The 2 Most Important Insurance Policies For Newlyweds | I Bet You Don’t Have Enough Of These

Updated: March 30, 2020 at 8:05 pm

Couple Holding Hands At SunsetInsurance policies for newlyweds? “Ha!”, you think. “Do you know what we have been doing?”, you ask.

No doubt this is a busy time for you. You went from cake-tasting and registry selection to writing thank-you notes and getting adjusted to married life. We at My Family Life Insurance say congratulations! Enjoy this time in your life. Have fun together. You are forming one life; enjoy it. Can you imagine your life without the other? No. We know you can’t. Once your life settles down a bit, a serious discussion needs to be had. Yes, about insurance.

In this article, we discuss the two most important insurance policies for newlyweds. Continue reading The 2 Most Important Insurance Policies For Newlyweds | I Bet You Don’t Have Enough Of These

Annuity Versus Life Insurance: Which Is Better To Save For Retirement?

Updated: March 27, 2020 at 8:14 pm

answers for annuity versus life insuranceRecently, we have had several clients approach us if they should purchase an annuity or life insurance policy as it relates to saving money. Both can offer conservative value growth with really no loss of principal. If you want to save for retirement, or just for emergency savings, the decision to purchase an annuity versus life insurance policy depends on the answer to one question. We will get to that question in a minute.

In this article, we will discuss the characteristics of an annuity versus life insurance policy. The life insurance we will specifically talk about is cash value life insurance. It is permanent life insurance, like whole life or a universal life insurance policy.

Here’s what we will talk about:

Which is better in your situation? Read on to find out.


Big Misconceptions About Annuities

Let’s level-set and talk about annuities. I am sure you have heard about annuities. You may have heard from other financial professionals to stay away from annuities like the plaque.

This isn’t true. Annuities aren’t bad. They become bad if they don’t fit your situation.

There are many types of annuities. The true definition of an annuity is a sum of money received at regular intervals, like monthly or annually. Think: pension.

However, now there are many types of annuities. Some are deferred, accumulation annuities and others meet the true definition of an annuity. These are known as income annuities or immediate annuities. The annuity we are talking about in this article is a deferred, accumulation annuity.  We aren’t talking about SPIAs, DIAs, or QLACs (also known as the “alphabet soup” of annuities) as these types of annuities offer an income stream.

So, How Does A Deferred Annuity Work?

A deferred annuity has the look and feel of any other savings asset. Generally speaking, you put money into the annuity every month or another frequency of your choosing, and the annuity grows in value.

Well, John, you say. I don’t want to lose money.

That’s the thing with annuities. You don’t lose money in an annuity unless it’s tied to the stock market. Annuities, generally speaking, are very conservative investments. Annuity carriers invest your premiums in conservative investment vehicles. Carriers don’t take a lot of risks at all. Even fixed-index annuities, which track the performance of a market index, are safe.

The only time you would lose money if you surrendered the contract early and faced surrender penalties or other charges.

These conservative annuities might offer a return similar to that of short-term to immediate term bonds, but without the bond market volatility.

They definitely offer a rate better than the CD or savings account at your bank. Moreover, the growth in the annuity is tax-deferred until withdrawal.


What Is Cash Value Life Insurance?

You may hear once in awhile “cash value” life insurance. You know what life insurance is, but what is “cash value”?

All cash value is the “savings account” component in a permanent life insurance policy like whole life or universal life. When you pay the premium, part of the premium goes to the cost of insurance and other fees. The remaining part goes to the cash value.

Check out how a typical carrier applies premiums to an indexed universal life insurance policy:

disadvantages of indexed universal life insurance

We won’t bog you in the details, but you can see the carrier pulls out the policy expenses. What remains is the cash value.

Like the growth in value in an annuity, the cash value growth usually is conservative. The growth really depends on the carrier and type of life insurance. Nevertheless, the return is similar to that of short-term to immediate bonds.

