Objective information about financial planning, investments, and retirement plans

Friday Finance Links August 24, 2012

Share

After our anniversary last past weekend; this week has been relatively quiet and uneventful.  The unfortunate exception was early Sunday morning when we had to put down our 11 year old Chow, Zoe.  She was a good dog and will be missed.

Life Insurance (album)

Here are some articles and blog posts that I suggest for your weekend personal finance reading:  

Personal Finance Blogs  

Many of us wrote posts about life insurance in connection with Jeff Rose’s life insurance movement designed to raise awareness of the need for life insurance, especially among younger families.  Here are three posts in support of this movement:

Fellow financial advisor and blogger Chuck Rylant asks Are You Worth More Dead Than Alive? 

Ryan at Cash Money Life discusses Life Insurance, Part of a Comprehensive Financial Plan.  I couldn’t agree more.

Jason at One Money Design told us  Why Life Insurance is Important for My Family? 

Money Q&A reveals that A Shocking Number Of Americans Rely Entirely On Social Security By The End Of Their Life.  A sobering piece via Business Insider.

Posts from Fellow NAPFA members

Robert Schmansky wrote A Lost Decade?  Not The Case For All Investors at forbes.com.  His point is that investors in a diversified portfolio did relatively well despite the mediocre performance of the S&P 500.

Jim Blankenship discusses The Roth 401(k) Plan.

Other articles from around the web

Josh Brown, The Reformed Broker wrote Lest Anyone Ever Forget… about the fact that four years later, nobody has been prosecuted in connection with the Lehman Brothers bankruptcy, the largest in U.S. history.

Ian Salisbury tells us that ETFs become surprise mutual fund holdings at Marketwatch.com.

Kelly Greene offers advice on When Kids Return Home at WSJ.com.

Mark Miller tells us that Senior financial scams often all in the family at Reuters.com.

In case you missed it here is a link to my latest post for the US News Smarter Investor Blog 4 Financial “To-Dos” for Right Now. 

Here’s wishing everyone a great weekend.

Photo credit:  Wikipedia

 

Enhanced by Zemanta

Life Insurance – You Probably Need It

Share

Jeff Rose, a fellow financial planner and blogger, has started another movement on his blog Good Financial Cents.  Jeff is committed to raising the awareness of the need for life insurance in general and especially among younger families.  Overall it is estimated that 35 million households don’t have any life insurance and another 58 million households that do have some coverage feel that they are underinsured.

As a financial planner I am convinced that life insurance coverage is a key element in the financial planning process.  Not all clients have a need for it, but it is always something that I look at.

You have young children and a non-working spouse.  I can’t tell you how many young professional couples that I have encountered who either have no life insurance or far too little insurance.  Often I will get a call from a high earning young professional who is eager for guidance on investing and perhaps in buying income property.  However when I ask them about the basics such as life insurance or a will the answer is all too predictable.  They haven’t paid any attention to these key protection elements.

In this case life insurance is an essential element of this family’s financial plan.  If the breadwinner spouse were to die, how would the mortgage be paid?  Assuming the non-working spouse needed to return to work how would childcare be paid?  How would the non-working spouse accumulate enough funds for both retirement and college?

Life insurance is an essential element in this family’s financial plan.  Life insurance can also be critical in a variety of situations.  Here are some examples from my experience in working with clients.

  • Life insurance allows the non-working spouse time to make decisions about the future.  While the death benefit might not last a lifetime it allows time to decide upon whether or not work, time for career training, what to do with the house, and other key decisions.
  • Life insurance is an easy, inexpensive way to build an estate.  Whether a younger family that has not had the time to accumulate assets or a mid-career person who has not been able to save, a life insurance policy can be an excellent way to fund expenses such as college, retirement for a spouse, or to simply provide a financial cushion for your survivors.
  • Life insurance can provide continuity for a business in the event of the death of one of the owners.  Life insurance is commonly used to fund a business buy-sell arrangement.  Under this type of arrangement, the proceeds of the policy are generally used to buy out the interest of the deceased owner and to provide a payout to their family.  This avoids the awkward situation of the remaining owners having to work with a surviving spouse who may have had no involvement in the business previously.

