What Expenses Could Change When You Retire?

/in , , /by

Some costs could rise, fall or even disappear.

Provided by Magnate Wealth Management

Your retirement may seem near at hand or far away, but one thing is certain: your future will differ from your present.

Financially, that fact is worth remembering. Some of the costs you have paid regularly all these years may suddenly decrease or fade away. Others may increase.

Will your insurance costs rise with age? Maybe not. You may find that your overall insurance expenses decline. Yes, health insurance becomes more expensive the older you get – but those premiums are merely part of the bigger insurance coverage picture. If you stop working in retirement, you have no need for disability insurance. You might have little need for life insurance, for that matter. You may have paid off your home and other major debts, and rather than drawing income from work, you will be drawing it from investments and Social Security.

You can expect your medical expenses to increase. By how much, exactly? That will vary per household, but perhaps you have read some of the latest estimates. This summer, Fidelity Investments said that a 65-year-old couple retiring today will need around $260,000 to cover future health care costs. This estimate assumes they live 20-22 years after they retire. Long-term care coverage was not included in that projection; Fidelity projects that a policy providing three years of care at $8,000 a month would cost the same couple an extra $130,000.1

How about your income taxes? If you live on 70-80% of your end salary in retirement – which is not unusual – then you may find yourself in a lower income tax bracket. Yes, your Social Security income may be taxed – but, even in the worst-case scenario, no more than 85% of it will be.2

If you have invested using a Roth IRA, you will be looking at some tax-free retirement income – provided, of course, you have owned the IRA for at least five years and are older than 59½ when you start making withdrawals. While a Roth account held in a workplace retirement plan requires withdrawals beginning at age 70½, the withdrawals will still be tax-free if you follow IRS rules.3

Will your housing costs fall? Over the long term, they may. Some retirees own their homes free and clear and others nearly do. Homeowner association fees and property taxes must still be paid, so, while that mortgage balance may be gone or nearly gone, other recurring costs will remain.

Homes inevitably need repairs, so, in some random year, you may find your housing costs jumping. Downsizing and moving into a smaller home can also mean a short-term rise in your housing expenses. If you do downsize and move, you will hopefully relocate to an area where housing costs are lower.

Will you face education costs? You may have retired your own college debt, but if you have children forty or fifty years younger than you are, you could risk retiring with some of their student loan debt on your hands. That expense could linger into your retirement – a valid reason to reject assuming it in the first place.

One “cost” may disappear, leaving you with a little more money each month. Once retired, your constant per-paycheck need to save for retirement vanishes. So if you are assigning 10% or 20% of your paychecks to your retirement accounts, you may be pleasantly surprised to find that money back in your wallet (so to speak) after you transition into your “second act.”

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – chicagotribune.com/business/columnists/ct-marksjarvis-retiree-health-costs-0821-biz-20160819-column.html [8/19/16]
2 – ssa.gov/planners/taxes.html [9/22/16]
3 – investors.com/etfs-and-funds/retirement/comparing-a-roth-401k-and-roth-ira/ [1/6/16]

What Expenses Could Change When You Retire?

/in , , /by

Some costs could rise, fall or even disappear.

Provided by Magnate Wealth Management

Your retirement may seem near at hand or far away, but one thing is certain: your future will differ from your present.

Financially, that fact is worth remembering. Some of the costs you have paid regularly all these years may suddenly decrease or fade away. Others may increase.

Will your insurance costs rise with age? Maybe not. You may find that your overall insurance expenses decline. Yes, health insurance becomes more expensive the older you get – but those premiums are merely part of the bigger insurance coverage picture. If you stop working in retirement, you have no need for disability insurance. You might have little need for life insurance, for that matter. You may have paid off your home and other major debts, and rather than drawing income from work, you will be drawing it from investments and Social Security.

