Places

Our definition of safe money is money you cannot afford to lose, or money that is protected from losses.  

Safe money places is then defined as a savings place, or institution where your principal and any earned interest are protected from losses, and are not subject to market fluctuations; the only component that fluctuates is the interest rate or yield you can earned in the future. 

You cannot lose your principal and any earned interested, as long as you follow the guidelines spelled out from that institution, such as time-duration.  For instance, if you decide to take all your money out early, you know there’s a penalty for early withdrawal.

Risk Money Places

The opposite of safe money is risk money.  Risk money is money you can afford to lose, or money that can be lost due to circumstances beyond your control.

Risk money places are investment places or institutions, where BOTH your principal and earnings are not protected and are subject to market fluctuations. 

While risk money places may offer you the potential for higher returns than safe money places, it also carries higher risks.  For instance, depending on the specific market your money is invested in, you may receive a higher or lower amount than what you initially put in should you decide to withdraw your money. Your principal is never guaranteed.

The following is a comparison of Safe Money Places vs. Risk Money Places.

How much should you have in safe money places vs. risk money places?

As a rule of thumb, many financial professionals have recommended that you use the Rule of 100.  

The Rule of 100:  Take 100 minus your age, and that’s the percentage amount of your money that should be at risk.  The rest should be in safe money places.

For example.  If you are 75 years old, 100 - 75 is 25.  That means that only 25% of your money should be at risk; 75% should be safe.

For a no-obligation, complimentary review of your safe money vs. risk money, click here or call us at (810) 714-9021.  We’re here to help you protect, grow and make your money last as long as you life’s journey.

What’s the right bank savings product for you? Deciding where to put your money is a big decision. Here are some basic facts to help you make the right choice.

Online Savings Accounts

If you’re looking to earn a higher rate than a conventional bank savings account, but still want easy electronic access to your money, this may be the account for you:

• Offers a higher yield than most traditional savings accounts or money market savings accounts.
• Includes easy online access to your funds through electronic funds transfer.
• Offers up to six withdrawal transactions per statement cycle.
• May require a minimum deposit.
• Usually no monthly service fees.
•  FDIC-insured up to $250,000 per depositor.

Money Market Savings Accounts

Want high yields, easy access to your funds, plus the flexibility of checks and a check card? Then this account could be right:

• Offers a higher yield than most traditional savings accounts.
• Access your money easily through electronic funds transfer, checks and a debit card.
• May require a small deposit.
• There may be little or no monthly service fees.
• FDIC-insured up to $250,000 per depositor.

Please note that a money market savings account issued by a FDIC-insured bank is NOT the same as a money market mutual fund account issued by an investment company. Money market mutual funds are NOT FDIC-insured and may lose money.

Certificates of Deposits (CDs)

If you can afford to lock your money away for anywhere from three months to five years, you’ll earn even higher interest rates than a Money Market Account:

Offers a higher yield on deposit than a savings, checking or Money Market account.

• The longer the term, the higher the yield.
• The CD’s fixed rate makes it immune to market fluctuations.
•  May require a minimum deposit.
• Money is not accessible (without a penalty) until the term has expired.
• FDIC–insured up to $250,000 per depositor.

For the latest and highest rates on Savings Accounts, Money Markets and CDs, click here or call us (810) 714-9021 for a no-obligation, complimentary consulation. 

What’s the right fixed annuity product for you? Deciding where to put your money is a big decision. We’ve assembled some key facts to help you make the right choice.

But, first, let’s be very clear here. We are only talking about fixed annuity products—which are insured products and the principals are guaranteed. 

We are not talking about variable products—which are securities products and whose principals and interest are not guaranteed and may fluctuate with the market.

