How to Leverage Insurance to Supplement Retirement Planning

One thing people don't realize about insurance is that its tax status makes it a very viable option to supplement any retirement plans you may have while providing protection for your family.

Here is one example of how one can leverage insurance to aid in retirement planning this is especially helpful if you plan on retiring before 59.5 where you would suffer penalties taking money out of your 401k.

If you were to invest in either a variable or universal policy and you put extra money into and let it grow to the max with out losing its insurance status you can then take withdrawals out tax free.

When I say lose its insurance status I mean exactly that if you over-fund a policy beyond a certain point , which with todays software can be easily illustrated for various scenarios the money in the policy may be taxable as a gain. So before you go funding your life insurance policies like crazy, have your financial representative make an illustration of for example of what would happpen if you put 300 dollars away in a variable policy at age 24 till age 55 and then took out withdrawals for 5 years. You will be pleased to see how much your money has grown but also how much you can take out tax free.

When using this method you need to make sure that you don't let your policy lapse you see as long as any death benefit is paid the money you invested and took out will be tax free.

Note that when using this method that some money is lost to offset sales charges and fees, if you were to invest in the same investments that are within a variable life insurance policy outside the insurance policy if you put them side by side the investments outside the insurance policy would be more however depending on you tax situation the insurance policy may be a good fit. After all its not how much that is in your account that is most important but its important to know how much you keep.

This is just one of the many reasons why Life Insurance may be a good option for you. If you need further assistance or would like to see an illustration of how this works shoot an email over to medinifinancial@gmail.com

What is an Annuity?

Several people ask me about their retirement goals and what I can do to help. Some people have asked me this question out of pure curiosity. Medini Financial in Ephrata would like to share its knowledge of what an annuity is and go into a little detail of the different types of annuities out there.

Annuities are products that are sold by licensed insurance agents that pays income out to its annuitant.

Annuities come in several varieties.

A fixed annuity pays out a fixed amount of income to its annuitant and grows at a fixed rate.

A variable annuity on the other hand is similar to an investment in a 401k where you can choose the subaccounts where your funds are invested.

People often choose annuities for two reasons one it offers another vehicle for tax deferred growth, and the second reason is because to ensure a steady stream of income in retirement.

Here is an example of how annuities have helped people in retirement.

Harry is a 65 year old man who is retired he has 800,000 dollars he has saved up for retirement, lets say he needs 50,000 dollars a year to survive. He can elect to leave the funds in an investment vehicle like a CDS, stocks, bonds, money market accounts, or a savings account depending on risk tolerance. Now if Harry's investments make a 0% return on investment the money will last 16 years, longer if the the investments do well and obviously shorter if the investments go south.

An annuity may help him guarantee a stream of income for as long he lives in exchange for either a one time payment, or a series of payments into the annuity. In case of options he can take out the money immediately known as an immediate annuity or he take out the money later what is known as a deferred annuity.

Now in this case is Harry would like to have guaranteed income the annuity can be the perfect vehicle. In this case an annuity is appropriate because income is more important than liquidity. If Harry were to live to be 100 and if he started taking out payments at age 70. He would have had a guaranteed stream of income all those years.

Annuities may or may not come with riders and additional benefits at various costs usually a few basis points. This topic has confused a lot of people with all the options out there.

Often times Fixed annuities are more suitable than CD's but sometimes CDS are more suitable than fixedannuities. The main attraction with an Annuity is often times the insurance companies pay higher rates than a CD.

Payouts on annuities can be for various options,including lifetime, or a for certain period of time i.e 20 years. For more information you can check out this great article

http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index.html

or you can contact Medini Financial at 717-419-6347 or via email medinifinancial@gmail.com Every person's financial situation is different. Let Medini Financial take a look at your individual situation and you can see if what options are best for you and make your own decision.

Medini Financial is committed to share its expertise with the local community. Should the need arise for you or your family Medini Financial looks forward to getting you the best rates and world class service.

When Should I consider life Insurance?

Someone reached out to me today and sent me an email asking:
When should I consider life insurance?

This is a very good question and every person's situation is different. To answer that question I will also answer these two questions : What is insurance? What is life insurance specifically?

I remember when I was studying to get my license and I ran across the definition for insurance. I always knew what insurance did on some basic level but didn't have a legal definition for it. Chris Rock put it this way, insurance is giving someone money in case (expletive) happens. The legal definition is that you are transferring risk from one party to another. Simple right. Life insurance is transferring the risk of someone passing away and the financial outcome as a result. So when you purchase or consider life insurance you are transferring the risk that you will pass away in exchange for money? This is the most basic reason to buy life insurance is to protect your loved ones in case you pass away in an untimely manner. Life insurance provides a tax free benefit to a party who would be affected by your loss, i.e your beneficiary.

Life insurance is normally purchased when:

1) A couple gets married.

2) You are taking on a loan college, vehicle, home purchase etc.

3) You have someone dependent on you for financial support who would be hard pressed with out you. To replace income for e.g Birth of Child, Adopting a child, caring for parent, etc.

