1.Are you overpaying?  Let’s face it, we are experiencing extreme economic volatility and many people are looking to cut costs any way possible.  You may be able to save some money on premiums and extend the term period a few more years.  Carrier pricing is extremely competitive right now which makes it the right time to see if you can improve your situation. 

2.Did you buy your policy from a captive agent?  There are many agents who work for a single carrier and may only offer that carrier’s products (examples are All State, State Farm and Northwestern Mutual).  There are many more carriers available to an Independent Agent, which would allow you access to more competitively priced products.

3.Did you buy a policy through an internet website?  Many individuals think that purchasing a policy online is the easiest and most effective way.  Unfortunately, what often happens is the policy is not shopped around to multiple carriers, and the client ends up paying more for a policy.  Because each carrier has different health guidelines, it is vital to make sure the appropriate carrier is chosen.  A policy purchased online should definitely be reviewed to make sure it is the right choice.  There is no cost associated with the use of an agent, so you might as well utilize their services.

4.Has your family situation changed?  If you’ve recently gotten married or had a child, your need for life insurance may have changed.  It is often less expensive to buy a new term policy for a larger amount than to supplement your old policy.

5.Have you bought a house?  You may have had enough coverage to support a family, but the added expenses a house brings may have increased your needs.

6.Have you had a positive change in health?  If you have stopped smoking, lost weight, or lowered your blood pressure or cholesterol, you may be able to qualify for a better health rating and lower premium.  Life insurance carriers have loosened their underwriting guidelines, especially involving family history and medically controlled health conditions.

7.Is your current term policy expiring soon?  You may be approaching the end of the guaranteed level term period.  If you still have a need for coverage, it may make more sense to apply now than to wait until it expires and be subject to substantially higher premiums.

Article written by Doug Lerner

What is file-and-suspend?

Generally, a husband or wife is entitled to receive a Social Security retirement benefit based either on his or her own earnings record (a worker’s benefit), or on his or her spouse’s earnings record (a spousal benefit), whichever is higher. But under Social Security rules, a husband or wife who is eligible to file for retirement benefits based on his or her spouse’s record cannot do so until his or her spouse begins receiving benefits. However, there is one exception–someone who has reached full retirement age may choose to file for retirement benefits, then immediately request to have those benefits suspended, so that his or her eligible spouse can file for spousal benefits.

Although many people think of Social Security as only a retirement program, Social Security also provides survivor’s benefits that can provide substantial income to your spouse after your death.

File-and-suspend is a strategy that may be used in a variety of situations, but is commonly used when one spouse has much lower lifetime earnings, and thus will receive a higher retirement benefit based on his or her spouse’s earnings record. (A husband or wife’s spousal benefit may be as much as 50% of what his or her spouse is entitled to receive at full retirement age.) Using this strategy not only allows the eligible spouse with lower earnings to immediately claim a higher (spousal) retirement benefit, but can also increase the amount of available survivor protection. The spouse with higher earnings who has suspended his or her benefits can accrue delayed retirement credits at a rate of 8% per year (the rate for anyone born in 1943 or later) up until age 70. Because a surviving spouse will generally receive a benefit equal to 100% of the retirement benefit the other spouse was receiving (or was entitled to receive) at the time of his or her death, suspending a benefit to accrue delayed retirement credits may substantially increase the survivor’s benefit.

Example

Let’s look at one hypothetical example of how filing for, then suspending, Social Security benefits might help a married couple increase their retirement income and survivor’s benefits.

Henry is about to reach his full retirement age of 66, but he wants to postpone filing for Social Security benefits. At full retirement age his monthly benefit will be $2,000, but if he waits until age 70 to file, his benefit will be $2,640 (32% more) due to delayed retirement credits. However, his wife Julia, who has had substantially lower lifetime earnings than Henry, wants to retire in a few months at her full retirement age (also 66). Based on her own earnings record, Julia will be eligible for a monthly benefit of $700, but based on Henry’s earnings record she will be eligible for a monthly spousal benefit of $1,000 (50% of Henry’s entitlement).

So that Julia can receive the higher spousal benefit as soon as she retires, Henry files an application for benefits, but immediately suspends it. That way, he can also continue to earn delayed retirement credits, which will result in a higher monthly retirement benefit for him later.

Using the file-and-suspend strategy not only increases Julia and Henry’s retirement income, but it also offers increased survivor protection. Upon Henry’s death, Julia will be entitled to receive 100% of what Henry was receiving (or was entitled to receive) at the time of his death. So by suspending his own retirement benefit in order to increase it through delayed retirement credits, Henry has ensured that Julia will receive a survivor’s benefit that is up to 32% higher for the rest of her life should he die first. (Note, though, that this hypothetical example is for illustrative purposes only and does not account for cost-of-living adjustments or taxes.)

Points to consider

• Deciding when to begin receiving Social Security benefits is a complicated decision. You’ll need to consider a number of scenarios, and take into account factors such as both spouses’ ages, estimated benefit entitlements, and life expectancies. A Social Security representative can help explain your options.
• Ask a tax professional to help you weigh the tax consequences of delaying Social Security income.
• Using the file-and-suspend strategy may not be advantageous when one spouse is in poor health or when Social Security income is needed as soon as possible.
• The spousal benefit will be reduced if the spouse claiming it is under full retirement age.

