• Besides the death benefit, it may also help you financially during your life.

     

    Provided by MidAmerica Financial Resources

     

     

    As Bankrate.com noted, 43% of Americans have no life insurance. Some view it as optional; some have simply procrastinated when it comes to buying a policy. Others believe that they can’t afford it.1

      

    In reality, life insurance is cheap today. If you just want term life coverage – essentially, life insurance that you “rent” for X number of years – you may find it quite affordable wherever you live. Plugging in some sample variables, a little comparison shopping online reveals that a 40-year-old, non-smoking woman in excellent health who lives in New Hampshire would pay premiums of just $380-420 a year for a 20-year level term policy with a $500,000 death benefit. (She would have several providers to choose from.)2

     

    If you choose permanent life insurance rather than term life, new possibilities emerge. In addition to a benefit for your heirs at your death, an insurance policy capable of building cash value gives you more capability to address financial needs during your lifetime.

     

    Permanent life insurance allows you the opportunity to build cash value. The premiums on a whole, universal, or variable life policy are higher than for a term life policy, but there is a reason for that – as you pay into one of these policies, the policy, itself, accumulates cash value. That cash value grows without being taxed.3

     

    In all probability, the cash value will continue to be available as long as you live. While it’s true that some insurance companies have gone under, the reality is that very, very few do. They guarantee the death benefit and the viability of the policy as long as you keep making the premium payments.3

     

    If you need a loan someday, a cash value life policy may give you an option. Some of these policies allow withdrawals of the cash value, meaning that you can borrow against the cash value once you have funded the policy with a sufficient amount of premiums. (You can even tap the cash value to pay the premiums, if you like.) Naturally, loans taken from the policy will reduce the death benefit amount. The policyholder faces no requirement to pay back the loan, but the loan is subject to interest.3

     

    Many of these policies come with degrees of flexibility. You may be able to transfer some of the cash value into another insurance product with the death benefit unaffected.

     

    The death benefit may do much to preserve your loved ones’ quality of life. Life insurance death benefit proceeds are almost never taxed (only under rare circumstances does the IRS count them as gross income). So a permanent life policy will give your heirs money to address funeral and burial expenses and possible estate taxes, and those funds could also provide them with part of their inheritance.4

        

    Cash value life insurance also means permanent coverage as long as the policy is in force. The death benefit will not be readjusted or diminished if you fall ill, and if you buy a policy in your thirties or forties, you save money compared to those who purchase a policy after age 50. 

     

    Permanent life insurance is also highly useful in estate planning. Several kinds of trusts may be used in conjunction with permanent life policies, such as irrevocable life insurance trusts (ILITs), special needs trusts, spendthrift trusts, simple living trusts, and more. Often, a trust can be named as beneficiary of a permanent life policy, an estate planning step toward an eventual financial benefit to heirs.5

     

    First and foremost, life insurance matters for its death benefit – but those considering it should not overlook its financial utility in other situations during the course of life.

     

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com. www.mid-america.us

     

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

       

    Citations.

    1 - bankrate.com/financing/insurance/how-painful-is-the-life-insurance-talk/ [9/15/15]

    2 - term4sale.com/cgi-bin/cqsl.cgi [8/9/16]

    3 - investopedia.com/terms/c/cash-value-life-insurance.asp [8/9/16]

    4 - irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds [1/1/16]

    5 - aol.com/article/2015/05/07/how-to-supercharge-trusts-with-life-insurance/21173793/ [5/7/15]

  •  

    A look at some popular & obscure options for receiving money with little or no tax.

     

    Provided by MidAmerica Financial Resources

     

     

    Will you receive tax-free money in retirement? Some retirees do. You should know about some of your options for tax-free retirement distributions, some of which are less publicized than others.

     

    Qualified distributions from Roth accounts are tax-free. If you own a Roth IRA or have a Roth retirement account at work, you can take a tax-free distribution from that IRA or workplace retirement plan once you are older than 59½ and have held the account for at least five tax years. One other nice perk: original owners of Roth IRAs never have to take Required Minimum Distributions (RMDs) during their lifetimes. (Owners of employer-sponsored Roth retirement accounts are required to take RMDs.)1,2

     

    Trustee-to-trustee transfers of retirement plan money occur without being taxed. In a rollover of this kind, the custodian financial firm that hosts your workplace retirement plan account makes a payment directly out of the account to an IRA you have waiting, with not a penny in taxes levied or withheld. Trustee-to-trustee transfers of IRAs work the same way.3

     

    If you are older than 80, you might get a tax break on a lump-sum withdrawal. If you were born prior to January 2, 1936, you could be entitled to a tax reduction on a lump-sum distribution out of a qualified retirement plan in certain cases. Unfortunately, this is never the case with an IRA RMD.4

       

    Your heirs could receive tax-free dollars resulting from life insurance. Payouts on permanent life insurance policies are normally exempt from federal income tax. (The payout may be included in the value of your taxable estate, though.) A life insurance death benefit paid out from a qualified retirement plan is also tax-exempt provided the death benefit is greater than the policy’s pre-death cash surrender value. Even if an employee takes a distribution from a corporate-owned life insurance policy on his or her life while still alive, that distribution may not be fully taxable as it may constitute a return of the principal invested in the life insurance contract.4,5

      

    Sometimes the basis in a workplace retirement account can be withdrawn tax-free. If you have made non-deductible contributions through the years to an IRA or an employer-sponsored retirement plan account, these contributions are not taxable when they are distributed to the original account owner, accountholder, or an account beneficiary – it is considered return of principal, a recovery of the original account owner or accountholder’s cost of investment.4

           

    IRA contributions can optionally be withdrawn tax-free before their due date. As an example, your 2016 IRA contribution can be withdrawn tax-free by the due date of your federal tax return – April 15 or thereabouts. If you file Form 4868, you have until October 15 (or thereabouts) to do this.6

     

    Withdrawals such as these can only happen, however, if you meet two tests set forth by the IRS. First, you must not have taken a deduction for your contribution. Second, you must, additionally, withdraw any interest or income those invested dollars earned. You can also take investment losses into account. (There is a worksheet in IRS Publication 590 you can use to calculate applicable gains or losses.)6

     

    These common and obscure paths toward tax-free retirement income may be worth exploring. Who knows? Perhaps, this year, your retirement will be less taxing than you think.

        

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com. www.mid-america.us

     

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

     

    Citations.

    1 - irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

    2 - irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [7/28/16]

    3 - irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions [2/19/16]

    4 - news.morningstar.com/articlenet/article.aspx?id=764726 [8/13/16]

    5 - doughroller.net/personal-finance/life-insurance-proceeds-tax/ [8/18/16]

    6 - tinyurl.com/gwoxed8 [8/18/16]