You can expect your medical expenses to increase. By how much, exactly? That will vary per household, but perhaps you have read some of the latest estimates. This summer, Fidelity Investments said that a 65-year-old couple retiring today will need around $260,000 to cover future health care costs. This estimate assumes they live 20-22 years after they retire. Long-term care coverage was not included in that projection; Fidelity projects that a policy providing three years of care at $8,000 a month would cost the same couple an extra $130,000.1

How about your income taxes? If you live on 70-80% of your end salary in retirement – which is not unusual – then you may find yourself in a lower income tax bracket. Yes, your Social Security income may be taxed – but, even in the worst-case scenario, no more than 85% of it will be.2

If you have invested using a Roth IRA, you will be looking at some tax-free retirement income – provided, of course, you have owned the IRA for at least five years and are older than 59½ when you start making withdrawals. While a Roth account held in a workplace retirement plan requires withdrawals beginning at age 70½, the withdrawals will still be tax-free if you follow IRS rules.3

Will your housing costs fall? Over the long term, they may. Some retirees own their homes free and clear and others nearly do. Homeowner association fees and property taxes must still be paid, so, while that mortgage balance may be gone or nearly gone, other recurring costs will remain.

Homes inevitably need repairs, so, in some random year, you may find your housing costs jumping. Downsizing and moving into a smaller home can also mean a short-term rise in your housing expenses. If you do downsize and move, you will hopefully relocate to an area where housing costs are lower.

Will you face education costs? You may have retired your own college debt, but if you have children forty or fifty years younger than you are, you could risk retiring with some of their student loan debt on your hands. That expense could linger into your retirement – a valid reason to reject assuming it in the first place.

One “cost” may disappear, leaving you with a little more money each month. Once retired, your constant per-paycheck need to save for retirement vanishes. So if you are assigning 10% or 20% of your paychecks to your retirement accounts, you may be pleasantly surprised to find that money back in your wallet (so to speak) after you transition into your “second act.”

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – chicagotribune.com/business/columnists/ct-marksjarvis-retiree-health-costs-0821-biz-20160819-column.html [8/19/16]
2 – ssa.gov/planners/taxes.html [9/22/16]
3 – investors.com/etfs-and-funds/retirement/comparing-a-roth-401k-and-roth-ira/ [1/6/16]

October Is National Financial Planning Month

/in , , /by

Saving is a great start, but planning to reach your financial goals is even better.

Provided by Magnate Wealth Management

Are you saving for retirement? Great. Are you planning for retirement? That is even better. Planning for your retirement and other long-range financial goals is an essential step – one that could make achieving those goals easier.

Saving without investing isn’t enough. Since interest rates are so low today, money in a typical savings account barely grows. It may not even grow enough to keep up with inflation, leaving the saver at a long-term financial disadvantage.

Very few Americans retire on savings alone. Rather, they invest some of their savings and retire mostly on the accumulated earnings those invested dollars generate over time.

Investing without planning usually isn’t enough. Most people invest with a general idea of building wealth, particularly for retirement. The problem is that too many of them invest without a plan. They are guessing how much money they will need once they leave work, and that guess may be way off. Some have no idea at all.

Growing and retaining wealth takes more than just investing. Along the way, you must plan to manage risk and defer or reduce taxes. A good financial plan – created with the assistance of an experienced financial professional – addresses those priorities while defining your investment approach. It changes over time, to reflect changes in your life and your financial objectives.

With a plan, you can set short-term and long-term goals and benchmarks. You can estimate the amount of money you will likely need to meet retirement, college, and health care expenses. You can plot a way to wind down your business or exit your career with confidence. You can also get a good look at your present financial situation – where you stand in terms of your assets and liabilities, the distance between where you are financially and where you would like to be.

Last year, a Gallup poll found that just 38% of investors had a written financial plan. Gallup asked those with no written financial strategy why they lacked one. The top two reasons? They just hadn’t taken the time (29%) or they simply hadn’t thought about it (27%).1

October is National Financial Planning Month – an ideal time to plan your financial future. The end of the year is approaching and a new one will soon begin, so this is the right time to think about what you have done in 2016 and what you could do in 2017. You might want to do something new; you may want to do some things differently. Your financial future is in your hands, so be proactive and plan.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities

Citations.
1 – gallup.com/poll/184421/nonretired-investors-written-financial-plan.aspx [7/31/15]

October Is National Financial Planning Month

/in , , /by

Saving is a great start, but planning to reach your financial goals is even better.

Provided by Magnate Wealth Management

Are you saving for retirement? Great. Are you planning for retirement? That is even better. Planning for your retirement and other long-range financial goals is an essential step – one that could make achieving those goals easier.

Saving without investing isn’t enough. Since interest rates are so low today, money in a typical savings account barely grows. It may not even grow enough to keep up with inflation, leaving the saver at a long-term financial disadvantage.

Very few Americans retire on savings alone. Rather, they invest some of their savings and retire mostly on the accumulated earnings those invested dollars generate over time.