Fixed Annuity

If you’re looking to earn a higher rate than a traditional bank savings accounts, money markets and certificates of deposits (CDs), and you can afford to let your money grow for 1-, 3-, 5- or more years, this may be the account for you:

• Principal is 100% guaranteed
• No fees– 100% of principal goes to work day 1
• Offers a higher yield than most traditional bank savings accounts, money market savings accounts and CDs
• No annual taxes
• May help avoid having Social Security benefits being taxed
• May avoid probate
• May offer creditor protection
• May require a minimum deposit
• Surrender charges do apply  

Fixed Indexed Annuity (aka Index Annuity, Equity Index Annuity)

If you will not access your money until 3-, 5-, 10- or more years,  you may have the potential to earn a higher rate of return than bank savings accounts, money markets, CDs, and fixed annuities. Fixed indexed annuities:

• Principal is 100% guaranteed
• No fees– 100% of principal goes to work day 1
• May offer a higher yield than a bank savings, Money Market accounts, CDs and Fixed Annuities
• May receive a first year deposit bonus, up to 10% or more. Earnings are linked to a market index, such as the S&P 500, Dow or NASDAQ. Earnings are capped to a percentage of the upside of the linked market index; however, there is NO loss of principal or earnings if the linked market index goes negative in any given year.
• May have check book access. No early withdrawal penalties (usually limited to 10% of account value annually)
• May provide a guaranteed life income you cannot outlive
• No annual taxes
• May help avoid having Social Security benefits being taxed
• May avoid probate
• May offer creditor protection
• May require a minimum deposit
• Surrender charges do apply

For a real life case of how a Fixed Indexed Annuity has performed over the years, click here.

For a presentation on how a Fixed Indexed Annuity works, click here.

For the latest and highest rates on fixed annuities and fixed indexed annuities, click here or call us (810) 714-9021, and see if they may be suitable for your situation. 

DISCOVER A LIFETIME OF INCOME THAT IS GUARANTEED TO LAST AS LONG AS YOU DO

In today’s volatile financial times, maintaining your retirement income may be one of the most challenging moments you’ll ever face.

We live in one of the most uncertain times since the Great Depression. 

With the continual threat of pension and corporate benefit reductions, it may be time for you to plan for a guaranteed supplemental income that you can never outlive, rather than simply trying to outguess the market, taking income from the market or buy-and-hold and hope the market will return.

Interested in learning more about income planning?  Let us help you remove the worry about running out of money during retirement.

Below are some interesting articles for you to review:

• Betting on a long life? Try an annuity
• Income Annuities In A Sea Of Investment Volatility
• Live Long and Prosper
• Many retirees should take a closer look at using annuities
• An Age-Old Problem: How to Make Sure Your Money Lasts as Long as You Do

Click here to contact us or call us (810) 714-9021 for a complimentary Income Analysis.

The following articles deals with the recent law that enables your qualified retirement accounts such as IRA, 401K, TSA, 403B to pass to your heir’s tax free or with little taxes.

The idea is to create an income stream for multiple generations to come and pay less taxes along the way.

If you are not taking advantage of these strategies, you heirs may needlessly have to pay hundreds of thousands of dollars to the IRS soon after your demise.

Protect Your IRA
Stretch Your IRA
Trust and Estates, The Stretch IRA
Some tips for making sure an IRA is passed on to your children
Inherit a Windfall Without the Pitfalls
IRA in living trust makes benefits immediately taxable upon death
Mutual Fund Firms Fall Short in Providing Wealth Transfer Tools and Education

Click here to contact us or call (810) 714-9021 for a complimentary IRA analysis today.

In 1983, Congress mandated that up to 50% of your Social Security benefits may be taxed if your combined income exceeded certain threshold limits.

Ten years later, in 1993, the law was again amended to allow up to 85% of your Social Security income to be taxed if your combined income exceeded a newer threshold limit.

In a nutshell, depending on your total annual income, a portion of your Social Security benefits, or those of your spouse if filing jointly, may be subject to income tax. If the total of your taxable pensions, wages, interest, dividends, and other taxable income, plus any tax-exempt interest income, plus a portion of your Social Security benefits are more than a certain threshold, some of your benefits will be taxable.

The thresholds are as follows: 

• Single Return – If combined income is between $25,000 (base amount) and $34,000; up to 50% of benefits are taxable. If combined income is above $34,000; 85% of benefits are taxable.
• Joint Return – If combined income* is between $32,000 (base amount) and $44,000; up to 50% of benefits are taxable. If combined income is above $44,000; 85% of benefits are taxable.
• Married Filing Separate Return – If taxpayer lived apart from spouse all year, taxation of benefits is computed the same as for a single person. If taxpayer lived with spouse any time during the year the base amount equals $0, and the taxpayer will probably pay tax on benefits regardless of income.

