To generate a tax-free income stream from cash value life insurance a few major caveats need to be in place. First any cash value policy needs to be designed as a non-modified endowment contract compliant with the TAMRA regulations or Cash Value Accumulation Test. Secondly, the policy must remain in force for the life of the policy insured. There are four cash value life insurance policies. Each policy has a different crediting method and needs to be qualified for the policy owner for product suitability. So every prospective purchaser needs to undergo a risk tolerance test to discover which policy fits his or her profile and financial goals. Participating Whole Life is an interest rate crediting method. Each year the board of directors declares a dividend, a return of unused premium. Guarantees are published in the illustration proposals. These types of polices are for conservative investors with long time horizons. Universal Life is an interest rate crediting method which has been consistently low for a decade.  As a result it has fallen out of favor among financial professionals for its low crediting rate. These type of polices are for conservative investors with long time horizons. Indexed Universal Life is an   Read more…

Financial products have expense loads, declared and undeclared. In this the information age with a little Sherlock Holmes savvy and access to the Internet you should be able to uncover what the manufacturer should disclose. But, for the most part, it’s not disclosed. Mutual funds and ETFs (Electronically Traded Funds) have their expense ratio disclosed in their prospectus, but other fund related costs are embedded in other documents and not generally disseminated to the fund owner.  The average expense ratio for small to large cap funds is around 1.30%, foreign stock funds around 1.50%, and bond funds near .90%.  The average Registered Investment Advisor, charges an annual fee around 1.03%. Based on public information disclosed in the prospectus and the RIA ADV form, most investors think they’re paying under 2.5% all in. But in reality there’s an average of an additional 1.33% listed in the statement of additional information which is available to anyone online, but not delivered as part of the fund cost. These transactional costs are not cheap and most fund owners are not aware of them, and shockingly neither are most of the registered representatives and RIAs that sell them. Cash Drag is another additional cost in   Read more…

It’s impossible to appreciate the tax equivalent return of any investment until you know your effective tax bracket. You also need to know how you should file: individual, head of household, married filing jointly or married filing separately.  For some married couples, filing jointly or separately can usually be determined quite quickly on most tax software. The U.S. tax code is a marginal, “progressive” income tax system. As your income increases or “progresses” from one tax bracket to the next you pay a blended tax rate of each tier, after all your tax deductions and exemptions (providing they’re not phased out) as well as any tax credits to reduce taxes owed. Once you know your effective tax bracket you can determine the value of a financial product, especially tax favored financial products. For example, most participants in a 401(k) plan know their contributions are tax deductible. Is your tax deduction, in your effective tax bracket, worth taking? Keep in mind that by taking the deduction you’re giving up its tax-free basis, i.e. your original contributions. Your 401(k) plan will be taxed at ordinary income tax rates and be included in the provisional income test for Social Security benefit taxation. If   Read more…

The vast majority of seniors need every last dime of their money to enjoy their golden years. Medical and long-term care costs are significant over a lifetime, it doesn’t compare to the accumulated taxes paid over a lifetime. We need to manage both our health and wealth. Part of managing your wealth is managing your taxes and it’s a worthwhile endeavor to learn how to do it. It’s possible that many retirees may be able to generate 10-15% more income by just managing their taxes. And there’s no place better to start than Social Security income. Social Security attracts taxable income like a magnet. With the exception of HSA Accounts, Roth IRAs, Reverse Mortgages and Cash Value Life Insurance, everything falls prey to the provisional income test. Even items you would never consider like municipal bond income or capital gains of non qualified mutual funds or ETFs. Qualified retirement funds are the biggest contributor to Social Security taxation of all income sources. Keep in mind that a qualified plan has no basis, so it’s all taxable. And although you can delay taking distributions from your qualified plan until age 70½, you’re forced to take required minimum distributions (RMDs), which directly   Read more…

“Sanctuary, sanctuary,” cried Quasimodo, the hunchback of Notre Dame as he ran into the church with the convicted woman Esmeralda to escape the lynch mop who had tried her and found her guilty. Back in the day the sanctity of the church was a safe harbor for those fleeing the law.  Today many of America’s affluent, upper middle class and even seniors in retirement are fleeing taxes. What tax shelters remain can help you keep more of your money. Here are the most popular for retirement. Health Savings Accounts: Contributing to a qualified health savings account is tax deductible, accumulates tax deferred and is distributed tax-free for medical expenses and medical insurance premiums for coverage like disability, health, Medicare and long-term care. The annual contribution limits for 2017 are $3,400 for individuals, $6,750 for married couples and $7,750 for married couples over age 55. There is also a once in a lifetime transfer from an IRA or Roth IRA to an HSA tax free up to $7,750 for married couples over age 55 in a non-contribution year. Roth IRAs: These accumulate tax deferred with tax-free distributions after age 59½. Under the five-year rule you could access part of your Roth   Read more…