Investing without planning usually isn’t enough. Most people invest with a general idea of building wealth, particularly for retirement. The problem is that too many of them invest without a plan. They are guessing how much money they will need once they leave work, and that guess may be way off. Some have no idea at all.

Growing and retaining wealth takes more than just investing. Along the way, you must plan to manage risk and defer or reduce taxes. A good financial plan – created with the assistance of an experienced financial professional – addresses those priorities while defining your investment approach. It changes over time, to reflect changes in your life and your financial objectives.

With a plan, you can set short-term and long-term goals and benchmarks. You can estimate the amount of money you will likely need to meet retirement, college, and health care expenses. You can plot a way to wind down your business or exit your career with confidence. You can also get a good look at your present financial situation – where you stand in terms of your assets and liabilities, the distance between where you are financially and where you would like to be.

Last year, a Gallup poll found that just 38% of investors had a written financial plan. Gallup asked those with no written financial strategy why they lacked one. The top two reasons? They just hadn’t taken the time (29%) or they simply hadn’t thought about it (27%).1

October is National Financial Planning Month – an ideal time to plan your financial future. The end of the year is approaching and a new one will soon begin, so this is the right time to think about what you have done in 2016 and what you could do in 2017. You might want to do something new; you may want to do some things differently. Your financial future is in your hands, so be proactive and plan.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities

Citations.
1 – gallup.com/poll/184421/nonretired-investors-written-financial-plan.aspx [7/31/15]

When Is Social Security Income Taxable?

/in , , /by

The answer depends on your income.

Provided by Magnate Wealth Management

Your Social Security income could be taxed. That may seem unfair, or unfathomable. Regardless of how you feel about it, it is a possibility.

Seniors have had to contend with this possibility since 1984. Social Security benefits became taxable above certain yearly income thresholds in that year. Frustratingly for retirees, these income thresholds have been left at the same levels for 32 years.1

Those frozen income limits have exposed many more people to the tax over time. In 1984, just 8% of Social Security recipients had total incomes high enough to trigger the tax. In contrast, the Social Security Administration estimates that 52% of households receiving benefits in 2015 had to claim some of those benefits as taxable income.1

Only part of your Social Security income may be taxable, not all of it. Two factors come into play here: your filing status and your combined income.

Social Security defines your combined income as the sum of your adjusted gross income, any non-taxable interest earned, and 50% of your Social Security benefit income. (Your combined income is actually a form of modified adjusted gross income, or MAGI.)2

Single filers with a combined income from $25,000-$34,000 and joint filers with combined incomes from $32,000-$44,000 may have up to 50% of their Social Security benefits taxed.2

Single filers whose combined income tops $34,000 and joint filers with combined incomes above $44,000 may see up to 85% of their Social Security benefits taxed.2

What if you are married and file separately? No income threshold applies. Your benefits will likely be taxed no matter how much you earn or how much Social Security you receive.2

You may be able to estimate these taxes in advance. You can use an online calculator (a Google search will lead you to a few such tools), or the worksheet in IRS Publication 915.2

You can even have these taxes withheld from your Social Security income. You can choose either 7%, 10%, 15%, or 25% withholding per payment. Another alternative is to make estimated tax payments per quarter, like a business owner does.2

Did you know that 13 states also tax Social Security payments? North Dakota, Minnesota, West Virginia, and Vermont use the exact same formula as the federal government to calculate the degree to which your Social Security benefits may be taxable. Nine other states use more lenient formulas: Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, and Utah.2

What can you do if it appears your benefits will be taxed? You could explore a few options to try and lessen or avoid the tax hit, but keep in mind that if your combined income is far greater than the $34,000 single filer and $44,000 joint filer thresholds, your chances of averting tax on Social Security income are slim. If your combined income is reasonably near the respective upper threshold, though, some moves might help.

If you have a number of income-generating investments, you could opt to try and revise your portfolio, so that less income and tax-exempt interest are produced annually.