In buying life insurance I always advise clients to look at it for the death benefit first.  Some agents will tout various types of cash value policies as an investment tool or as a means to take money (the accumulated cash value) out of the policy tax-free in retirement.  In general I’ve found that life insurance is an expensive route to go if one is using it as an investment vehicle.

While these types of policies may have their uses, for most people term insurance is the way to go.  Term insurance will provide the least expensive death benefit.  There is no cash that accumulates in the policy and coverage will cease if you stop paying the premium.

For most folks that I encounter, however, buying the largest death benefit is the main reason to buy the insurance.  Two points about term insurance:

  • Term policies often come with a guaranteed level premium period.  This means that the premium remains fixed for a period of 10; 20; or 30 years.  For a younger family I would advise at least a 20 year level policy and perhaps a 30 year term.  Think through how long you might want to have insurance in place.  Also realize that your situation may change in the future and you may want a policy but be unable to obtain one due to changes in your health.
  • I work with clients to review their policies every few years.  Term rates change and we have been able to obtain policies with a larger death benefit in some cases without much increase in premium.

Life insurance often gets a bad rap.  It’s probably not so much that people perceive insurance as a bad product, but rather it’s the way it’s often sold.  If you work with a competent financial professional they can assist you in determining how large a death benefit to look at and other factors to consider.

Please feel free to contact me with your insurance and financial planning questions.

 

Photo credit: Christopher S. Penn

Enhanced by Zemanta

Friday Finance Links August 17, 2012 – Anniversary Edition

Share

The big event this week is our 28th wedding anniversary tomorrow.  My still lovely wife, Kyung, and I will be heading to the city for dinner and perhaps other activities.  (photo of Kyung with two of Chicago’s finest during NATO weekend here in Chicago earlier this Summer during our unsuccessful quest to find some protesters)

Here are some articles and blog posts that I suggest for your weekend personal finance reading: 

Personal Finance Blogs 

Tom at Stupid Cents asks Are You Making Spending Decisions Based on Fear? highlighting some ways advertisers others use fear to get us to spend our money.

Ryan at Cash Money Life discusses Investing for Cash Flow – Building a More Diversified Investment Portfolio.  Hard to believe a guy who looks this young is so smart.

Ken Faulkenberry at AAAMP Blog looks at a strategy for the income portion of your portfolio in This is How to Optimize Your Income Asset Allocation Plan.

Fellow financial planner and blogger Jeff Rose says It’s Time for Another Movement – Life Insurance Style.  I couldn’t agree more. 

Posts from Fellow NAPFA members 

Eve Kaplan asks Could You Be Forced To Pay Your Parent’s Long Term Care Bill?

Richard Feight discusses the question Rent Or Buy?

Kimberly Howard provides some sound advice on Preparing Finances For A Potential Layoff. 

Other articles from around the web

Kimberly Palmer of U.S. News warns us to Beware of These Common Holes in Homeowners Insurance Coverage.

Chuck Jaffe discusses 6 money lessons for your college student at Marketwatch.com.

Robert Powell offers 11 reasons to leave your 401(k) behind when you leave a job at Marketwatch.com.  Some good ideas, however as Bob says everyone’s situation is unique.

For the third week in a row I’m including an article from Christine Benz on Long-Term Care 4 Best Practices When Self-Insuring for Long-Term Care.  I’m a big fan of Christine’s; her articles on Morningstar.com are always worthwhile reading.

In case you missed it here is a link to my latest post for the US News Smarter Investor Blog Your Takeaway for New 401(k) Fee Disclosures.    

Thank You

For the second week in a row to Josh Brown for featuring one of my posts in his  The Good Leads  post in the Wall Street Journal this past Tuesday.  Josh also blogs at The Reformed Broker which is a must read financial blog.

Here’s wishing everyone a great weekend.

Enhanced by Zemanta