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Life Insurance - Costs and BenefitsLet's look at the "top five" reasons people give for not owning life insurance.
1. Too Expensive. "I just cannot afford life insurance right now."
2. Confusing. "We looked at proposals from three companies—page after page of numbers. What does it all mean? I haven't the slightest idea!"
3. Too Many Types. "I checked into term insurance, whole life insurance, universal life, variable life, single premium, and survivorship insurance. But which one is right for me?"
4. No Trust. "Those big insurance companies claim to have billions of reserve funds. But one of the biggest insurance companies has been on the ropes for months. Who can you trust?"
5. Don't Plan to Die. "Someday when I plan to die, I will consider life insurance. But for now—don't worry, be happy!"
Five Reasons to Own Life Insurance
There are several reasons for you to purchase life insurance. If you were to pass away, the life insurance death benefits could provide resources that are quite important to your family. The various benefits include payment of your funeral and final expenses, paying off mortgages or other debts, living expenses or income for a surviving spouse, inheritance for children and payment of estate taxes.
1. Final Expenses and Funeral Costs. Usually there are medical expenses during the last weeks of life. These frequently will range from $5,000 to $10,000. Your memorial service preparation and costs can also easily exceed $10,000. Total final expenses can often be more than $20,000.
2. Pay Debts and Mortgages. The payment of debts or a mortgage is a one-time expense. Depending upon the amount of your mortgage, this could cost anywhere from a few thousand dollars to many hundreds of thousands of dollars.
3. Living Expenses for Spouse. The largest amount of insurance is typically purchased to provide both economic security and an investment that will add to the spouse's other annual income. A reasonable method is to estimate a 5% return on the investment. For example, if a spouse needed another $25,000 of income over and above the amount paid by retirement funds, Social Security and other earnings, then insurance equal to $500,000 invested at 5% would produce this amount.
4. Inheritance for Children. Permanent insurance is frequently used as a method of providing an inheritance for children. Many parents who make substantial gifts to charity plan to use life insurance as a means of providing additional inheritance for children or other family members.
5. Estate Taxes. If your estate is large, there may be a substantial payment of federal or state estate tax. If you own a family business or other assets that are intended to be transferred to family, then your estate could be subject to estate tax. Life insurance can be an excellent method to provide funds for payment of estate tax. Normally, for larger estates the life insurance is owned by an irrevocable life insurance trust so the insurance itself is not subject to estate tax.
Determining the Life Insurance Amount
A fairly simple way for you to determine the total amount of needed insurance is to add up your one-time expenses, then calculate the amount of insurance invested at 5% necessary to benefit a surviving spouse, children or other family members. For example, if your one-time expenses are $200,000 and your spouse desires additional income of $25,000, then the total insurance would be $700,000. This amount includes $200,000 for expenses and $500,000 invested at 5% to produce the annual income.
More sophisticated calculations are available online. Use your favorite search site to look for "life insurance needs calculator," and select from the available free public calculators.
How Life Insurance Works
Life insurance started because individuals were concerned that they might pass away and not provide sufficient resources for family. Because young families typically need a substantial fund and lack the ability to save enough in a short period of time, the concept of life insurance was created.
If many thousands of individuals pay premiums and those funds are invested, then a pool of funds will be available to compensate individuals. The life insurance company hires actuaries who determine the probable number of individuals who will pass away in a given year. Especially for younger persons, out of a pool of 100,000 only a few will pass away in a given year. As a result, the insurance company is able to receive all the premiums and invest them in the insurance reserve fund. The earnings and a portion of the funds are distributed each year to pay claims for those who pass away.
The insurance funds are primarily invested in bonds. The insurance company generally receives 1% to 1.2% to cover all of their overhead and costs. The balance is returned through insurance proceeds to beneficiaries.
Life Insurance Policy Categories
Insurance is generally divided into two categories—term insurance and permanent insurance.
Term Insurance
Term insurance is the least expensive type of insurance and is favored by younger people and many financial planners. The term insurance is available with an annual renewable term (ART) or with a fixed payment for five years, 10 years, 15 years or longer.
Because term insurance does not include any investment or cash value, it enables the largest potential policy to be purchased for the least cost. Due to intense competition within the insurance industry, prices on term policies and level-pay term policies have moved lower in recent years.
Some types of term policies also include the ability to convert to whole life or universal life at a future time. If the conversion is elected, then there will be a substantial increase in the premium.
Permanent Insurance
Permanent insurance includes several types. The traditional favorite is whole life insurance, but there are also universal life, variable life and survivorship life insurance.
