Transcript Tools & Strategies for Life’s Financial Decisions

Tools and Strategies for
Life’s Financial Decisions
Presented By:
Brian H. Grant, CLU, ChFC, MSFS
Certified Financial Planner™
President
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Hypothetical Case Study
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Maxine T., MD
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26 years old
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Single, female
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Second-year, Rheumatology Resident
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Annual income $38,000
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Financial Planning
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Develop a budget – control spending
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Have an emergency fund
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Build strong personal savings base
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Consider buying vs.
renting a home
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Financial Planning (cont.)
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Leasing vs. purchasing a car
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Investing vs. paying off loans
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Risk management / insurance needs
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Saving for retirement
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Education planning
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Financial Calculators
Available on our website: trinityfp.com
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Retirement
Savings
Taxes
Loans and mortgages
Business
Auto
Insurance
(See last handout for additional detail)
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What is a Mutual Fund?
FUND
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Variety of Mutual Funds
Higher Risk
Aggressive
Growth
Higher
Potential
Return
International
Lower
Risk
Growth & Income
Balance
Lower
Potential
Return
Fixed Income
Money Market
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Why Invest in a Mutual Fund?
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Diversification and stability
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Collective buying power
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Professional management
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Convenience
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Investment Strategies
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Remember that past performance
doesn’t guarantee future returns
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Buy selectively with a purpose
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Know your fund’s portfolio
objectives
Disciplined savings program
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Investment Strategies
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Maintain long holding periods
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Diversify
– Asset allocation
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Dollar cost averaging
– Purchase more in down markets; less in
higher markets
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What Affects Portfolio Return?
1.8%
Market timing
4.6%
Security selection
91.5%
2.1%
Asset allocation
Other factors
Source: Financial Analysts Journal
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The Power of Time
CINDY
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TOMMY
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65
12%
12%
Contributions
Total Contributed
4 x $2,000
$8,000
39 x $2,000
$78,000
At age 65
$1,567,501
$1,532,183
Age started
Age ended
Rate of return*
Start Saving for Retirement TODAY!
* These are hypothetical examples and are not intended to portray the results of any particular investment.
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Reduce Taxes
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Qualified retirement plans
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Mutual funds
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Nonqualified strategies using life
insurance
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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.
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The Power of Tax Deferral
Tax deferral means you
don’t reduce your
investment by income taxes
during accumulation.
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Disability Insurance
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Insure the goose or the eggs?
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Ensure your future insurability
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“Own Occupation” definition
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Cost of living rider
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Residual Benefit Rider
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Non-cancelable policy
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Power of Life Insurance
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Tax deferred growth
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Tax free retirement income
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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.
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Life Insurance
The need and why…
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Four basic reasons
– Income replacement
– Final expenses
– You love someone
– Giving to charity
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Life Insurance
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Four Types
– Whole life
– Term
– Universal life
– Variable universal life
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Life Insurance
How much is enough?
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What financial formula was
used to estimate your need?
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Life Insurance
What is the best type?
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The amount you need at a
price you can afford.
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FAQ’s About Wills
Q. What is the effect of a will on life
insurance?
A. 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.
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FAQ’s About Wills
Q. Can taxes be saved by a will?
A. 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.
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FAQ’s About Wills
Q. When should a will be made?
A. 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.
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FAQ’s About Wills
Q. Who should prepare the will?
A. 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.
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Premier Financial Group, Inc.
1522 Old York Road
Abington, PA 19001
(215) 887-4750
E-mail: [email protected]
Member
Trinity Financial Partners
Visit our websites:
trinityfp.com
www.premierfinancialgroup.com
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