There are specific life insurance policies that can become a financial asset to you. Think of it like an investment account, such as an IRA or mutual fund.

Permanent Life Insurance

Permanent life insurance policies allow you to invest in conservative investments, like mutual funds or ETF’s. You can customize your investments, allowing your policy to align with your goals and risk tolerance. There are two types of permanent life insurance.

Whole Life Insurance

Whole life insurance is the most common type. This policy allows you to accumulate cash value. When you pay for the policy each month, a portion of it is placed onto a cash value account. This is basically a savings account component with the life insurance policy.  It is noteworthy that the premiums on these policies typically won’t increase over the life of the policy.

Universal Life Insurance

Universal life insurance is the second type that allows policymakers to grow an asset over time. What sets this one apart is that the premiums are not set and can change at any point. There is something called “variable universal life insurance” which allows investors to have more freedom over their investments. This could lead to higher returns in the long run.

How To Use Your Policy

To use your life insurance policy as an asset you must grow your investments and develop the power to borrow against what you have saved. These earnings are also growing on a tax-deferred basis.

• Use your policy as collateral for a loan: This will help you get approved for a loan or potentially get a better rate on the loan. This is a form of showing lenders that you are trustworthy as a borrower.
• Take a loan from your policy: You can borrow against the cash value of your permanent life insurance policy. When you do take a loan from your policy and it is not paid off by the time of your death, then that benefit is subtracted from what your beneficiaries would have received.
• Withdraw funds: You can simply take money from your policy that is cash. This is also money that will not be paid to your beneficiaries later. If your withdrawal is a large amount, then you may pay taxes from dipping into your investments.
• Option for accelerated benefits: This option is available in a time of severe medical emergencies.
• Surrender the policy: You can cancel your insurance policy and get back the cash value that you put in. Keep in mind to read the fine print, because often time there are quite high fees when doing this. Similarly, if you to withdraw from a retirement account early.

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The post Life Insurance as An Asset appeared first on New Century Investments.

Introduction

Nobody wants to have a loved one pass away and not be able to access their belongings with ease during a time of grief. Unfortunately, this is the case for many. Not having beneficiaries on your account and policies can be detrimental to your family members and loved ones who are grieving your loss. Taking the time now to review and update your beneficiaries will leave a lasting impact on those you care for.

Why?

Designating a beneficiary is important because it ensures that your assets will be transferred to the place you desire. You can name beneficiaries on life insurance policies and investment or retirement accounts. Typically, with a life insurance policy, the chosen beneficiary will receive some benefit that the policy pays. With investment or retirement accounts, the balance of your assets will transfer smoothly to your beneficiaries.

Naming a beneficiary is not required, meaning we need to take the responsibility to ensure our beneficiaries are updated across our holdings. Once you pass away, and you have no beneficiaries, the financial products you own will not be governed by your will anymore. Without beneficiaries, there is no clear answer to who is entitled to your assets. This creates a lengthy and grueling legal process to determine how your assets are distributed. Probate is one of those processes that gives power to the court to decide where your assets are distributed.

How?

With any financial service, you should be able to designate beneficiaries through the website or filling out a form. When setting up accounts through your employer, you can also have them keep your beneficiaries on file. If you work with a financial professional, they will also keep up to date with your beneficiaries.

A beneficiary can be a person, charity, trust, or your estate. Typically when choosing your beneficiaries, the immediate people who will suffer financially, will prioritized as beneficiaries. When naming beneficiaries, you can also split the benefits across multiple names. For example, say you have 3 children, and you want to split equally across them. They would each receive 33.33% of the assets in that account. It is important to research state laws before naming your beneficiaries on your accounts. Beneficiary laws vary by each state, and some states make it a requirement to list your spouse as your primary beneficiary. Updating beneficiaries happens in specific circumstances, such as divorce, remarriage, or the death of a loved one who was one of your beneficiaries.

When designating beneficiaries, you will likely provide the full legal name as well as their relationship to you. When providing beneficiary information, be as detailed and thorough as possible. This will ensure that the benefits entitled to your beneficiaries will be expedited to them as efficiently as possible.