A charitable IRA gift may be a good idea. You can make one if you are 70½ or older in the year of the donation. You can endow a qualified charity with as much as $100,000 in a single year this way. The amount of the gift may be used to fully or partly satisfy your Required Minimum Distribution (RMD), and the amount will not be counted in your adjusted gross income.3

You could withdraw more retirement income from Roth accounts. Distributions from Roth IRAs and Roth workplace retirement plan accounts are tax-exempt as long as you are age 59½ or older and have held the account for at least five tax years.4

Will the income limits linked to taxation of Social Security benefits ever be raised? Retirees can only hope so, but with more baby boomers becoming eligible for Social Security, the IRS and the Treasury stand to receive greater tax revenue with the current limits in place.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities

Citations.
1 – ssa.gov/policy/docs/issuepapers/ip2015-02.html [12/15]
2 – fool.com/retirement/general/2016/04/30/is-social-security-taxable.aspx [4/30/16]
3 – kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html [7/16]
4 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

When Is Social Security Income Taxable?

/in , , /by

The answer depends on your income.

Provided by Magnate Wealth Management

Your Social Security income could be taxed. That may seem unfair, or unfathomable. Regardless of how you feel about it, it is a possibility.

Seniors have had to contend with this possibility since 1984. Social Security benefits became taxable above certain yearly income thresholds in that year. Frustratingly for retirees, these income thresholds have been left at the same levels for 32 years.1

Those frozen income limits have exposed many more people to the tax over time. In 1984, just 8% of Social Security recipients had total incomes high enough to trigger the tax. In contrast, the Social Security Administration estimates that 52% of households receiving benefits in 2015 had to claim some of those benefits as taxable income.1

Only part of your Social Security income may be taxable, not all of it. Two factors come into play here: your filing status and your combined income.

Social Security defines your combined income as the sum of your adjusted gross income, any non-taxable interest earned, and 50% of your Social Security benefit income. (Your combined income is actually a form of modified adjusted gross income, or MAGI.)2

Single filers with a combined income from $25,000-$34,000 and joint filers with combined incomes from $32,000-$44,000 may have up to 50% of their Social Security benefits taxed.2

Single filers whose combined income tops $34,000 and joint filers with combined incomes above $44,000 may see up to 85% of their Social Security benefits taxed.2

What if you are married and file separately? No income threshold applies. Your benefits will likely be taxed no matter how much you earn or how much Social Security you receive.2

You may be able to estimate these taxes in advance. You can use an online calculator (a Google search will lead you to a few such tools), or the worksheet in IRS Publication 915.2

You can even have these taxes withheld from your Social Security income. You can choose either 7%, 10%, 15%, or 25% withholding per payment. Another alternative is to make estimated tax payments per quarter, like a business owner does.2

Did you know that 13 states also tax Social Security payments? North Dakota, Minnesota, West Virginia, and Vermont use the exact same formula as the federal government to calculate the degree to which your Social Security benefits may be taxable. Nine other states use more lenient formulas: Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, and Utah.2

What can you do if it appears your benefits will be taxed? You could explore a few options to try and lessen or avoid the tax hit, but keep in mind that if your combined income is far greater than the $34,000 single filer and $44,000 joint filer thresholds, your chances of averting tax on Social Security income are slim. If your combined income is reasonably near the respective upper threshold, though, some moves might help.

If you have a number of income-generating investments, you could opt to try and revise your portfolio, so that less income and tax-exempt interest are produced annually.

A charitable IRA gift may be a good idea. You can make one if you are 70½ or older in the year of the donation. You can endow a qualified charity with as much as $100,000 in a single year this way. The amount of the gift may be used to fully or partly satisfy your Required Minimum Distribution (RMD), and the amount will not be counted in your adjusted gross income.3

You could withdraw more retirement income from Roth accounts. Distributions from Roth IRAs and Roth workplace retirement plan accounts are tax-exempt as long as you are age 59½ or older and have held the account for at least five tax years.4

Will the income limits linked to taxation of Social Security benefits ever be raised? Retirees can only hope so, but with more baby boomers becoming eligible for Social Security, the IRS and the Treasury stand to receive greater tax revenue with the current limits in place.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities

Citations.
1 – ssa.gov/policy/docs/issuepapers/ip2015-02.html [12/15]
2 – fool.com/retirement/general/2016/04/30/is-social-security-taxable.aspx [4/30/16]
3 – kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html [7/16]
4 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

Why Life Insurance Matters

/in , , /by

Besides the death benefit, it may also help you financially during your life.