Brainstorming is one of the most enlightening exercises in business. There’s nothing like a meeting of the minds to develop a fuller understanding of corporate goals, strategies and tactics. The facilitator needs to know how to turn into the storm to drive ideas and stay away from blowhards that take up oxygen in the room. Ideas must be pithy and to the point. Don’t be surprised that the vast majority of ideas are absolutely insane and can’t be implemented. But the few that survive are generally worth pursuing. There are always more tares than wheat. Serving is part of the building process. Product selling can only go so far. The direct and indirect elements that affect product sales often become the servicing menu items that have marketing magnetism that attract clientele. As an example: Your firm sells life insurance, but that space is overrun with competition. You need to educate your clients, referrals and prospects on the tax aspects, the physiology of underwriting, the distinctions in product lines and planning scenarios that include indemnification, income and inheritance. Those are your differentiators. Unwarranted fears can put the brakes on a company and decelerate growth and decrease profitability. Fear that we’re out   Read more…

The personal touch always out ranks the typical business talking points and lets people know you care. Social media is one aspect of personal publication. The original intent of social media was an environment for friends and family to keep apprised of activities occurring within their community. But it was eventually adopted by corporate America as a high-tech contact tool. Sharing business ideas and concepts on social media is like having your own study group. But, as mind boggling and cool as high tech is, high touch is actually viewed as heartfelt. All work and no play can make your edge dull. Finding life’s balance should be priority one. Placing the fulcrum in the right place between work and play can bring an equilibrium to your practice and family. Workaholics spend their time and health to secure wealth. Everyone needs to strike a balanced lifestyle between their vocation and family. Many businesses have parties, social gatherings and charity events where they participate in their community as a group. It develops a comradery with business associates that brings them together as team, which can increase productivity. A major error that can undermined relationships is placing unrealistic expectations on others especially expectations   Read more…

In the economy of relationships people make mistakes. It’s just part of the price you pay in a partnership. Factoring in a few inevitable mistakes into the relationship equation can soften the blow of a blunder. Being vulnerable and open can help others through their difficulties and challenges. No doubt you will need some grace yourself someday, and the universe has a way of pay back, so sow well. Sharing in the public domain is tricky business. We live in an open society with social media and cameras everywhere. Any post can be an evergreen… forever.  Be judicious in exposing personal issues, politics and religion. Lines get drawn in politics and religion and it’s hard to cross back over to repair a bad posting. It can be detrimental to business when you share too much. Having someone’s back in business is a high value characteristic among partners. It creates a bond, a loyalty that is not easily broken. When someone has been there for you, you need to display commensurate actions that speak louder than words. Unnecessary conversation is almost always counterproductive. Sometimes our additional discussions hurt our credibility. Stick to the meat of the matter and avoid wordiness. Often,   Read more…

Being authentic is often referred to as the approach. This is pretty simple. Be who you are and accept others as they are. The authenticity of connecting personalities, beliefs and points of view can accelerate relationships. Generating a personal touch is a solid business characteristic, but personal politics and religion are often deal killers. Business is business. Professionalism is just good business. Identify Shared Goals and Values. Have you ever heard the statement, “Birds of a feather flock together”?   In life we typically seek out people with whom we share similar goals and values.  How do they treat others? Do we respect them? We cannot always share the same point of view with everyone, but shared values are a must.  It’s ok to agree to disagree!  Learn to compromise and appreciate how people with different goals, ambitions, and viewpoints can enhance your life. Most importantly, learn what they can teach you. Disagreements can enlarge and broaden a partnership. Different points of view can create contrast.  If everyone agrees on everything then you may have inadvertently created an echo chamber and not a sounding board for differing business strategies and tactics. Respect is earned. Developing relationships takes time, dedication, and a willingness to   Read more…

No one wants to spend sweat equity with people who never sweat and have no ‘skin in the game’.  If you’ve been around the block more than once, you know you’ve wasted time and treasure on lesser things. So as a promise to myself and you as well, let’s partner with people who are aligned with our goals. Many partnerships suffer from misalignment. They just don’t mesh. They don’t complement each other. It’s best to recognize it, cut your losses and move on. Successful businesses know their core competencies and market to them. They create a value proposition around them and design a menu of services to develop an inter-dependency with their target audience. If the services or “deliverables” are viewed as a significant benefit to your target audience, it will create a reliance upon you for support, and direction. To be effective and profitable, you will need to strike a balance between spending time and treasure on “givers and not takers”. You only have so much time, resources and money, so choose wisely and keep the phrase “mutually beneficial” at the forefront of your mind. If it’s not mutual, It’s over right then and there. Our business, and possibly   Read more…