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Which Do You Need: Life Insurance or Annuity?
Jeff Martin, CRPC®
Life insurance and annuities are essential financial planning tools for providing future independence. Each may be part of a comprehensive financial plan depending on one's situation and goals.
But first, it’s essential to understand what each is.
- Life insurance—Life insurance is a contract with an insurance company in which, in exchange for premium payments, the company promises to pay a sum of money, called a death benefit, to beneficiaries upon your death.
- Annuity— An annuity is a contract issued and distributed by an insurance company and bought by individuals. The insurance company pays the purchaser a fixed or variable income stream in exchange for the premium.
Here’s how to determine which may fit your needs, depending on your circumstances.
1. You have dependents
Life insurance may be appropriate if your dependents count on your income. Apart from providing independence to your loved ones in case of your untimely death, some life insurance policies also offer investment options, allowing the death benefit to grow over time. Life insurance can provide for lost income and pay for dependent care and education.
2. Retirement income is important to you
moreIs Investing in Land Suitable for You?
Jeff Martin, CRPC®
Among various real estate investment options, purchasing parcels of undeveloped land has seen a substantial surge in popularity. In recent years, farmland has also become a popular investment for many who have no intention of farming but intend to lease parcels for agricultural production as a source of income. As land values continue increasing, due diligence is recommended before a deal is carried out. Like any investment, investing in land also comes with risks.
Raw land: A blank canvas
Undeveloped land, often termed 'raw land,' provides a blank canvas for the real estate investor. The potential uses for this land are virtually limitless, from residential housing projects to commercial developments or even agricultural utilization. However, the primary lure of undeveloped land is its inherent potential for substantial profit margins. Real estate investors acquire these large parcels with hopes that urban expansion or developmental projects may increase the land's value over time.
Lower cost- Investors often prefer purchasing larger parcels due to economies of scale. Larger parcels typically cost less than smaller ones, providing investors with more space and optimal utilization potential. Moreover, securing sizeable pieces allows for a broader range of development possibilities, increasing the chances of a higher return on investment.
moreHow to File Taxes After the Death of a Spouse
Jeff Martin, CRPC®
Losing a spouse can be an incredibly challenging time. Amidst the emotional turmoil, there's the daunting task of dealing with finances and filing income taxes at the end of the year.
Facing the aftermath of a loved one's death is challenging, and dealing with income tax returns can add to the stress. However, the steps outlined here can make the process more straightforward.
Step #1- Identify the filing status
The first step in filing income taxes after the death of a spouse involves determining your filing status. If your spouse passed away during the tax year, the IRS still considers you married for the entire year for tax purposes. Therefore, you must file a joint return using the "Married Filing Jointly" status.
However, if you have dependent children, you may be able to use the "Qualifying Widow(er) with Dependent Child" status for two years following the death, granting you the same benefits as a joint return. A financial or tax professional can help determine the filing status for your situation and clarify any questions you may have.
Even if your spouse filed married filing separately, income taxes must be filed for the year of their death.
more529 Plans: For Adult Savings or Going Back to School
Jeff Martin, CRPC®
529 plans can benefit adults in numerous ways besides being a savings vehicle for a child's education. It offers a straightforward way for adults to finance their education, take non-qualified distributions, fund a Roth IRA, and, under certain restrictions, make payments towards outstanding student loans.
The flexibility of a 529 plan provides adults with numerous options for using the monies.
Adult education funding- Using a 529 plan for adults returning to school is remarkably straightforward. Contributions to a 529 plan grow free from federal and, in most cases, state taxes. These distributions are tax-free when withdrawn and used to pay for qualified higher education expenses such as tuition, fees, books, and room and board for beneficiaries enrolled at least half-time. Adults can even set up a 529 plan on their behalf, making themselves both the account owner and the beneficiary.
Non-qualified distributions- A 529 plan allows non-qualified distributions for purposes other than educational expenses. However, it's essential to know that withdrawing money for non-educational expenses may result in income tax on any earnings portion of the distribution and a 10% penalty. The penalty can be waived in specific circumstances, for example, if the beneficiary receives a scholarship or attends a U.S. military academy. To understand how non-qualified distributions work and if a non-qualified waiver would apply, consult a financial professional.
moreTariffs and Portfolios: A Primer for Investors
Jeff Martin, CRPC®
Tariffs are pivotal in shaping domestic and global trade policies and economic events. Implementing tariffs may impact countries, manufacturers, businesses, and investors alike.
Therefore, understanding the correlation between tariffs and an investor's portfolio performance is vital. Here, we provide a brief history of tariffs, their significance, and how they impact investors.
Tariffs and policies
Tariffs have a long history in the U.S. as they were once a significant source of governmental revenue; in 1913, income tax replaced tariff monies. In 1930, the Smoot-Hawley Tariff Act increased tariffs on over 20,000 imported goods, triggering a trade war that prolonged the Great Depression.
The U.S. has continued its policy on tariffs for various reasons, such as to protect domestic interests, as leverage in negotiations, and to capture a share of global wealth.
Other policies have emerged, signaling a shift toward imposing tariffs on imported goods worldwide:
- 1947- The General Agreement on Tariffs and Trade (GATT)
- 1995- The World Trade Organization's agreement on trade equalization and reducing tariff barriers.
A tool with far-reaching implications
moreThe Sustainability of Social Security: Cause for Concern?