 

 

 

 

 

Many carriers offer a guaranteed interest rate. See this below:

Additionally, they may offer dividends that you can receive and put back into the policy. Dividends aren’t the same as the dividends offered by publicly traded companies. They aren’t guaranteed, and they represent, essentially, premium monies returned to you.

The growth in the cash value really depends on the carrier and the type of insurance. Whole life offers guarantees and dividend-participating policies. People like this because they will always receive some growth every year (except in the first couple of years).

Indexed universal life is very popular. The reason why is a policy owner could possibly receive a higher cash value. Remember, the IUL tracks the performance of a market index. If the underlying index has a nice performance year, you’ll receive a portion of that growth. You won’t receive all of it, because an IUL protects you from any loss with the creation of a floor. The carrier pays for this floor by limiting your growth upside.

Nevertheless, these life insurances offer a conservative cash value growth with no potential for loss (unless you surrender the policy early or have optional riders/policy expenses).

Well, what is better? Let’s compare an annuity versus life insurance next by answering one question,


The One Question

So, which should you choose? As we will get into next, the annuity and the cash value in the life insurance is similar. However, there are differences. We will get to that in a minute.

Answering one question can help which one is more appropriate in your situation.

The one question that needs to be answered in the annuity versus life insurance decision. It will really determine which way is right for you.

Are you healthy enough to go through medical underwriting with life insurance?

Pretty simple question. If the answer is  “yes,” then a life insurance policy is most likely appropriate. If the answer is “no,” then an annuity policy could be the best choice.

It doesn’t get much simpler than that, does it?

There you have it. The annuity versus life insurance debate is settled by answering one question. People get so wrapped up about it. But, if you had cancer or heart disease, a good life insurance plan (remember: to save for retirement) might be out of reach. You’d be better off with an annuity to save.

Next, we will go into the similarities and differences of an annuity versus life insurance. The characteristics of each should make this decision much more clear.


Characteristics Of An Annuity Versus Life Insurance

I want to be clear. Saving for retirement through an annuity and even a whole life insurance policy might put you way behind of your retirement savings goal. I write this even as the market has been crushed by Coronavirus.

However, I feel a portion of your portfolio can and should be placed into a safe savings vehicle such as an annuity or cash value life insurance. As I mentioned, the growth is conservative. You can’t lose money from market losses.

We will go through several characteristics of both an annuity and life insurance. Here they are in no particular order, subject to state requirements and regulations (meaning, not all characteristics may exist in all states):

Characteristics

suitability – no suitability requirements for life insurance (or any life insurance), but there are suitability requirements for an annuity.

decision turnaround time – about one week or more for life insurance. Annuities usually about a week or less.

premium bonus – yes, on annuities. Possibly on life insurance, but not likely. Don’t know what a premium bonus is? It is a bonus, usually based on contribution, that the carrier offers as an inducement to buy.

Usually, the premium bonus ranges from 5% to 10% or more of contribution. We would never suggest purchasing any product for simply the bonus.

tax-deferred growth – both annuities and life insurance offer tax deferred growth.

guaranteed interest rate – yes on annuities and whole life insurance. Some IULs have guaranteed interest rates. Generally speaking, up to 4% guaranteed interest rate on whole life insurance and 1% on annuities.

paramedical/physical exam – no on annuities. Life insurance could require a paramedical exam.

free withdrawal period – yes, for annuities. No for life insurance.

loans – yes, usually loans are available on both.

accelerated living benefits – yes, most life insurance and annuities allowed accelerated benefits for terminal illness, nursing home / home health, and/or critical illness. These are subject to state regulations.

issue ages – annuities tend to underwrite for longer ages, some as long as age 90 or more. Life insurance, on the other hand, usually allows application up to 85.

surrender charges – both SPL and annuities can have surrender charges, which are penalties for terminating the policy early.

income tax-free value – the largest advantage I see between cash value life insurance and an annuity is that the cash value in life insurance could be withdrawn on an income-tax free basis. This is huge. With an annuity, likely not unless the annuity is in a Roth IRA.