The amount of your Social Security benefits that you must include in taxable income depends on the total of your income plus half of your Social Security benefits. The higher the total, the more benefits that must be included in taxable income. You may have to pay income tax on anywhere from 50 percent to 85 percent of your Social Security benefits.

What Can You Do to Avoid Having Your Social Security Being Taxed? 

Contact us and stop having your Social Security benefits being taxed today. Remember, part of being a smart investor, is not paying unnecessary taxes when you don’t have to.

If you own a 401k annuity, IRA annuity or any other kind of annuity, and you are at the point where you want to start taking an income stream from it, stop.

Read this first before you do it. 

It could just save you hundreds, if not thousands of dollars!

I would like to show you a way to receive a higher monthly income.

Here’s the little dirty secret that most insurance companies do not want you to know. Insurance companies have special contracts known as immediate annuities (SPIA), which use factors which can be very competitive when it comes to income payment.

For example, recently a client was offered a 10-year payout of $700 per month for her annuity from an insurance company. Because the client was in poor health, we were able to shop around for an “impaired risk annuity” and locked in a payment of nearly $850 per month. That’s an increase of 15% or $13,000 additional dollars in pocket over the life of the contract!

So before you annuitize your 401k, IRA or Annuity, contact us first. You’ll be glad you did.

Every year, nearly a million seniors become financially insolvent as a result of the high costs of long term disability care. What many people do not realize is that Medicare generally does not cover the cost of long term care.

Where Medicare does cover, however, is limited to skilled nursing care and is available only for the first 100 days. After 100 days, Medicare pays nothing. You must finance the care yourself or spend-down your assets until you are poor enough to qualify for Medicaid.

In order for Medicare to cover skilled nursing care, you must meet these requirements:

• You have a condition requiring daily skilled care;
• You have been hospitalized at least three days in a row;
• You have been admitted to a skilled nursing facility within 30 days of leaving the hospital;
• Your care in the skilled nursing facility is for a condition that was treated in the hospital, and
• Your physician has certified that you required skilled nursing services.

Today, if you are facing a potential long term care crisis, you have three options.

For most people, Option # 1, is where it all starts. You pay for the care out of your own resources. But unless you have lots of money, this is not a viable option for the long term.

Option #2 is becoming increasingly more popular as a result of the Deficit Reduction Act of 2005, because the government strongly recommends that all who are eligible to purchase long term care insurance do so now.

Option #3. If you are a veteran or a surviving spouse of a veteran, you may be eligible for benefits from the VA to help pay for your home healthcare, assisted living or nursing home.

If you have already spent down all your assets to below $2,000, you may be eligible for Medicaid assistance. But Congress has passed sweeping legislation (Deficit Reduction Act of 2005) that significantly affect Medicaid benefits.

This new law imposes punitive new restrictions on the ability of seniors to transfer their assets before qualifying for Medicaid coverage in a nursing home.

• The look back period has been changed from 3 to 5 years.
• The value of a house that can be exempt is limited to $500,000.
• Annuities and many other planning tools may be eliminated.
• Monthly gifts are severely limited.

Today, more important than ever, you must preplan for the possibility of long term care. The government has made it cleared; their help is limited. It is your responsibility to plan for your long term care needs if you want to protect, preserve and pass on your legacy. If you are thinking about Medicaid Planning, be sure to talk to licensed professional who specializes in Medicaid Planning.

Click here to contact us for additional information.

Question: Where else can you do business where you’re dealing with other people’s money, it’s insured by the federal government, you pay your clients as little interest as possible, and you have the potential for huge profits?

Banks, of course!

Banks love it. They love your “passport” savings, money markets, and especially Certificates of Deposits (CDs).

In the current low interest rate environment, banks get to pay you little interest on your money while they reinvest your money and stand to earn substantial profits. 

Why do you suppose banks have gigantic buildings, especially some of the tallest buildings in the world?

You guess it. They know how to make huge amounts of money on our money.