Jeff Martin, CRPC®
Social Security, established in 1935, provides financial benefits to the elderly, disabled, and disadvantaged groups. However, there are concerns regarding its sustainability.
Social Security is particularly concerning among younger generations who are not yet receiving benefits and must continue paying SSI taxes despite their future benefits being reduced or, at worst, discontinued. So, should you be concerned about the state of Social Security? The answer, while multifaceted, tends to lean toward the affirmative.
Reasons for concern
There are several reasons for concern about Social Security's sustainability.
Demographic changes—The number of baby boomers born between 1946 and 1964 are reaching retirement age, and their numbers are significant. As they draw Social Security retirement benefits, fewer workers contribute to the program, straining the system's financial resources.
Longer lifespans—Due to advancements in healthcare and technology, People are living longer than ever. While longer lifespans are a positive development, they also mean that individuals draw upon Social Security benefits for extended periods. This increased longevity, combined with the influx of retiring baby boomers, puts increasing pressure on an already burdened Social Security system.
moreInflation and Your Wallet: How to Combat Rising Prices
Jeff Martin, CRPC®
Inflation is the rate at which the cost of goods and services rises. Inflation is measured by the consumer price index (CPI), which monitors the average prices of goods and services across categories like food, vehicles, apparel, and healthcare services.
Due to inflation, your hard-earned money will buy you fewer groceries, gas, medical services, or anything else than previously. While inflation affects most industries, how much it affects them varies. After all, not all goods and services increase at the same percentage. Inflation may impact multiple sectors, impacting your wallet simultaneously.
Food industry—When inflation hits, Food prices go up due to the increased costs of agriculture, labor shortages, and infrastructure issues, like a shortage of truck drivers. It may be no surprise that your grocery bill is more expensive than it used to be.
Air transportation—An increase in oil prices often leads to a rise in airplane fuel prices, which eats into the earnings of many airlines. Also, since travel is usually a nonessential expense, many people tend to spend less on airfare or avoid airfare costs altogether, further hurting the bottom line of the air transportation industry during inflationary periods.
moreInherited Accounts, RMDs, and The Ten-Year Rule: What Beneficiaries Need to Know
Jeff Martin, CRPC®
Understanding the guidelines surrounding Required Minimum Distributions (RMDs) becomes crucial as we navigate the complexities of personal finance and retirement planning.
For those who have inherited retirement accounts or are approaching their RMD age, the ten-year rule is a pivotal part of this financial landscape. Here are the ten things you need to know about it.
1. The origin of the ten-year rule—The rule took effect in 2020 with the passing of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. This legislation revamped many rules regarding retirement accounts, including RMDs.
2. Who the rule applies to—The ten-year rule primarily applies to non-spouse beneficiaries of Individual Retirement Accounts (IRAs) and defined contribution plans such as 401(k)s, 403(b)s, and other employer-sponsored retirement plans.
3. The purpose of the rule—The rule mandates that these beneficiaries empty the account by the end of the 10th year following the original account owner's death. This rule ensures that tax-deferred growth benefits don't extend indefinitely and that the government can reclaim some of its deferred tax money.
4. No yearly RMDs—Under the ten-year rule, there's no requirement to withdraw a certain amount each year. As long as the entire account balance liquidates by the end of the tenth year after the account owner's death, the beneficiary is compliant with the rule.
more5 Strategies for Navigating Market Volatility
Jeff Martin, CRPC®
Given the dynamic nature of global markets and the ever-changing economic landscape, addressing portfolio management and market volatility is essential. During these periods, wealth preservation paths can prove complex. Managing and addressing portfolio risk, taxes, estate and retirement planning, and monitoring progress toward goals is essential.
Therefore, a comprehensive understanding of fundamental strategies for navigating market volatility often includes the following:
1. Diversification. The old investment adage, “Don't put all your eggs in one basket,” is particularly relevant today as it was decades ago. Diversifying your investment portfolio mitigates the risk by spreading the investments across various types of investments, sectors, or geographies.
For example, consider including bonds, ETFs, real estate, or alternative investments in your portfolio instead of investing only in equities.
2. Staying informed. Additionally, staying informed about market trends and economic indicators is key to wealth management. Understanding how geopolitical events, policy changes, or other developments affect market conditions provides insight into making informed investment decisions. Staying informed enables one to anticipate market shifts and position one's portfolio accordingly.
moreIs Wealth Accumulation Tied to Luck?
Jeff Martin, CRPC®
There is often debate on the role that luck plays in accumulating wealth. Some argue that wealth accumulation is a matter of hard work, commitment, and good decisions, while others believe luck is a factor.
However, there are actions that those with wealth initiate in their wealth accumulation approach.
1. Financial Literacy—Financial literacy is the cornerstone of wealth accumulation. It equips one with understanding how money works, tools to make informed financial decisions, and strategies to optimize wealth. A basic knowledge of economic concepts, investing principles, taxes, budgeting, risk management, and retirement planning is vital. Wealth accumulation isn't about relying on luck but developing the skills and aptitude to grow financially.
2. Ability to adapt to changing circumstances—Wealth accumulation isn't just about sticking to one strategy. Instead, it requires constant adaptation based on changing scenarios. A sudden market downturn or an industry's spiraling growth shouldn't catch you off guard.
Being prepared, flexible, and willing to change your investment approach is essential. This often determines whether assets will continue accumulating or lose value.
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