Whole Life. The traditional whole life policy involves both insurance and a cash value. The premiums are substantially higher than term insurance because the policy will build a savings element or cash value. During the first year, much of the cash value may be used by the insurance company to cover the commission payment to the sales representative, but over time the cash value may increase. The owner of the policy has the right to borrow against the cash value at favorable rates.
Whole life is frequently fixed in terms of premiums paid and death benefit. The insurance company is determining the probable return of its reserve fund and, based on the age and health of the insured person, calculates and commits to a fixed benefit in exchange for a certain premium.
Universal Life. Universal life was created to provide an option for people who would consider purchasing term insurance and invest an additional amount in mutual funds. With universal life, the policy is invested and a cash reserve is built up. The insurance reserve growth covers the cost of the insurance policy. Universal life policies may include flexible options for increasing or decreasing premium payments. Of course, the cash value of the policy will change with a modification of the premium schedule.
Variable Universal Life. If the insured desires to own life insurance but also potentially gain from investments in stocks and bonds, a variable policy may be appropriate. With a variable policy the insured typically is permitted to invest in different mutual funds managed by the financial services company. If the mutual funds increase in value, the policy cash value will increase.
Survivorship Life. For a couple, an attractive option is to purchase a survivorship policy. This policy pays a death benefit after both husband and wife pass away. Because two persons are insured, it frequently is possible to obtain insurance even if one spouse is in poor health. Quite often, this insurance can be purchased at a more reasonable premium because two persons must pass away before the death benefit is paid. It is particularly useful for providing funds to pay for taxes if a business is to be transferred from parents to children after they both pass away.
Life Insurance Beneficiaries
In most estates, life insurance does not pass through the probate process. The insurance policy is a contract between the insured and the insurance company. The person who purchases the insurance has the right to name the beneficiaries. Normally, a primary and a secondary beneficiary are named. It's also possible to divide the insurance policy among several children or other beneficiaries.
A common beneficiary designation is for the spouse to be a primary beneficiary and the children to be the contingent beneficiaries with equal shares. If the spouse were to predecease the insured or they were to pass away in a common accident, then the children would receive the insurance proceeds.
Minor children should usually not be the beneficiaries of a policy. In many states, if a minor child receives a substantial inheritance, a conservator must be appointed to manage the assets. This is quite expensive and also has the disadvantage of transferring the assets to the minor child when he or she becomes an adult.
A much better arrangement is to transfer the policy to a living trust for the benefit of the minor children, or to create a trust and a will for the benefit of the minor children and transfer the policy to the estate to fund that trust.
Prudent Purchase of Insurance
Life insurance is an important decision, and it is helpful to learn about the different types of insurance. Most individuals will also visit with a chartered life underwriter (CLU) or other representative of a financial services company.
The representative can conduct an insurance needs analysis and suggest the appropriate type of insurance. It is helpful for you to do sufficient research to understand the reasons why many individuals choose term insurance or permanent insurance. In addition, the use of online calculators to determine insurance funding will also provide you with a better understanding of the appropriate amount of insurance. The amount of insurance recommended by online calculators can vary greatly, so understanding your probable needs is quite important.
Insurance Company Ratings
Insurance companies are rated by several sources. A.M. Best, Weiss, Moody's and other ratings services are available. You should be certain to ask for the ratings of any company if a representative suggests purchasing a policy from them. It is also easy to go online and do a search for "insurance company ratings" and obtain the actual ratings for most financial services companies.
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SAVVY LIVING
How to Help Older Drivers Give Up the Car KeysWhat tips can you recommend that can help me deal with my mom's bad driving? At age 83, her driving abilities have declined, but I know she's bound and determined to keep driving as long as she's alive.There's no doubt that giving up driving can be a tough step for many elderly people, as well as a difficult conversation for concerned family members. While there's no one way to handle this sometimes touchy topic, there are a number of tips and resources that can help you evaluate and adjust your mom's driving, and ease her out from behind the wheel when she can no longer drive safely.
Assess Her Driving
To get a clear picture of your mom's driving abilities, your first step—if you haven't already done so—is to take a ride with her and watch for problem areas. For example: Does she drive at inappropriate speeds, tailgate or drift between lanes? Does she have difficulty seeing, backing up or changing lanes? Does she react slowly, get confused easily or make poor driving decisions? Also, has your mom had any fender benders or tickets lately, or have you noticed any dents or scrapes on her vehicle? These, too, are red flags. For more assessment tips see SeniorDriverChecklist.info.