Provided by Magnate Wealth Management

As Bankrate.com noted, 43% of Americans have no life insurance. Some view it as optional; some have simply procrastinated when it comes to buying a policy. Others believe that they can’t afford it.1

In reality, life insurance is cheap today. If you just want term life coverage – essentially, life insurance that you “rent” for X number of years – you may find it quite affordable wherever you live. Plugging in some sample variables, a little comparison shopping online reveals that a 40-year-old, non-smoking woman in excellent health who lives in New Hampshire would pay premiums of just $380-420 a year for a 20-year level term policy with a $500,000 death benefit. (She would have several providers to choose from.)2

If you choose permanent life insurance rather than term life, new possibilities emerge. In addition to a benefit for your heirs at your death, an insurance policy capable of building cash value gives you more capability to address financial needs during your lifetime.

Permanent life insurance allows you the opportunity to build cash value. The premiums on a whole, universal, or variable life policy are higher than for a term life policy, but there is a reason for that – as you pay into one of these policies, the policy, itself, accumulates cash value. That cash value grows without being taxed.3

In all probability, the cash value will continue to be available as long as you live. While it’s true that some insurance companies have gone under, the reality is that very, very few do. They guarantee the death benefit and the viability of the policy as long as you keep making the premium payments.3

If you need a loan someday, a cash value life policy may give you an option. Some of these policies allow withdrawals of the cash value, meaning that you can borrow against the cash value once you have funded the policy with a sufficient amount of premiums. (You can even tap the cash value to pay the premiums, if you like.) Naturally, loans taken from the policy will reduce the death benefit amount. The policyholder faces no requirement to pay back the loan, but the loan is subject to interest.3

Many of these policies come with degrees of flexibility. You may be able to transfer some of the cash value into another insurance product with the death benefit unaffected.

The death benefit may do much to preserve your loved ones’ quality of life. Life insurance death benefit proceeds are almost never taxed (only under rare circumstances does the IRS count them as gross income). So a permanent life policy will give your heirs money to address funeral and burial expenses and possible estate taxes, and those funds could also provide them with part of their inheritance.4

Cash value life insurance also means permanent coverage as long as the policy is in force. The death benefit will not be readjusted or diminished if you fall ill, and if you buy a policy in your thirties or forties, you save money compared to those who purchase a policy after age 50.

Permanent life insurance is also highly useful in estate planning. Several kinds of trusts may be used in conjunction with permanent life policies, such as irrevocable life insurance trusts (ILITs), special needs trusts, spendthrift trusts, simple living trusts, and more. Often, a trust can be named as beneficiary of a permanent life policy, an estate planning step toward an eventual financial benefit to heirs.5

First and foremost, life insurance matters for its death benefit – but those considering it should not overlook its financial utility in other situations during the course of life.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – bankrate.com/financing/insurance/how-painful-is-the-life-insurance-talk/ [9/15/15]
2 – term4sale.com/cgi-bin/cqsl.cgi [8/9/16]
3 – investopedia.com/terms/c/cash-value-life-insurance.asp [8/9/16]
4 – irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds [1/1/16]
5 – aol.com/article/2015/05/07/how-to-supercharge-trusts-with-life-insurance/21173793/ [5/7/15]

Why Life Insurance Matters

/in , , /by

Besides the death benefit, it may also help you financially during your life.

Provided by Magnate Wealth Management

As Bankrate.com noted, 43% of Americans have no life insurance. Some view it as optional; some have simply procrastinated when it comes to buying a policy. Others believe that they can’t afford it.1

In reality, life insurance is cheap today. If you just want term life coverage – essentially, life insurance that you “rent” for X number of years – you may find it quite affordable wherever you live. Plugging in some sample variables, a little comparison shopping online reveals that a 40-year-old, non-smoking woman in excellent health who lives in New Hampshire would pay premiums of just $380-420 a year for a 20-year level term policy with a $500,000 death benefit. (She would have several providers to choose from.)2

If you choose permanent life insurance rather than term life, new possibilities emerge. In addition to a benefit for your heirs at your death, an insurance policy capable of building cash value gives you more capability to address financial needs during your lifetime.

Permanent life insurance allows you the opportunity to build cash value. The premiums on a whole, universal, or variable life policy are higher than for a term life policy, but there is a reason for that – as you pay into one of these policies, the policy, itself, accumulates cash value. That cash value grows without being taxed.3

In all probability, the cash value will continue to be available as long as you live. While it’s true that some insurance companies have gone under, the reality is that very, very few do. They guarantee the death benefit and the viability of the policy as long as you keep making the premium payments.3

If you need a loan someday, a cash value life policy may give you an option. Some of these policies allow withdrawals of the cash value, meaning that you can borrow against the cash value once you have funded the policy with a sufficient amount of premiums. (You can even tap the cash value to pay the premiums, if you like.) Naturally, loans taken from the policy will reduce the death benefit amount. The policyholder faces no requirement to pay back the loan, but the loan is subject to interest.3

Many of these policies come with degrees of flexibility. You may be able to transfer some of the cash value into another insurance product with the death benefit unaffected.

