Having a Retirement Income That Works for Your Lifestyle
December 22nd, 2014
We’ll start with asking the difficult question – can you afford the lifestyle you want during retirement? A lot of baby boomers are wondering. Forbes.com published a great article about this very subject. Baby boomers are in a dilemma. Many feel cheated by the retirement climate of today because they did what they were told to do with their money, but feel like they cannot retire when and how they wanted. Why is this?
A Large Population Sector
Part of the retirement problem for boomers today is a sad case of “how the cookie crumbled”. Between 1946 and 1964 there were 76 million births in the United States making up the ‘baby boomer era’. Today that 76 million (give or take a few) make up about one-fourth of the current population (Population Reference Bureau).
Because baby boomers occupying a giant chunk of the population, how they spend their money, save their money, and when they actually start retiring matters to the rest of us – and to their own retirement plans. The massive influence they have on our economy, based on their sheer population size alone, will shake things up a bit. People have started to call this shift ‘the greatest wealth transfer in the world’. Because their spending makes up most of the consumer base, and their wealth control totals at 67% of the country’s whole; when the boomers start aggressively retiring their qualified plans will reflect this shift, as well as the quality of their retirement.
401(k), Roth IRA, IRA, etc.
U.S. News & World Report published online that because a lot of 401(k)s were lost during the recession, retirees are now making ends meet a multiple amount of ways, including part-time jobs. But besides the disappointing fact that retirees are having to resort to clever income streams during their golden years, what is being said about the promises associated with their qualified plans? Are qualified plans really the way to go when there is already so much evidence about the security of those plans? Not only are baby boomers retiring much later because their retirement savings shrunk, they are also hustling for the more income needed to survive.
The answer is NO
When clients walk through the doors at Paradigm Life, they come to us with 3 major fears about retirement:
- Running out of Money
- Affording Healthcare Costs
- Maintaining Independence
We help eliminate those fears by teaching them to look at retirement in two phases – the accumulation phase, and the distribution phase. To successfully retire, one must ask crucial questions about their lifestyle, but also ask questions about how their current plan will really look once they start withdrawing money and paying taxes. The variables associated with popular plans, like taxes, inflation and market volatility, can be eliminated when you use Life Insurance to retire.
A properly structured Life Insurance policy can give you the guaranteed retirement income you are looking for. When your money is sheltered in a cash value policy, you receive tax benefits, liquidity, and market security. Your Life Insurance Policy can supply with you the steady retirement income you are looking for to achieve the lifestyle you want during your non-working years.
How to Fix Poor Credit
December 19th, 2014
Unlike the old adage about leaving things that work alone, some things really are broken and do need fixing. Like poor or bad credit. While there are many reasons to eliminate all your credit card debt, keeping your existing credit good, is important for the times you really need it. Namely, for being able to obtain the best interest rate possible for your large and important purchases: your house, your car, your education.
But let’s assume that for any number of reasons, you lost control of your credit card activity, or keeping up on payments. Your current credit score will reflect that or any credit misuse. If that is your situation, you’ll want to correct and rebuild as quickly as possible.
The good news is that there are several ways that you can restore both your credit and your credit score. The bad news is that it won’t happen overnight. In fact, any “fix your credit fast” offer will probably only “fix” the bank-roll of the person or company offering it. Fixing your credit is a process. It takes time; oddly, more time than it took to ruin it!
Getting Your ‘Poor Credit’ in the Black
The first step in getting your credit back into good standing is to find out just what shape it’s in now. And taking a hard look at your current credit report might be the most difficult part of the process. Until you see it in black and white – names and numbers, you might be able to comfort yourself in the thought that it’s really not that bad. And perhaps it’s not. But usually when you have a stack of unopened Visa and MasterCard bills, or you pull that plastic out of your wallet and hold your breath, waiting for purchase approval then your credit is probably not stellar.
However, the better reason for viewing your credit report is not to punish yourself for ignoring the warning to “never spend what you don’t have”, but you should look for errors. Errors happen more frequently than you might think. Incorrect late payments or accounts that aren’t even yours need to be found and corrected. And this is one thing you can and should do quickly.
Next, since late payments are one of the biggest issues in damaging your credit, you might consider enrolling in an automatic monthly payment plan set up with the credit card company and your bank – easy peasy.
Pay an extra $20
One of the most obvious, but not so easy peasy steps is to stop using your credit cards altogether. That’s difficult, considering that if you’re at the point of repairing your credit, it’s likely you’ve made a habit of overusing your cards to begin with. So instead of such a drastic move, pay just $20 extra to your monthly payment. This might seem small, but an extra $20 can significantly start your debt reduction snowball.
Finance Everything the Right Way
At Paradigm Life we tell our clients to finance everything. We don’t suggest you spend money you don’t have with someone else’s credit line i.e. credit card companies. What we do suggest is finance everything you buy with your Whole Life Policy. Because you can borrow against yourself with a policy loan and pay yourself back, the only person earning back that interest is you – not a credit card company. By utilizing your policy with purchases you are essentially your own banker and lender. This is how wealthy people stay wealthy, and stay in control of their personal economy.
Infographic: Infinite Banking Basics
Watch: The Financial Climb
Avoiding Inheritance Tax: A lesson from Philip Seymour Hoffman
December 18th, 2014
If you don’t live under a rock, you are probably aware of the horrific celebrity deaths that hit newsstands with shock – usually there is one or a two a year (sorry for the irreverence). Among those untimely deaths was that of actor Philip Seymour Hoffman. Almost a year ago (February 2014), the surprising announcement was made about the loss of this great Oscar winning actor.
Besides the pain that Hoffman’s family must have felt with his loss, more pain ensued as his heirs dealt with his estate being in shambles at the time of his death. Hoffman failed to update his will leaving his ‘unmarried widow’ and their three kids to battle with costly estate taxes, or inheritance taxes.
Hoffman’s net worth totaled at $35 million, but because he was not married to his kids’ mother (Marianne O’Donnell), she cannot receive any estate tax breaks that are awarded to spouses. On top of that, because Hoffman’s estate valued at more than the Federal Law exemption of $5.34 million, it leaves the rest of the money to be taxed at almost 40%. In addition to Federal taxing, his estate is also taxed by the state at 16%. Yikes!(Forbes.com)
Properly structured whole life policies can help avoid the chaos that comes with a lot of mismanaged estates. Typically, the death benefit from your life insurance policy is not taxed as income to your beneficiaries – it is not considered a taxable event.
However, the IRS and state tax authorities do try to find ways to tax money, so if you own a policy at the time of death, the death benefit could be included as part of your estate. If your estate values lower than $5.34 million, you’re in the clear. But, when you own a properly structured life insurance policy, the death benefit will increase, and likely exceed the $5.34 million dollar threshold. It is necessary to then have an estate plan in place.
The goal is to legally avoid paying excess, or any taxes on money passed to beneficiaries. As a policy owner you must be informed on your policy’s value and ensure you have an estate plan in place. There are many ways to ensure your heirs are receiving the maximum value of your policy, without taxes and with the help of an estate-planning attorney.