If you need help with this, consider hiring a driver rehabilitation specialist who's trained to evaluate older drivers. This typically runs between $100 and $200. Visit AOTA.org/older-driver or ADED.net to locate a specialist in your area.
Transitioning and Talking
After your assessment, if you think it's still safe for your mom to drive, see if she would be willing to take a driving course tailored for seniors.
These courses will show her how aging affects driving skills, and offers tips and adjustments to help ensure her safety. Taking a class may also earn your mom a discount on her auto insurance. To locate a class, contact your local AAA (AAA.com) or AARP (AARP.org/drive, 888-227-7669). Most courses cost around $20 to $30 and can be taken online or in a classroom.
If, however, your assessment shows that your mom really does need to stop driving, you need to have a talk with her, but don't overdo it. If you begin with a dramatic outburst like "Mom, you're going to kill someone!" you're likely to trigger resistance. Start by simply expressing your concern for her safety.
For more tips on how to talk to your mom about this, the Hartford Financial Services Group and MIT AgeLab offer a variety of resources at TheHartford.com/lifetime - click on "Publications" on the menu bar, then on the "We Need To Talk" guidebook.
Refuses To Quit
If your mom refuses to quit, you have several options. One possible solution is to suggest a visit to her doctor who can give her a medical evaluation, and if warranted, prescribe that she stops driving.
If she still refuses, contact your local Department of Motor Vehicles to see if they can help. Or, have an attorney discuss the potential financial and legal consequences of a crash or injury with your mom. If all else fails, you may have to take away her keys and set her up with alternate transportation.
Alternative Transportation
Once your mom stops driving she's going to need other ways to get around, so help her create a list of names and phone numbers of family, friends and local transportation services that she can call on.
To find out what transportation services are available in her area, contact the Rides in Sight (RidesInSight.org, 855-607-4337) and the Eldercare Locator (800-677-1116), which will direct you to her area agency on aging for assistance.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization’s official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.
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YOUR PLAN
Give it Twice Trust
While visiting the Wills Planner on her favorite charity's website, June, a surviving spouse, came across the idea of a Give it Twice Trust. She contacted the charity for more information and talked with a gift planner who explained the concept as a way to first give income to children through a trust and then transfer the trust balance to charity in the future. June: Fred and I talked about this before he passed away. We both agreed that we wanted to treat each of our four children equally and also provide a benefit to our favorite charity.
The gift planner told June that with her estate of $800,000 she would have the ability to do something significant for both her family and favorite charity. June was concerned because while her three older children are financially responsible, her youngest, Jim, "spends money like water." June was afraid that if Jim were to receive cash in a lump sum he would spend it right away.
The gift planner explained that the "Give It Twice" plan could be very helpful. June could transfer $400,000 from her IRA at death to the trust. Her children would each receive one-fourth of the income from the trust over 20 years. That would give Jim a chance to learn to save and invest. After that time, the trust balance would benefit her charity. In addition, by using her IRA, June could save on income tax because the special trust is tax-exempt.
June: I established a Give it Twice Trust and was thrilled with the plan. The prospect of helping my four children and my favorite charity made me happy and I knew that it was the right thing to do.
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WASHINGTON NEWS
Top Five IRS Refund MythsIn IR-2017-16, the IRS explained the top five "myths" about IRS refunds. Most early filers will receive a timely refund, but some taxpayers do not understand the process.In this letter, the Service clarified some potential areas that hopefully will reduce taxpayer misunderstandings.
Myth 1: All Refunds Delayed – An estimated 90% of refunds will be processed by the IRS within 21 days. However, refunds involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) are required by Congress to be delayed until the middle of February.
Myth 2: Call IRS for Quicker Refund – Contacting the IRS will not change your refund date. It is best to use the "Where's My Refund" tool on www.irs.gov. The IRS database is generally updated each day. Calling the IRS is not going to provide new information – the IRS operators are looking at the same database as the taxpayers.
Myth 3: Order a Transcript – Taxpayers are permitted to order a transcript of their prior tax filings. This is frequently done for a mortgage application, student loan or other type of loan. However, the tax transcript will not show the refund date.
Myth 4: "Where's My Refund" Must Have Deposit Date – If filing and claiming the EITC or ACTC, there may be no deposit date on "Where's My Refund." Congress required the IRS to wait until mid-February with these refunds. By the fourth week of February there is likely to be a deposit date reflected on "Where's My Refund."