The death benefit may do much to preserve your loved ones’ quality of life. Life insurance death benefit proceeds are almost never taxed (only under rare circumstances does the IRS count them as gross income). So a permanent life policy will give your heirs money to address funeral and burial expenses and possible estate taxes, and those funds could also provide them with part of their inheritance.4

Cash value life insurance also means permanent coverage as long as the policy is in force. The death benefit will not be readjusted or diminished if you fall ill, and if you buy a policy in your thirties or forties, you save money compared to those who purchase a policy after age 50.

Permanent life insurance is also highly useful in estate planning. Several kinds of trusts may be used in conjunction with permanent life policies, such as irrevocable life insurance trusts (ILITs), special needs trusts, spendthrift trusts, simple living trusts, and more. Often, a trust can be named as beneficiary of a permanent life policy, an estate planning step toward an eventual financial benefit to heirs.5

First and foremost, life insurance matters for its death benefit – but those considering it should not overlook its financial utility in other situations during the course of life.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – bankrate.com/financing/insurance/how-painful-is-the-life-insurance-talk/ [9/15/15]
2 – term4sale.com/cgi-bin/cqsl.cgi [8/9/16]
3 – investopedia.com/terms/c/cash-value-life-insurance.asp [8/9/16]
4 – irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds [1/1/16]
5 – aol.com/article/2015/05/07/how-to-supercharge-trusts-with-life-insurance/21173793/ [5/7/15]

Are There Really Tax-Free Retirement Plan Distributions?

/in , , /by

A look at some popular & obscure options for receiving money with little or no tax.

Provided by Magnate Wealth Management

Will you receive tax-free money in retirement? Some retirees do. You should know about some of your options for tax-free retirement distributions, some of which are less publicized than others.

Qualified distributions from Roth accounts are tax-free. If you own a Roth IRA or have a Roth retirement account at work, you can take a tax-free distribution from that IRA or workplace retirement plan once you are older than 59½ and have held the account for at least five tax years. One other nice perk: original owners of Roth IRAs never have to take Required Minimum Distributions (RMDs) during their lifetimes. (Owners of employer-sponsored Roth retirement accounts are required to take RMDs.)1,2

Trustee-to-trustee transfers of retirement plan money occur without being taxed. In a rollover of this kind, the custodian financial firm that hosts your workplace retirement plan account makes a payment directly out of the account to an IRA you have waiting, with not a penny in taxes levied or withheld. Trustee-to-trustee transfers of IRAs work the same way.3

If you are older than 80, you might get a tax break on a lump-sum withdrawal. If you were born prior to January 2, 1936, you could be entitled to a tax reduction on a lump-sum distribution out of a qualified retirement plan in certain cases. Unfortunately, this is never the case with an IRA RMD.4

Your heirs could receive tax-free dollars resulting from life insurance. Payouts on permanent life insurance policies are normally exempt from federal income tax. (The payout may be included in the value of your taxable estate, though.) A life insurance death benefit paid out from a qualified retirement plan is also tax-exempt provided the death benefit is greater than the policy’s pre-death cash surrender value. Even if an employee takes a distribution from a corporate-owned life insurance policy on his or her life while still alive, that distribution may not be fully taxable as it may constitute a return of the principal invested in the life insurance contract.4,5

Sometimes the basis in a workplace retirement account can be withdrawn tax-free. If you have made non-deductible contributions through the years to an IRA or an employer-sponsored retirement plan account, these contributions are not taxable when they are distributed to the original account owner, accountholder, or an account beneficiary – it is considered return of principal, a recovery of the original account owner or accountholder’s cost of investment.4

IRA contributions can optionally be withdrawn tax-free before their due date. As an example, your 2016 IRA contribution can be withdrawn tax-free by the due date of your federal tax return – April 15 or thereabouts. If you file Form 4868, you have until October 15 (or thereabouts) to do this.6

