Browsing Category Life Insurance

An Empty Nest Still Needs Life Insurance

May 3rd, 2010 // 4:00 am @ Andrew Rosenbaum

Having children is one of life’s greatest joys. It’s also the reason many people buy life insurance.

So, once the kids are out of college and off on their own, do you still need life insurance?

Absolutely!

With college tuition bills behind you, you’re in a position to aggressively save for retirement.

You are likely to need both your income and your spouse’s to accumulate sufficient retirement savings.

Life insurance can help you still reach that goal if something should happen to your spouse.

What’s more, you’ve heard of “boomerang” kids who move back in if they lose a job or divorce?

In the past 18 months we’ve seen a lot of families reunited under one roof because adult children have lost jobs and even homes due to foreclosures. Your children’s welfare is your concern at any age.

Grandchildren may also need your help. If tuition at a private college now costs close to $50,000 a year, what might it be 20 years from now? Will your adult children be able to save that on their own?

Whole life insurance is a versatile guaranteed financial vehicle that protects your family in the case of premature death.

It can provide a strong financial foundation for your economic security no matter what life has in store for you and your children.

Category : Family &Life Insurance &Permanent Insurance &Retirement

Save Now, Play Later

April 26th, 2010 // 4:00 am @ Andrew Rosenbaum

If you’re like most people, you may be having trouble sticking to your New Year’s resolution to save more money.

There are two common reasons why it’s hard to save, particularly in today’s economy:

1. We buy too many things to satisfy emotional needs, instead of buying only the things we really need.

We’re too willing to pay a premium for a brand that feeds our self-esteem. It’s a habit we could afford in the go-go years, but we’re finding it difficult to break now that we need to save.

The solution: Re-examine your motive for accumulating stuff.

Are you a victim of a mentality that believes “I buy, therefore I am”?

Is that the image you really want to project to your family and friends? Is that a lesson you want to teach your children?

A far better self-image is someone who is economically secure.

I define economic security as a feeling that your financial plan is on track even during volatile economic times.

Economic security gives you the confidence that your net worth will not crumble overnight.

You’ve heard the saying, “Pay yourself first.” It’s wise advice.

The first check you write each month should be to yourself in the form of savings.

If you don’t have the discipline to write it yourself, set up an automatic payment system that transfers some income each month into savings.

Of course, choosing the right savings vehicle is not always easy. That brings me to the second big obstacle to saving:

2. The roller coaster markets are still volatile, so we don’t know where to put the money we save.

The yields are small on many conservative investments, and they shrink even more after you pay the tax bill.

Fear, confusion, and inertia are discouraging people from setting money aside. If it remains in your bank account, it’s tempting to spend.

What if I told you that you could put away money each month into a financial product in which your cash value will build and that the value will be backed by a guarantee?

What’s more, any increase in cash value is currently tax deferred, and that if structured correctly you are able to withdraw some of the value without paying taxes at any age?

It sounds pretty good, right?

The product is permanent life insurance, and specifically known as whole life.

That means your family’s financial security is protected by a death benefit (also not subject to income tax under current law) if something were to happen to you.

So instead of buying a term life policy to protect your family and trying to save and invest money on your own to build financial security, why not combine both necessities into one streamlined product?

It’s the best and easiest way I know to achieve financial peace of mind.

Category : Economic Confidence &Financial Certainty &Permanent Insurance &Saving

Spending Year-End Bonuses Wisely

April 19th, 2010 // 7:02 am @ Andrew Rosenbaum

It’s Wall Street bonus time, and the big surprise is what is on so many bankers’ shopping lists: whole life insurance.

After last year’s economic freefall, it’s not just Main Street investors seeking safer financial products; Wall Street players are adding whole life products to their portfolios.

And many of them are using guaranteed financial products to balance portfolio risk.

They’ve seen how other investors protected their wealth with products such as whole life insurance when the economy sank.

Sophisticated investors have begun to question the common belief, “Buy term and invest the rest.”

They see it is a misconception, because (1) most people don’t invest the rest, they spend it, or (2) they invest it in something that they think will produce a high return, but that is more like gambling than investing.

Bonus time is a great time to invest in your economic security.

Consider taking part of your bonus and putting it toward guaranteed financial products that will weather the storm, whether markets go up or down.

Category : Financial Risk &Investing &Life Insurance &Market Volatility &Permanent Insurance &Recession

Average Returns v. Actual Yields, & Why Whole Life is a Great Bet

December 30th, 2009 // 4:00 am @ Andrew Rosenbaum

Here’s a message for all investors who like playing with high-risk investments: Math is not money, and money is not math.

Imagine you are investing $1,000 in a mutual fund. You have a fantastic first year, earning a 100 percent rate of return, bringing your balance to $2,000.

In year two, things go poorly and the investment loses 50 percent. Your balance is now back to $1,000.