Myth 5: EITC and ACTC Refunds on February 15 – While Congress is required to hold all refunds for taxpayers claiming EITC or ACTC, it still will require some time to process those payments. The likely distribution date will be the fourth week of February.
The "Where's My Refund" on www.irs.gov or IRS2Go app has three steps. First, the return has been received. Second, a refund has been approved. Third, the refund has been sent. The best plan is to check "Where's My Refund" one time per day. The IRS computers are normally updated each evening.
Dangerous W-2 Phishing Scam
In IR-2017-20, the IRS warned of a "Dangerous W-2 Phishing Scam" that is "Targeting Schools, Restaurants, Hospitals, Tribal Groups and Others."
The attack often commences when a hacker breaks into the email account of an organization executive. The hacker may monitor the account to learn the typical contacts and activities of the executive.
Following this preparation, the attacker "spoofs" by sending an email to the finance or HR department. The "spoofed executive" directs finance or HR to send a list of W-2s to the executive.
After receiving all of the employee W-2 data, the hacker may also use a new strategy.
Hackers are also sending an email from the "spoofed executive" to the chief financial officer (CFO) of the organization. The bogus email directs the CFO to make a wire transfer of funds to a specific account. After the transfer is completed, the hacker withdraws the funds and vanishes into cyberspace.
All schools, restaurants, hospitals, tribal groups and other organizations should have set policies on distribution of W-2 forms. Organization leaders should explain to HR and finance staff the nature of this attack.
If you are attacked, contact the government by forwarding the bogus email to phishing@irs.gov and use "W2 Scam" as your subject line. If you have actually been victimized by this scam, then file a complaint with the Internet Crime Complaint Center (IC3). This complaint will be reviewed by the Federal Bureau of Investigation.
Commissioner John Koskinen warned about the new scam. He stated, "This is one of the most dangerous email phishing scams we've seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns."
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FINANCES
Stocks - Apple Breaks Records and Emerges from Slump
Apple Breaks Records and Emerges from SlumpApple Inc. (AAPL) announced its quarterly earnings on Tuesday, January 31. The computer electronics company reported a boost in revenue and earnings in the first quarter.Apple announced record quarterly revenue of $78.4 billion in the first quarter. Last year the company reported first quarter revenue of $75.9 billion.
"We're thrilled to report that our holiday quarter results generated Apple's highest quarterly revenue ever, and broke multiple records along the way," said Apple CEO Tim Cook. "We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch. Revenue from Services grew strongly over last year, led by record customer activity on the App Store, and we are very excited about the products in our pipeline."
Apple reported $17.9 billion in net income for the first quarter. On an earnings per share basis, profit rose to $3.36 per share compared to $3.28 per share in the same quarter last year.
In the holiday quarter, Apple sold a record 78.3 million iPhones, surpassing the 74.8 million iPhones that were sold in the same quarter last year. This boost was driven in large part by strong demand for Apple's latest mobile device, the iPhone 7 Plus. Revenue in the quarter was also boosted by an 18% increase in the company's Services division's sales, which includes Apple Pay and AppleCare.
Apple Inc. (AAPL) shares ended the week at $129.08, up 6.3% for the week.
Amazon Misses the Mark on EarningsAmazon.com, Inc. (AMZN) announced its fourth quarter earnings on Thursday, February 2. While the company's earnings beat Wall Street's expectations, revenue fell short, causing shares to drop 4% after earnings were released.
Amazon announced quarterly revenue of $43.7 billion, up 22% from last year's fourth quarter revenue of $35.7 billion. This was below the $44.7 billion in revenue expected by analysts.
"Our Prime team's customer obsession kept them busy in 2016," said Amazon CEO Jeff Bezos. "Prime members can now choose from over 50 million items with free two-day shipping — up 73% since 2015. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more."
Amazon announced adjusted earnings of $1.54 per share. Last year at this time, Amazon reported adjusted earnings of $1.00 per share.
The company's non-retail cloud service, AWS, continues to prosper with its Prime Video and movie offerings leading the way. Amazon Studios earned seven Academy Award nominations and 11 Golden Globe nominations this year. However, Amazon's retail segment is about to face some stiff competition. Earlier this week, Wal-Mart announced that it is will be offering free two-day shipping on two million items when customers spend $35 or more and, unlike Amazon Prime, there is no membership required.
Amazon.com Inc. (AMZN) shares ended the week at $810.20, down 2.8% for the week.
Facebook Beats ExpectationsFacebook, Inc. (FB) reported quarterly earnings on Wednesday, February 1. The company crushed analysts' expectations with revenue and earnings that soared above last year's numbers.