For more information, contact the Social Security Administration at 800-772-1213 or visit www.socialsecurity.gov.

Ken and his associates believe everyone should have access to truly independent, professional financial advice regardless of income level or net worth. Financial planning provides direction and purpose and is essential in financial goals.

Ken has been a part of the financial services industry for more than 15 years. Prior to establishing his fee-only financial planning practice, he worked as administrator of benefits for Chrysler Corporation, where he managed their health care, disability, 401(k) and Define Benefit plan.

Ken is a graduate of Rockford College and is a CERTIFIED FINANCIAL PLANNER®. The Certified Financial Planner Board of Standards is a professional regulatory organization which promotes ethics, integrity and professional standards in personal financial planning. This gives the public an opportunity to have access to — and benefit from — competent, ethical financial planning. Individuals who meet rigorous certification requirements are certified by CFP® Board to use its certification trademark.

Ken is a member of the Garrett Planning Network, an international network of professional, fee-only financial advisors dedicated to providing advice on an hourly, as-need basis. He is an active member of the Financial Planning Association of Greater Phoenix. He has completed a two-day workshop of life planning by Kinder Institute of Life Planning.

Ken lives in Sun Lakes, Arizona with his wife Shirley. They enjoy spending time as a family, riding bikes, playing softball and snow skiing. To learn more about Ken and Brenden Financial Planning, LLC, please continue to visit this site. If you want to talk to Ken to set up a free get acquainted meeting, please contact us. There is no further obligation should you elect not to move forward.

While many rewards programs offer credit with (and rewards from) a particular merchant, other programs, offered by credit card issuers, may allow you to earn rewards, such as gift certificates, that may be used with a wide variety of merchants. And in most cases, these cards offer the option of earning cash back each time you use the card. A cash back reward can be used anytime, anywhere.

The rules, restrictions, and limitations on what you may earn through a rewards program can be complex. Most programs offer a larger percentage reward for purchasing select products or categories of products than they do for all products. You may have to spend a minimum amount per month, quarter, or year to get any rewards, and there are often limits both on the amount of rewards you can earn and on the time allowed for cashing them in. What’s more, the originator of the rewards program may change the rules or cancel the program altogether with little notice or recourse.

The prohibition against certain dubious but profitable practices by the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, coupled with the overall tightening of credit, have made the reward card market less lucrative, and credit card issuers with rewards programs may begin to take steps to preserve their profit ratios. Such steps could include higher interest rates and annual fees, restructurings of reward policies that water down the rewards, inactivity fees, and/or reinstatement fees to restore points lost because of late payments.

In a typical IRA, your beneficiary takes control of the IRA assets upon your death. There’s nothing to stop your beneficiary from withdrawing all or part of the IRA funds at any time. This ability of your beneficiary to withdraw assets at will may be troublesome to you for several reasons. For example, you may simply be concerned that your beneficiary will squander the IRA funds.

Or it may be your wish that your IRA “stretch” after your death–that is, continue to accumulate on a tax-deferred (or in the case of Roth IRAs, potentially tax-free) basis–for as long as possible. Your intent to stretch out the IRA payments may be defeated if your beneficiary has total control over the IRA assets upon your death.

Even if your beneficiary doesn’t deplete the IRA assets, in a typical IRA you normally have no say about where the funds go when your beneficiary dies. Your beneficiary, or the IRA agreement, usually specifies who gets the funds at that point. So, in a typical IRA, if you name your spouse as your primary beneficiary, your spouse could name children from a previous marriage, or a new spouse if he or she remarries, as the ultimate beneficiary of your IRA assets. A trusteed IRA allows you to control the ultimate beneficiaries of your IRA, by letting you specify contingent beneficiaries that cannot be changed by your primary beneficiary.

With a trusteed IRA, you can’t stop the payment of required minimum distributions (RMDs) to your beneficiary but you can restrict any additional payments. You can direct the trustee to pay only RMDs to your beneficiary. Or you can provide the trustee with discretionary authority to make payments to your beneficiary in addition to RMDs, e.g., for your beneficiary’s health, welfare, or education. Or you can impose restrictions on distributions that last only until your beneficiary reaches a specified age. Trusteed IRAs can also be set up to qualify as marital, QTIP, and credit shelter (bypass) trusts, potentially simplifying your estate planning.

A trusteed IRA can also be a valuable tool during your lifetime. It can be structured so that if you become incapacitated, the trustee will step in and take over the investment of assets and distribution of benefits on your behalf, ensuring that your IRA won’t be in limbo until a guardian is appointed.
Is a trusteed IRA right for you?

While trusteed IRAs can be as flexible as a particular trustee will allow (not all provide the same level of IRA planning services), they aren’t right for everyone. The minimum balance required to establish a trusteed IRA, and the fees charged, are usually significantly higher than for other IRAs, making trusteed IRAs most appropriate for large IRA accounts. You may also incur attorney’s fees and other costs.

And in some cases, another approach might be more appropriate. For example, you may be able to assure that your IRA “stretches” after your death by instead naming a trust as the beneficiary of your IRA. If specific IRS rules are followed, RMDs can be calculated using your trust beneficiary’s life expectancy (this is commonly called a “see-through” trust).

See-through trusts are generally more expensive, and more complicated, than trusteed IRAs. It’s important that you consult an estate planning professional who can explain your options and make sure you choose the right vehicle for your particular situation.