You Might Need An Annuity…

In my opinion, if you qualify for life insurance, that might be the better way to go. However, you need to compare the annuity illustration with a life insurance and compare the guaranteed values.

There are many reasons why you may want an annuity instead of life insurance. The reasons include:

(1) you don’t qualify for life insurance because of underwriting

(2) you can afford a lower premium versus life insurance

(3) an emergency fund needed: an annuity can work well

(4) have CDs that just are not earning enough. An annuity could work well if you don’t need the income to live off


Now You Know An Annuity Versus Life Insurance

We hope you learned the similarities and differences of an annuity versus a life insurance policy. Deciding on which really depends on you. If you can qualify for life insurance, that might be more beneficial as the cash value has the potential to earn a higher amount compared to an annuity. Additionally, cash value life insurance has the potential for income-tax free income. An annuity will only allow that if it is placed in a Roth IRA.

Here’s the moral of our article. Contact us, or use the form below. We obviously can help you determine the right course of action for you. Moreover, we have duty of care to put your interests first. That allows us to offer a no-risk conversation. Why? Because we are simply trying to learn about you and your situation. At the very least, you’ll learn something new and part as friends! Seriously! That is the only way we know how to work with our clients.

Learn More

Interested in learning more about the information in this article? Fill out the form below and we will email you additional customer literature, explaining these options in more detail. We are here to help and work only in your best interest.

5 Ways To Save Money On Medicare [Simple Solutions]

Updated: March 25, 2020 at 8:04 pm

Medicare and Medication MoneyAre you looking to save money on Medicare? You are not alone.

According to a new report by CNBC, a healthy couple aged 65 could expect to pay over $385,000 in today’s dollars in Medicare with copays, coinsurance, and deductibles as well as dental premiums, vision costs and more!

If you are currently on Medicare, or will be turning 65 soon, you may have wondered how to save money on Medicare. Like anything else, figuring out ways to save takes some effort on your part. There’s many simple solutions, though. It can seem impossible. It is not.

In many cases, the process of saving money on Medicare is similar to that of saving money on other things. If you are a person who just can’t save money in general, then saving money on Medicare and other healthcare expenses will be hard.

In this article, we discuss the following. Feel free to click and jump around.

Let’s talk about a Medicare assessment next.


Take An Assessment to Save Money on Medicare

In order to truly save money on Medicare, you first need to perform a financial self-assessment on your health. Does this mean you have to be a doctor? No, all you need to do is look in the mirror of your current health. Answer these questions:

  • What were your health expenses during the last couple of years, including premiums?
  • How much did you spend on prescription drugs?

(Note these two are easily found on your health insurance carrier’s website whether it is Medicare or not.)

  • Do you have a family history of any conditions or diseases?
  • Are you comfortable with out-of-pocket exposure or do you want a plan which will cover nearly everything?

The answers to these questions will help determine the best Medicare plan for your situation. For example, if you had a lot of out-of-pocket costs, or have a long-term, costly chronic condition, a Medicare Supplement plan might be beneficial for you rather than a Medicare Advantage plan.

It is also important to make a list of the providers you see and gather a list of your prescription drugs. You will want the right part D prescription drug plan and assistance through the “donut hole” if you are exposed.  More on that in a minute.

What you are trying to do: you are aiming for the “Goldilocks” plan. It is the one that you don’t pay too much or not enough. In other words, one that is “just right” in terms of cost, coverage, and your specific financial and health situation. Some people will spend too much on Medicare insurance plan premiums or too little which cost them higher out-of-pocket costs.


Knowing Your Income Will Save Money On Medicare

A majority of us paid into Medicare during our working years. This allowed us to pay for Part A (hospital care). Therefore, nearly all of us do not have to pay for Part A upon enrollment.