Facebook announced that revenue for the fourth quarter was $8.81 billion, compared to last year's fourth quarter revenue of $5.84 billion. This fell below the $8.51 in revenue predicted by analysts.
"Our mission to connect the world is more important now than ever," said Facebook CEO Mark Zuckerberg. "Our business did well in 2016, but we have a lot of work ahead to help bring people together."
The company reported net income of $3.57 billion, up from last year's fourth quarter earnings of $1.57 billion. Adjusted earnings per share for the fourth quarter were $1.21, up from $0.54 per share a year ago and below analysts' estimates of $0.98 per share.
With 1.15 billion daily mobile active users, Facebook is continuing to expand its reach. In the previous quarter, the social network reported that the number of users increased 17% from a year ago. Zuckerberg continues to expand Facebook's reach and brand the company as more than just a social network. In the fourth quarter, the company introduced "Marketplace," a new feature that allows users to buy and sell items to other Facebook users, and "Workplace," which functions as a communication platform for businesses, non-profits and other organizations.
Facebook, Inc. (FB) shares ended the week at $130.88, down 0.5% for the week.
The Dow started the week of 01/30 at 20,029 and closed at 20,071 on 02/03. The S&P 500 started the week at 2,286 and closed at 2,297. The NASDAQ started the week at 5,636 and closed at 5,667.
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Bonds - Yields Fall From January Highs
Yields Fall From January HighsU.S. benchmark Treasury yields fell on Friday after the latest jobs report revealed weak wage growth that could impact the Federal Reserve's next rate hike decision. The fall marks a departure from January's gains.While the economy added more than 227,000 jobs in January, the U.S. Labor Department also reported that hourly wages rose only 0.1%, which fell short of the 0.3% predicted by analysts. Following the report's release, the yield on the 10-year Treasury note fell 2.2 basis points to 2.448%.
"The good news was payrolls were muscular, but the bad news was average hourly earnings only grew 0.1%," said Ward McCarthy, chief financial economist at Jefferies. "From the Fed's standpoint, this reduces the urgency to push the button."
Many analysts, who were hoping that a solid jobs report would push the Fed to raise interest rates in March, echoed McCarthy's sentiment on Friday. The disappointing wage data has added to uncertainty regarding the Fed's next rate hike.
"This certainly brings into question the likelihood that the Fed moves in March," said Ian Lyngen, strategist and BMO Capital Markets in a written statement. "In fact, heading into the release, the market had the odds of a hike at 24% and as we write, it's closer to 12%."
The Fed has indicated that it will raise interest rates three times this year. However, analysts were disappointed at the conclusion of the Federal Reserve's meeting this week when the Fed's policy statement failed to indicate when the next rate hike might occur. The uncertainty caused Treasury yields to fall slightly after the statement was released.
The 10-year Treasury note yield finished the week of 01/30 at 2.49%, while the 30-year Treasury note yield was 3.11%.
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CDs and Mortgages - Mortgage Rates Stay Steady
Mortgage Rates Stay SteadyFreddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 2. The report revealed that rates have held steady after rising last week.The 30-year fixed rate mortgage remained unchanged after last week, averaging 4.19% this week. Last year at this time, the 30-year fixed rate mortgage averaged 3.72%.
This week, the 15-year fixed rate mortgage averaged 3.41%. This was slightly higher than last week's average of 3.40%. The 15-year fixed rate mortgage averaged 3.01% one year ago.
"The 30-year mortgage rate remained flat at 4.19%, starting the month 47 basis points higher than this time last year," said Sean Becketti, Chief Economist at Freddie Mac. "Despite the uncertainty in the market, the pending home sales index increased 1.6% in December, up from a decline of 2.5% the month prior."
Based on published national averages, the money market account finished the week of 1/30 at 0.58%. The 1-year CD finished at 1.23%.
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Thank you for your interest in planned giving. To access any of our resources, please go to our website.
Your Brother in Yeshua (Jesus),
David Stone
Jews for Jesus
Copyright © 2017 Jews for Jesus, All rights reserved.
Our mailing address is:
Jews for Jesus
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Thank you for your interest in planned giving. To access any of our resources, please go to our website.
Your Brother in Yeshua (Jesus),
David Stone
Jews for Jesus
Copyright © 2017 Jews for Jesus, All rights reserved.
Our mailing address is:
Jews for Jesus
60 Haight Street
San Francisco, California 94102, United States
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