Every year, Americans pour millions of dollars into CDs with the hope to earn a few a bucks here and there. They feel safe placing their money with the banks because they see that their money is “FDIC-insured”. 

But just how safe are CDs? Let’s consider the following points:

1. Inflation Risk         The interest you earn on your CD usually does not keep up with inflation. According to Inflationdata.com, the inflation rate for July 2008 was 5.60%. And, bankrate.com showed a national average of 1-year CD rates at 3.69%. 

If you are earning 3.69% in your bank CD and inflation is at 5.60%, what is your earning?

Nothing!

When you account for taxes you have to pay for those earnings, it gets even worst!  In a 30% tax bracket, your earnings are reduced to a mere 2.58% after taxes, and -3.02% after adjusted for inflation.

At this rate, what kind of purchasing power do you have?

2. Returns       Real returns on CDs, after taxes and inflation, usually fall into negative territory about 50% of the time.  Unfortunately, a reliance on CDs to fund your retirement plan could result in big shortfalls at retirement age and may require you to go back to work.

If you’re considering long-term savings for retirement, consider using tax-deferral vehicles instead of taxable ones. As the example below shows, utilizing tax-deferral clearly provides you with an advantage over taxable savings.

This may provide you with the ability to maintain your purchasing power. And, this is one reason it’s important to find savings vehicles that not only can provide you with an inflation hedge but also tax-deferral, such as inflation-protected savings bonds, fixed rate annuities, fixed index annuities, etc.

3. Tax Risk      Not only is the earnings on a CD taxable, it could also make your Social Security income taxable up to 85%.  First, whether you are earning social security income or not, the fact that interest from bank CDs is taxable should be a concern.  You can never avoid taxes, but if you do not need the interest to supplement your income, why pay the unnecessary taxes? 

Never pay taxes if you do not have to.

Second, if you are earning social security income, then the interest you earn from bank CDs may be enough to make more of your social security income taxable.  Obviously, if you need the interest income to supplement your social security, then the extra tax burden is something you must live with.

Let’s look at an example.  If you’re a married couple earning $30,000, there are no taxes on your social security income.  However, if you earn more than $32,000 ($2,000 in additional interest from bank CDs), then 50% of your social security income becomes taxable.  If you have social security income of $24,000, then 50% of it is $12,000, taxed at 15% tax bracket and your tax obligation is $1,800. 

Basically, if you earned $2,000 more in interest, you essentially have paid nearly all of that back in taxes!

Ouch!

3. Lost Opportunity Cost       When you pay taxes on the earnings on your CDs, those tax dollars are gone forever, and you lose the future earnings potential on those dollars. You lose the opportunity to use those dollars to earn more interest in what’s called compounding interest.

But you don’t pay taxes out of your CD earnings, do you? You pay the taxes out-of-pocket. But really, is there a difference? Of course, not. A dollar out of your right pocket is no different than that which comes out of your left pocket.

Often, most bankers will tell you to let your interest accumulate or “roll over” and add to your CD’s principal. But is this good advice? 

Not only do you suffer the increasing annual tax consequences but you also lose any potential interest you could have earned on the money you paid out in taxes. This is what’s called your lost opportunity cost (taxes paid plus the interest you could have earned on that money had you not been required to pay it to the IRS).

Take a look for yourself. In this example, let’s assume you’re in a 30% tax bracket and you earn a rate of 5% on your CD. As you can see, as you continue to “roll over” your interest from one year to the next, your taxes keep rising and so does your opportunity cost!

So, after 20 years, your CD is worth $265,329.77. But you’ve paid a total of $49,598.93 in taxes and lost an opportunity to earn $75,808.51. Taking the opportunity cost away from your CD’s value, and it’s only worth $189,521.26.

3.  Liquidity Risk       There can be significant penalties to access your CD early. Most banks charge 5-15% in penalties to access your money in a CD.  You can plan around this by laddering CD maturities, but that causes two problems.  First, you can never plan well enough for emergencies and waiting for a CD to mature every year may be a problem if you need money immediately.  Second, the interest you earn when you ladder CD maturities is significantly reduced because you are committing your money to the bank for less time.  Banks do not allow any penalty-free access to your money in CDs prior to maturity.