In year three, the market goes up and you earn 100 percent again, bumping your balance back up to $2,000. The fourth year markets tank again and you lose 50 percent. Your balance has now fallen back to $1,000.

Notice that your beginning and ending balances are exactly the same. Your actual yield is a big fat 0 percent.

Here’s the interesting thing. What is your average rate of return? 25 percent.

I know any investor would love to get a 25 percent return. A mutual fund with this exact performance could advertise, “Our fund has averaged 25 percent over the last four years.”

It’s a true statement. It is not illegal or blatantly dishonest. It simply fails to illustrate the fact that investors actually ending up with no return.

One of my clients is a major league hedge fund manager. He knows something about high-risk investments. But what does he have in his portfolio? A guaranteed contract –- a whole life insurance policy.

In the past year he doubled the size of his policy. In this economic environment, he told me, he needed to lower the overall risk of his investments. And a guaranteed contract is a smart alternative to treasury bills, which are currently paying a very low yield.

Here’s how he explains it in his own words:

Whole life is an investment with its own risks and rewards. But the risk is relatively low. The return is virtually guaranteed, you can borrow against it over time, and you can use it for estate planning purposes. I know that when I die my family will have enough money to manage their own lives. I could invest in ExxonMobil, but who knows what the stock would be like in ten years?”

He told me he thought that whole life has a bad rap, which encourages people to think they can outperform the policy. To quote him again,

Many savvy investors believe they can stimulate the characteristics of life insurance benefit on an after-tax basis – it has to be after tax because money accumulates within a policy tax-free. They think they can take $10,000 a year and invest it, but what happens is they never do it, and their portfolio is skewed.”

My hedge fund client really understands risk, and he certainly understands rewards.

Category : Financial Certainty &Financial Planning &Investing &Market Volatility &Permanent Insurance &Stocks & Mutual Funds

Accumulating v. Utilizing Wealth

December 23rd, 2009 // 3:59 am @ Andrew Rosenbaum

Accumulated money means nothing if it’s not utilized properly. There’s a huge difference between accumulating money and putting it to good use.

Accumulating without utilizing is like buying a cruise to the Bahamas then never going.

The basic premise of the accumulation theory is that collecting money — gathering a “nest egg” — guarantees financial protection.

But no amount of money guarantees happiness or, for that matter, security. Many Wall Streeters are discovering this.

I believe in the utilization theory, which says money gains meaning by how it is earned and used.

What is true is that money is a tool and, like all tools, it is designed to do a job. It’s up to you to use that tool to enhance your happiness.

People who enjoy lasting wealth have a deep understanding of money — what it is and what it is not. Money isn’t as important as the asset that produces it.

With the utilization theory, the idea is to limit the risk that the asset will lose its power to provide financial security for you.

The more risk we take on, the more stress and pressure we experience, regardless of how much money we have or make. The more we use money to transfer risk, the more economic confidence we feel.

Purchasing a guaranteed contract that provides a reliable return, virtually risk-free, and ensures your family’s financial security if you die, is a wise use of money.

Category : Accumulation v. Utilization &Economic Confidence &Financial Certainty &Financial Risk &Permanent Insurance

Whole Life: A Surprising Source of Cash When Times are Tough

December 16th, 2009 // 3:58 am @ Andrew Rosenbaum

This past September, the Wall Street Journal printed a special section entitled “The Resurgence of Whole Life Insurance.”

Many more people are considering whole life insurance these days because it’s one of the few assets that has retained its value during the economic downturn.

It’s interesting that the WSJ focused on a little-known advantage to this great life insurance product –- a benefit you should know about if you’re a business owner.

If your business runs short on cash –- and most businesses are suffering from a cash crunch in this recession –- you can borrow against a whole life policy without incurring the onerous fees and penalties of borrowing against traditional retirement accounts.

To quote the article,

Whole life, or permanent life, as it is also called, is experiencing a revival of interest as a long-term investment to weather difficult economic times. Aside from the death benefit, the insurance provides a tax-deferred buildup of cash value that can be borrowed against on a tax-favorable basis, providing a ready source of capital when other sources of money are problematic or hard to come by.”

Whole life has both a “living” and a death benefit. You can assess the accrued cash value of a whole life policy at any time.

I’ve seen how useful this can be. The cash helped one of my clients through a business downturn.

The whole life policy he had purchased years ago had built up a considerable amount of cash. He was able to withdraw a part of the cash value at no penalty.

Because he withdrew the money personally, it didn’t affect the credit rating of his business. Although he repaid the loan, the fact is he didn’t have to. The amount one withdraws from a policy can be deducted from the policy’s payout.

The bottom line is this: A whole life insurance policy that has been given a chance to grow is an asset that’s “got your back” if you need it.

If you’d like to read the entire Wall Street Journal section, please contact me and I’ll send you a copy.