Withdrawals such as these can only happen, however, if you meet two tests set forth by the IRS. First, you must not have taken a deduction for your contribution. Second, you must, additionally, withdraw any interest or income those invested dollars earned. You can also take investment losses into account. (There is a worksheet in IRS Publication 590 you can use to calculate applicable gains or losses.)6

These common and obscure paths toward tax-free retirement income may be worth exploring. Who knows? Perhaps, this year, your retirement will be less taxing than you think.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]
2 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [7/28/16]
3 – irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions [2/19/16]
4 – news.morningstar.com/articlenet/article.aspx?id=764726 [8/13/16]
5 – doughroller.net/personal-finance/life-insurance-proceeds-tax/ [8/18/16]
6 – tinyurl.com/gwoxed8 [8/18/16]

Are There Really Tax-Free Retirement Plan Distributions?

/in , , /by

A look at some popular & obscure options for receiving money with little or no tax.

Provided by Magnate Wealth Management

Will you receive tax-free money in retirement? Some retirees do. You should know about some of your options for tax-free retirement distributions, some of which are less publicized than others.

Qualified distributions from Roth accounts are tax-free. If you own a Roth IRA or have a Roth retirement account at work, you can take a tax-free distribution from that IRA or workplace retirement plan once you are older than 59½ and have held the account for at least five tax years. One other nice perk: original owners of Roth IRAs never have to take Required Minimum Distributions (RMDs) during their lifetimes. (Owners of employer-sponsored Roth retirement accounts are required to take RMDs.)1,2

Trustee-to-trustee transfers of retirement plan money occur without being taxed. In a rollover of this kind, the custodian financial firm that hosts your workplace retirement plan account makes a payment directly out of the account to an IRA you have waiting, with not a penny in taxes levied or withheld. Trustee-to-trustee transfers of IRAs work the same way.3

If you are older than 80, you might get a tax break on a lump-sum withdrawal. If you were born prior to January 2, 1936, you could be entitled to a tax reduction on a lump-sum distribution out of a qualified retirement plan in certain cases. Unfortunately, this is never the case with an IRA RMD.4

Your heirs could receive tax-free dollars resulting from life insurance. Payouts on permanent life insurance policies are normally exempt from federal income tax. (The payout may be included in the value of your taxable estate, though.) A life insurance death benefit paid out from a qualified retirement plan is also tax-exempt provided the death benefit is greater than the policy’s pre-death cash surrender value. Even if an employee takes a distribution from a corporate-owned life insurance policy on his or her life while still alive, that distribution may not be fully taxable as it may constitute a return of the principal invested in the life insurance contract.4,5

Sometimes the basis in a workplace retirement account can be withdrawn tax-free. If you have made non-deductible contributions through the years to an IRA or an employer-sponsored retirement plan account, these contributions are not taxable when they are distributed to the original account owner, accountholder, or an account beneficiary – it is considered return of principal, a recovery of the original account owner or accountholder’s cost of investment.4

IRA contributions can optionally be withdrawn tax-free before their due date. As an example, your 2016 IRA contribution can be withdrawn tax-free by the due date of your federal tax return – April 15 or thereabouts. If you file Form 4868, you have until October 15 (or thereabouts) to do this.6

Withdrawals such as these can only happen, however, if you meet two tests set forth by the IRS. First, you must not have taken a deduction for your contribution. Second, you must, additionally, withdraw any interest or income those invested dollars earned. You can also take investment losses into account. (There is a worksheet in IRS Publication 590 you can use to calculate applicable gains or losses.)6

These common and obscure paths toward tax-free retirement income may be worth exploring. Who knows? Perhaps, this year, your retirement will be less taxing than you think.

Magnate Wealth Management may be reached at 502-855-3160 or bgorter@magnatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Registered Investment Advisory services offered through Magnate Wealth Management, LLC., a Registered Investment Adviser. Securities and advisory services offered through Silver Oak Securities, Inc. Member FINRA/SIPC. Magnate Wealth Management, LLC., Capital Wealth Management, LLC. and Silver Oak Securities, Inc. are separate entities.

Citations.
1 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]
2 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [7/28/16]
3 – irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions [2/19/16]
4 – news.morningstar.com/articlenet/article.aspx?id=764726 [8/13/16]
5 – doughroller.net/personal-finance/life-insurance-proceeds-tax/ [8/18/16]
6 – tinyurl.com/gwoxed8 [8/18/16]