However, Part B is a different story. We do have to pay for Part B (doctor services), and how much we pay is directly based on our modified gross adjusted income from two years prior. For instance, your 2020 Medicare Part B premiums are based on your 2018 MAGI. In 2020, for single income individuals with less than $87,000 MAGI and joint filer with $174,000 MAGI, your monthly Part B premium is $144.60. A MAGI above these levels results in a higher Part B premium.

If you are in a higher bracket and earn a higher income, you may ask how you can mitigate this? Have a tax, cash flow, and spending plan. Although we are not tax advisers, we are CFPs and financial planners. You will want to understand the different tax income options. You will also want to keep an adequate cash on hand and try not to tap into retirement savings. At the end of the day, you will want to work with a qualified advisor who has experience with creating a retirement income plan.


To Save Money On Medicare, You Need To Know Your Enrollment Periods

Do you know your enrollment periods? This is one of the keys to save money on Medicare. Many don’t, and this is a major mistake I see many Medicare beneficiaries make.

Three months before you turn 65, a 7 month window starts for your Original Medicare (A&B), Medicare Advantage (C), and Prescription Drugs (Part D). Moreover, if you have done your homework and wished to purchase a Medicare Supplement plan instead, that window begins the month you turn 65 and goes an additional 6 months.

Why are these initial enrollments important? If you don’t sign up when first eligible for Medicare, you will pay a penalty.

The Part B penalty is 10% of the premium for every 12 months you should have been enrolled. It is a lifetime penalty, so getting it right the first time is important. Likewise, you will pay a penalty if you don’t sign up for Part D prescription drugs when first eligible. That penalty is different than the Part B penalty. So, it is important that you know these enrollment periods in order to save money on Medicare.

 What happens if you continue to work beyond age 65 or on an employer-retiree health care plan? This is an allowed exception, and you can delay your enrollment period once you are off your employer plan. You will have a special election period. As long as you make your choices within the special election timeframe, you won’t pay a penalty.

Moreover, you can make changes to your plan, without penalty, during Medicare’s annual election period. This period runs between October 15 and December 7th. During this time, you can disenroll in your current plan and enroll in something else. Plan changes during this time will be effective January 1 of the ensuing year.


Knowing Your Plan Options Can Help Save Money On Medicare

You really have three common plan options when it comes to Medicare insurance plans (there are other plan options for specific needs individuals such as Medicaid beneficiaries. These plans are outside the scope of this article). Which one you choose depends on your self-health assessment. That is why the self-assessment is important because it will save you money.

Note that some plans pay more benefits and others pay less. The premiums range: a lower monthly premium usually means greater out-of-pocket exposure and vice versa. Between the Part B premium, Part D premium, and the Medicare Advantage/Medicare Supplement plan selected, you could pay $200 to $500 per month or more. Here are the plans.

Medicare Plan Options

(1) Stick with Original Medicare (Parts A&B) and a Part D Prescription Drug Plan. You can simply enroll in Original Medicare A & B, and enroll in Part D. You will have to pay the Part B premium and a Part D premium.

Here’s an example. Your Part B and Part D premiums cost you $200 per month in total. Did you know if you stayed with original Medicare, you would be subject to not only cost sharing but also unlimited out-of-pocket costs? Let’s say you got in a car accident which cost Medicare $50,000. There would be deductibles to pay along with the standard 20% coinsurance. Let’s say you had to pay $12,000 out-of-pocket.

Can you pay this?

(2) Enroll in a Part C Medicare Advantage Plan.  A Medicare Advantage plan is offered by private insurers. It combines parts A & B. You typically have to pay a monthly premium in addition to part B. Nearly all Medicare Advantage plans integrate with Part D, in which there is no separate premium. So, that is a good thing! These plans may also offer other benefits such as preventative dental coverage, vision, and hearing among some fitness discounts.


The downside: you still have out-of-pocket exposure, up to $6,700 in 2020. You still have to pay plan deductibles, co-pays, and coinsurance. Is that worth the out-of-pocket exposure?