The end result of laddering is reduced earnings and greater inflation risk and overall, bank CDs do not provide any liquidity for unexpected needs.

4. More Liquidity Risk      Banks do not allow any loans against your bank CDs.  You can certainly try to obtain a loan with your CDs as collateral, but you cannot directly access your CDs funds in the form of a loan.  This further reduces your liquidity options if you need access to your money.

5. Probate Risk      Bank CDs do not automatically avoid probate.

If you have a Will, then your entire estate will be subject to the probate process upon your death.  The probate process can cost your heirs 3-10% of your assets and take 6-12 months to full completely.  Bank CDs are not exempt from this process unless you have a Living Trust or other Trust vehicle set up to protect your estate.  The final result is that your bank CDs could be held up in the probate process and not directly accessible by your heirs.

6.  Income Risk      While it may be possible to live off on the interest on your CDs, what happens when interest rates fall like these days?

When interest earnings are not enough to supplement current income, most people begin to invade their principal, and soon all their CDs depleted.

A CD does not and cannot guarantee you a lifetime income stream.

7. Creditor Risk     Bank CDs can be garnered or seized by creditors. Having a CD in a bank is as good as cash in your pocket. You have no protection whatsoever if you are sued or if a creditor comes after you.

8. Risk of Bank Seizure        If you own a CD and take out a loan with the same bank, if you default on the loan, the bank may seize your CD. Because CDs carry no asset protection, any creditor, including the very own bank you place your CD with, may seize your CD to fulfill the obligations of your loan. 

Make no mistake about it. Your CD is not as safe as you might think.

9. Risk of Bank Failure      A Bank CD is only as safe as the Bank holding the CD. Sure, bank CDs are FDIC-insured, but when a bank fails, not everyone may get all their money back. FDIC insurance only covers up to $100,000 per depositor. If your deposits are above that, you may or may not get all of it back. Take a look at these recent bank failures. Notice the percentage of assets exceeding the insurance limit recovered.

Sources: www.fdic.gov
For the latest list of bank failures, click here. 

10. FDIC Risk           If you think your CD or money at the bank is safe because it’s FDIC-insured, you may wish to think again. First, the FDIC is an insurance corporation; FDIC stands for “Federal Deposit Insurance Corporation.

The FDIC was created by the federal government in response to the many bank failures in the 1920s and 30s. It’s goal, to restore consumer confidence in the national banking. Just like it says in it’s name, the FDIC insures deposits in accredited banks and thrifts up to $100,000.

Since the creation of the FDIC, no one has ever lost any insured money after a bank failure.

However, there are many instances where people have lost money, and it’s important that you do not. Here are some situations you may want to pay particular attention to:

A.     PAYABLE-ON-DEATH  (POD) ACCOUNTS        Each beneficiary’s share of a POD account may be insured up to $100,000 ($200,000 if there are two beneficiaries, $300,000 if there are three, and so on). However, the beneficiary must be a “qualifying” beneficiary. That is, the beneficiary must be the grantor/depositor’s spouse, child, grandchild, parent or sibling. Other relatives, such as nieces, nephews, cousins or in-laws, as well as friends, do not qualify the account for the additional insurance coverage provided to other POD accounts. What happens if you name a non-qualifying beneficiary? The portion payable to that person would be added to any accounts you have at the bank in the single (or individual) account category and the total will be insured to $100,000.

Example: You have a $300,000 CD at the bank with POD designation, with your nieces and nephews as beneficiaries. Because they are not considered “qualifying” beneficiaries, if your bank fails, you are only insured up to $100,000, the rest is not insured.

B.    LIVING TRUST AS BENEFICIARY          You set up a living trust as a way to retain full control over your assets from the grave. However, you may be surprise to find out some of your kids’ inheritances may go up in smoke if the bank holding your CD or other funds fail. 

FDIC rules treat a living trust similar to that of a POD account. As such the rules require that the funds be passed directly to the named beneficiaries without any condition. 

However, most living trusts do contain provisions and conditions before any payment is made to your kids, such as a child must not get married before his/her 30^th birthday, or he/she must graduate from college, etc.