4) If you are planning on retiring before 59.5 years old (will go into detail later, this involves advanced topics in insurance and its tax situation)

5) You or your loved ones cannot cover the costs for funeral out of pocket (10,000)

6) A child is born and the insurance will be used as a partial vehicle to fund college expenses (also an advanced topic which will be touched upon later)

7) To divide up funds equitably once you pass away and increase the amount your next of kin would receive (also another advanced topic which will be discussed at another time)

8) To be used as a vehicle for charitable giving could be an organization could be your University

9) You are looking to use insurance as an investment vehicle (also another advanced topic to be discussed on this blog)

Most Common Questions and Answers about Paramed exams

Often times my clients have asked me what happens when you have a paramed exam and a related question when would I need a doctors exam or an ECG?

For most people time is money, so they want to know how long does a paramed exam take?

Answer: Usually 15-30 minutes.

What is the paramed going to do?

Answer: They will at a minimum take your blood pressure, height weight, urine sample and also draw a blood sample which may or may not require you to fast for 12 hours before the exam. They also will ask you a series of medical questions about your family history and your personal medical history. (Don't lie to the examiner the test will show any conflicts) If you are applying for a larger face amount you may have to also have an ECG done which the examiner will have a portable machine to do that for you.

When do you need a doctors exam?

Answer: Similar to the ECG requirement it is usually required for people who are older or for clients requesting large face amounts of insurance.

How much does this cost?

Answer: he exam cost nothing to have done and you will get all the results back which you can then share with your doctor.

Why do I need to get this done?

Answer: Bottom line the insurance company doesn't want to take on any unnecessary risk, and frankly you don't want them to either because if their funds run short, claims take longer, the company's customer service suffers, and they may go out of business all these things are not good. Underwriting and the exam will allow the insurance company to rate you and if you are in shape and healthy that will result in lower premiums.

Where can the exam be done?

Answer: The exam can be completed either at home or at work often times the examiner may be able to see you Monday through Friday between 7am and 8pm or even on Saturdays.

Hopefully that cleared up some things for you folks out there. Medini Financial strives to provide insurance and financial answers in Ephrata and Lancaster County. Check us out on facebook and become a fan just search Medini Financial.

What is the difference between the insurance policy with only a few questions and no exam versus the policy that requires an exam?

Recently, I have received an email from someone in Lancaster looking for insurance who asked what is the difference between companies who just ask few medical questions with no exams versus going through underwriting and possibly an exam.

You may have gotten in the mail or have heard commercials both on the TV and the Radio about life insurance with no exams just answer a few medical questions and mail back in your check and you get life insurance. Some of these companies even offer guaranteed policies. What they don't want you to know is that you may be guaranteed insurance but only if you have an accidental death and there may be several caveats where you are not covered under a guaranteed issue policy that may or may not have medical questions.

The next type of policy discussed earlier is the one that all you have to do is answer some questions and you may or may not be offered coverage while these are often times more appropriate for a client there is a price you for the convenience of not having a medical exam. Here the main difference when you forgo the medical exam and blood work the life insurance companies are taking a larger risk on an individual who may be in poor health and who is a higher risk. So in order to leverage against the risk what they do is charge often charge 4-6 times the normal rate you may have paid had you gone through underwriting. By charging more you receive a policy relatively quick and easy, however in the eyes of the insurance company a person they must assume that you are a bigger risk even if you are not. What these companies often do is offer lower amounts of insurance with no exam as not to expose themselves to a high risk. It is also beneficial because 25,000 dollars worth of insurance at 4 times the going rate may come out to 20 dollars a month versus listing 100,000 dollars worth of insurance at 4 times the going rates can easily cost over a $100 dollars a month with no exam.

Often times people will actually opt for the smaller amount of insurance to save them self the time with an exam. What you are really doing is similar to eating out versus cooking at home. You are paying more money each month in exchange for convenience however on a large scale. Depending on your situation it may be beneficial to just answer the questions and pay more to get that peace of mind right away. on the other hand you may want to go forward with a policy that requires an exam. Financial the policy with the exam cost several times less. You get a free exam that will let you know your cholesterol if you are pre-diabetic etc. The main thing here is that you can get a lot more insurance for your money going through underwriting. Similar to how car insurance companies charge people more for having bad driving records they also charge smokers and people in poor health more for their insurance. If you have a clean bill of health you pay less the same way you would for car insurance with a clean driving record. The main difference here is that when you answer the questions without the exam you are often paying for one size fits all underwriting which often the same as paying the same car insurance premium as someone with a bad record. In some cases having a blanket premium may be cost effective if your health is not the best it could be. However if you are young and healthy; underwriting and exams may be the way to go.

Next post will answer another popular question I have been asked which is "What does the exam entail?



Medini Financial recommends each person evaluate their individual circumstances and to speak with an insurance or financial professional before making any decisions for or against a policy. This information is for educational purposes. Medini Financial is licensed with the Pennsylvania Dept of insurance.