(3) Enroll in a Medicare Supplement Plan. Medicare supplement plans work in tandem with Parts A, B, and D, which means you would have to purchase a separate Part D plan if you choose a Medicare Supplement Plan. A Medicare Supplement Plan generally pays for your out-of-pocket costs. Most Medicare beneficiaries have access to 10 different Medicare Supplement plans. Other residents have alternative Medicare Supplement plans, but they work the same way.


Understanding Carrier Discounts And Assistance Can Help You Save Money On Medicare

It pays to look beyond the insurance coverage as well. Most carriers offer additional value-added services such as fitness discounts or 100% paid, home/errand assistance, etc. CVS Pharmacy offers a 20% discount on their generic over-the-counter products for anyone who purchases a Part D plan through their network. These benefits are different among carriers, so it pays to do some homework here, too.

Additionally, you may qualify for Part D “extra help,” manufacturer discounts, or Medicaid. It pays to look into these programs as well. If your doctor prescribes a high-cost drug, approved by your Part D carrier, chances are the manufacturer could offer a discount beyond what is offered through the donut hole, which your cost exposure will be greatest.

Finally, if you have money in an HSA, you can use that money to pay for coinsurance, deductibles, and copays. Although it is not allowed to pay for Medicare Supplement premiums, HSA money can pay for Medicare Advantage and Part D premiums as well as any cost sharing and deductibles.


Using A Qualified Agent To Help Save Money On Medicare

Ok, a shameless plug, but it is worth mentioning. You can go on any website and select a Medicare plan. How do you know if it is right for you? Do you have the time to go through every plan available in your area and select the right one? The longer you wait, you might miss important enrollment deadlines (see above).

And, sure, you can visit a SHINE/SHIP counselor in your area. It is a free service, and he or she can present the plans to you. However, counselors can not advise you on what the right plan is for your specific situation. Having a qualified agent like My Family Life Insurance work on your behalf, and with many carriers, can save money on your Medicare costs.

You can be certain a qualified agent will direct you to the right plan for your situation, discussing the advantages, disadvantages, and expectations. Sure, we get paid a commission. The commission is paid for our efforts and to provide future service for your Medicare needs. You have someone in your corner. Does that make you feel comfortable?


Now You Know How To Save Money On Medicare

As you can see, selecting the right Medicare plan is more than simply picking the cheapest, least expensive option. It is really dependent upon you and your health care needs. Need help in determining that? We at My Family Life Insurance have helped many Medicare beneficiaries select the right plan for their own, unique situation. Contact us today to help you.

Learn More

Interested in learning more about the information in this article? Fill out the form below and we will email you additional customer literature, explaining these options in more detail. We are here to help and work only in your best interest.

Yes, Marijuana Users Can Obtain Life Insurance | Easily Attainable, Too

Updated: March 24, 2020 at 11:02 pm

Years ago, marijuana users couldn’t obtain life insurance. No way!

However, the marijuana industry has changed in the last several years. No longer is the stigma that smoking marijuana is a dirty, criminal activity (although use is still illegal at the federal level). TV shows such as High Profits attracted record viewers. More importantly, as of this writing, many states have legalized both the medical and recreational use of marijuana.

Continue reading Yes, Marijuana Users Can Obtain Life Insurance | Easily Attainable, Too

The Top 10 Life Insurance Mistakes

Updated: March 22, 2020 at 6:46 am

Crumpled up paper next to blank page and hand with pencil.We all make mistakes. Mistakes give us a chance to learn and grow. In many cases, making a mistake is harmless.

However, I’m sure you will agree, there are situations where making a mistake could be harder to recover and have negative, long-term effects. Making a mistake with life insurance falls in this category and can have similar results.

In this article, we discuss the top 10 life insurance mistakes and how to avoid them. Continue reading The Top 10 Life Insurance Mistakes