Category : Business Planning &Life Insurance &Permanent Insurance &Recession

Whole Life Insurance: The New Asset Class

November 17th, 2009 // 12:10 pm @ Andrew Rosenbaum

In economic terms, an asset is any form in which wealth can be stored. Asset classes have three essential characteristics:

1. They embody a future benefit that involves a capacity to contribute to and receive future net cash flows.
2. They involve a resource controlled by a firm or an individual that offer the possibility from which future economic benefits (besides cash) are expected to flow.
3. They allow the owning entity control and access to the benefit.

I liken the performance of permanent life insurance to that of an investment-grade bond with a super-bonus.

The word “bond” works well here because a bond is a financial instrument that is very stable, reliably producing low-risk gain. It doesn’t offer crazy, off-the-chart returns; just safe reliable actual rates of return.

The super-bonus is the death benefit, which is payable income-tax free to the policyholder’s chosen beneficiary. More importantly, with the right strategies the death benefit can be leveraged by the policyholder  to use while living.

When used this way (which I discuss in the next chapter), whole life insurance is an asset class of substantial value that meets all the designated criteria:

• The cash value provides the policyholder with living benefits similar to a fixed account with a guaranteed minimum return that can be used for a wide range of applications.
• The death benefit provides cash when needed most.
• The tax-deferred cash accumulation can be accessed income-tax free.
• The death benefit is payable income-tax fee and, with the proper strategies, estate-tax free.
• Policy proceeds are typically beyond the reach of creditors.
• Unlike equities, with a waiver of premium rider, the policy is self-completing in the event of disability.
• The death benefit is based on the event of death — not a market event that can cause a downturn in value.
• Premiums may be funded with interest earned from other invested assets in lieu of budgeted income.
• Adding permanent life insurance to a portfolio of cash, bonds and equities can produce at least as favorable long-term result with less risk then a similar portfolio without life insurance.

Because of these factors, I view permanent life insurance as an unknown new asset class. It is even more appealing in that it still flies under the radar screen of the federal government’s tax-claw.

Here’s another example of a tax benefit using this financial contract. Imagine you put $10,000 of annual premium into a permanent life insurance policy for ten years.

Your basis on this policy would be $100,000 ($10,000 x ten years). Let’s say that over the ten years the equity in the policy grew to $110,000 of cash value. Because permanent life insurance operates with a First-In First-Out principle, you could take the $100,000 (your basis) out of the policy without creating a taxable event.

You could also borrow virtually the whole amount as a loan, using the cash value as collateral. Of equal importance is that you can do so without disrupting the cash value growth, or the death benefit  features of the policy.

Most insurers have very low net cost associated with borrowing cash values. But the most powerful features are the utility, liquidity and control you have over your money.

Category : Featured Content &Life Insurance &Permanent Insurance

The Wealth Swing Coach: Maximize Lasting Wealth with Certainty, Not Luck

November 16th, 2009 // 3:58 pm @ Andrew Rosenbaum

My book, The Wealth Swing Coach, explains how you can achieve lasting economic confidence and financial peace of mind, regardless of market volatility.

Why the title?

Well, I was once watching Tiger Woods taking practice swings, while a gentleman carefully studied his swing. The commentator mentioned that this man was Tiger’s swing coach, Butch Harmon.

I was somewhat shocked.

I knew Tiger was perhaps the greatest golfer in history, yet he still had a swing coach? Despite his skill, Tiger cannot see himself swing. Harmon’s vast knowledge enables him to spot tiny flaws in even the best golfer’s swing.

What the swing coach does for the world’s greatest golfer is exactly what I do for some of the world’s smartest executives and entrepreneurs.

I’m their wealth swing coach.

My book explains how you can become a more efficient investor by rethinking your attitude toward money and definition of wealth.

Here’s an excerpt that describes my philosophy of wealth and financial planning:

“Investors should stop pursing high-risk investments and begin to seek ‘safe-risk’ investments instead. My great fear is that investors who lost money taking big risks in the last few years now will take even bigger risks to try to recoup their losses in a hurry.

“What people need most is financial peace of mind. They need a financial plan that works whether the markets go up or down. They need to stop chasing high returns. My message is that it’s time to shift your financial goals from amassing wealth to ensuring lasting economic confidence no matter what.”

Purchase and read The Wealth Swing Coach to enjoy the following benefits:

• Reveal the hidden flaws that invariably result in money worries and erode financial efficiency.
• Learn how to get the closest thing to a lock-down guarantee as possible with specific financial contracts.
• Absorb a new financial strategy that will increase your economic confidence with certainty, not luck.
• Learn why it is better to “utilize” money than to merely “accumulate” it.
• Discover a new asset class hidden from the general public, which offers tax-free and tax-advantaged growth.

Category : Articles &Featured Content &Financial Certainty &Life Insurance &Wealth Swing Coach