Conclusion

To secure the financial stability of those important to you, consider naming, reviewing, or updating your beneficiaries. The whole purpose of this system is to be able to honor your desires once you are no longer here, making it advantageous to put thought into the futures of your loved ones today.

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The post Secure & Honor: The Importance of Beneficiaries appeared first on New Century Investments.

Financial Planning has only been around since the 1970s, preceded by banks and insurance agents whose aim was not to provide holistic financial advice. Financial planning services have become sophisticated and technology-driven to meet complex and individual needs of people and businesses. Certified financial planners today are founded on a fee-based, personalized relationship with their clients to help them achieve true financial success.

In the beginning, financial advice was reserved for the wealthy with little focus on long-term planning. Services can find roots back in the 20^th century from banks and insurance companies focused on selling their products.

The 60s and 70s was the birth of financial planning as we know it today. Modern financial planning was first established in 1969 with the International Association for Financial Planning. This was where the groundwork was laid for CFP’s today. The College for Financial Planning was founded in 1971 bringing to the world the first Certified Financial Planners in 1973 providing comprehensive financial planning. The standardized credential of CFP was significant, because those practicing financial planning must meet rigorous education, examination, experience, and ethical standards.

The 80s and 90s were a turning point for the growth of this industry. Mutual funds, 401k plans, other investments, and the need for regulation and standardization demanded more professionals in the industry. The Certified Financial Planner Board (CFP Board) was established in 1985 to mange the certification process and provide an ethical code and standard for Certified Financial Planners.

There has been a shift in the industry from selling products to selling advice. Advisory, fee-based relationships became increasingly in demand, as personal finances are close to the personal lives of the clients. The fee structure effectively integrates the reward system of the client and investor to be aligned. The advisor became incentivized by the client’s portfolio performing well rather than by trades and transactions. This allowed advisors to begin making decisions that had the client’s best interest in mind.

The 21^st century brought incredible advancements in technology that transformed financial planning services. Financial Planning has been integrated with artificial intelligence and data analytics, equipping financial planners to offer more personalized and precise advice. Comprehensive financial plans today offer clients plans that consider many factors, including risk tolerance, life goals, and market conditions.

Financial planning is likely to continue evolving and providing more detailed and in-depth projections for clients. Holistic financial planning considers retirement planning, investment management, estate planning, tax planning, and more.

The history of financial planning has grown over many years to meet the diverse needs of clients. The foundation of financial planning is adhering to ethical standards and professional excellence. The financial planning model today emphasizes a genuine relationship that offers personalized guidance for that client’s needs, challenges, and goals.

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1. Donate to Charity¹ (if you’re over 70 ½ you can donate from an IRA for tax savings)
2. Consider funding an HSA (must have HDHP)
3. Prepay Deductions²
4. Consider Business Expense Deductions

If you notice, cash has lost the most on every single 5+ year period. And, if you also notice, stocks have had the exact opposite effect. Stocks become less risky as time goes on.

On every rolling 20-year period in stock market history, stocks have been up. Therefore, if you’re still working, you may consider keeping between 6-12 months in cash, depending on your situation. But if you’re retired, then it’s a different situation because you may not have other income. Distribution planning tells us that in retirement we should be more conservative.

Now, let’s recap stock markets this year.

In 2021, emotions fueled a stock market rally in the early part of the year. The rally cooled off by mid-spring and depending on the industry, some markets are down year-to-date. This is exactly why we diversify holdings and monitor performance. Nobody has the crystal ball to know exactly which investments are going to perform well into the near future. Therefore, prudence tells us that we should have several different investments.

We consider investing as a form of “probabilities”, rather than a form of speculation. Unlike rolling the dice, investing involves analyzing market conditions, monitoring economic and tax law changes, studying fundamental characteristics, and looking for investments that are undervalued or poised for growth (but at a reasonable price). This increases our probability of success. We are not speculators. We are long-term investors. We believe that by weighting towards these fundamentals (among others), long-term performance will be rewarded.

Reach out to our firm if you have any questions about saving on taxes or investments!
817-238-6300

Matt Ward

*All tax planning and investment content is generalized. Specific situations will apply in determining eligibility.

The post Market Perspectives & Taxes. A Common Myth about Cash appeared first on New Century Investments.