As a result, living trust accounts very often are ineligible for the $100,000-per-beneficiary insurance coverage. Instead, they likely would be insured to $100,000 in total along with any individually-owned deposits of the person who established the living trust account.

C.    IRA ACCOUNTS & KEOGHS        If you purchase a CD within your IRA or Keogh Plan, generally speaking, you are insured separately from your other account types, up to the maximum limit of $250,000.

However, if you have an IRA worth more than $250,000 and you spread it among different branches of the same bank, and named different beneficiaries, all your accounts must be added together and you can only be insured up to an aggregate of $250,000. 

So, say for example, you have $500,000 in CD IRAs, and you split them into 5 different $100,000 IRA accounts at 5 different branches of the same bank. You’re still insured only up to $250,000; the rest of the $250,000 is not insured.

D.    JOINT ACCOUNTS    If you have a joint account with a spouse, child or another person, FDIC rules state that you can not be insured for more than $100,000 for your share of all joint accounts.

Example: You own a joint CD account with your spouse for$200,000. FDIC rules state that you would be insured for $100,000 and your spouse $100,000. 

However, if you have $500,000 worth of CDs and you have more than one joint account at the same bank, the rules say you cannot be insured for more than $100,000 for your share of all those joint accounts, $400,000 would be uninsured.

E.     MULTIPLE BANK CDs       If you have more than one CD at a bank and all total more than $100,000, you are only insured up to $100,000, the rest is not insured.

Example: You bought a CD October 1^st of last year for $50,000. Then a broker sold you another CD with the same bank (but you were not aware of it) for another $75,000. You’re only insured up to $100,000, the $25,000 above the limit is not insured. 

For additional on FDIC coverage, visit the FDIC website.

When was the last time your bank told you these potential risks with your CD or bank deposits?

For a complimentary review of your CDs and bank deposits so you may avoid these common risks and more, click here and an Advisor will contact you promptly.

Want to rescue an over-priced, under-promised variable annuity?

Chances are, like so many investors, your traditional variable annuity may not be working hard enough for you. Many variable annuities (VAs) carry high fees, which could erode the principal and reduce growth potential. If you account for upfront sales commissions and limited fund choices, most VAs simply don’t perform as promised.

Today, you may be able to save more money by transferring those nonperforming VAs to a low-cost variable annuity or no-cost fixed index annuity through a non-taxable procedure called a “1035 exchange”. It’s fast, simple, and it may cost you nothing.  However, before the exchange, you’ll want to see if your current annuity will assess any surrender charges. You’ll also want to evaluate the current annuity’s features to determine if you need these benefits or if you can use a more cost-effective solution.

Chances are you’re probably paying too much!

With exception for a few, nearly all variable annuity companies charge “mortality and expense” fees (M&E). This covers basic insurance guarantees such as the death benefit and a guaranteed lifetime payout option. These fees are calculated as a percentage of your annuity’s account value. So the more money you have invested and the more your annuity grows, the higher those fees will grow, too. Over time, these fees can cost more than the benefits that you or your heirs might receive.

It’s time to review what you have and see if you’re paying a fair price for what you’re getting.

A simple check up could save you thousands of dollars each year.

Americans still need to save more for retirement and rescuing an overpriced, under-promised variable annuity is one way to help.

So when was the last time you gave your variable annuity a check up?

According to Morningstar®, the average VA charges 1.35% a year in insurance fees. On a $100,000 annuity that adds up to $1,350 per year. If your VA performs well for the year, you could pay more!

The simple, low-cost solution to save more for retirement: Low cost or no load annuities.

When it comes to retirement, the more you accumulate, the more income you can generate. So if you’re committed to building long-term wealth, then you’re already maximizing contributions to traditional tax-deferred plans such as a 401(k), IRA and Roth IRA.

Why low cost or no load annuities? You can take back thousands!

If you already own a VA and exchange it for a low cost or no load annuity, you could take back thousands of dollars in unnecessary fees and put that money back into principal, where it belongs, to save more for retirement.

Contact us for a complementary Variable Annuity Rescue Plan analysis, or click here to contact us.