Retirement is a significant phase in life, often marked by mixed emotions: excitement for the years ahead and uncertainty about financial security. Many people have some form of retirement plan in place, whether through personal savings, an employer-sponsored plan, or a combination of both. But with changing market conditions, evolving retirement needs, and increasing lifespans, it’s critical to ensure your retirement plan is robust and aligned with your long-term goals. Seeking a second opinion on your retirement plan can be a prudent step to ensure you’re on the right track.

Common Retirement Planning Challenges

Retirement planning can be complicated, and even the most carefully considered strategies can have blind spots. Here are some common challenges:

• • Underestimating Longevity: Many people outlive their life expectancy predictions, and not having enough savings can lead to financial difficulties.
  • Healthcare Costs: Healthcare expenses tend to rise with age. Not accounting for unexpected medical bills can put a strain on your savings.
  • Inflation: A plan that doesn’t consider inflation might leave you with significantly less purchasing power.
  • Market Risks: Investment risks, particularly with volatile markets, can impact portfolios and retirement income.
  • Estate Planning: Many overlook estate planning, potentially leaving loved ones with complex and expensive inheritance issues.

Benefits of a Second Opinion

Getting a second opinion on your retirement plan offers numerous advantages:

• Uncovering Gaps: A different financial advisor can identify potential gaps or weaknesses in your current plan that you might have missed.
• Fresh Perspective: A second advisor may offer fresh ideas and strategies to optimize your savings, reduce risks, or take advantage of tax-saving opportunities.
• Validation: If you’re confident in your plan, a second opinion can provide validation that you’re on the right track.
• Enhancing Strategy: Recommendations from a new advisor might complement or enhance your existing strategy, ensuring better financial health.

When to Seek a Second Opinion

It’s a good idea to consider a second opinion in the following scenarios:

• Significant Life Changes: Major life events, like downsizing your home, starting a new business, or making a substantial investment, should prompt a review.
• Uncertain Recommendations: If your advisor’s suggestions seem unclear or inconsistent with your goals, it might be time to consult another professional.
• Lack of Confidence: If you’re not fully confident in your plan, a second opinion can provide reassurance or adjustments.

What to Expect from a Second Opinion

A second opinion typically involves a thorough review of your financial situation and retirement goals:

• Assessment Process: The advisor will evaluate your income streams, portfolio risk, insurance policies, estate plans, and other assets to identify gaps or risks.
• Personalized Recommendations: Based on the assessment, the advisor will recommend adjustments that better align your plan with your objectives.
• Actionable Strategies: The advisor may suggest specific strategies, like diversifying your investments or optimizing Social Security benefits.
• Risk Mitigation: They’ll help mitigate risks, such as market volatility or long-term care costs, that could affect your retirement.

Choosing the Right Financial Advisor for a Second Opinion

Selecting the right financial advisor is crucial. Here’s how to find one who aligns with your needs:

• Credentials and Experience: Verify the advisor’s credentials, ensuring they’re certified and experienced in retirement planning.
• Potential Conflicts of Interest: Advisors who don’t adhere to a fiduciary standard may not be obligated to prioritize your interests above their own. Look for advisors who are legally required to provide unbiased, client-focused advice.
• Transparent Fees: Understand their fee structure to avoid hidden costs that could eat into your savings.
• Communication Style: The advisor should communicate clearly and listen to your needs, providing personalized advice rather than one-size-fits-all solutions.

Conclusion
Seeking a second opinion on your retirement plan can be a game-changer in securing your financial future. With the complexities of retirement planning and the challenges that arise over time, a fresh perspective can uncover blind spots, validate your existing plan, or enhance it with new strategies. Make sure to choose a trustworthy advisor who will carefully analyze your financial situation and provide personalized guidance. Taking this proactive step can offer peace of mind and ensure a comfortable and secure retirement ahead.

If you’re seeking tailored guidance, consider consulting a financial professional. Visit our “Find a Financial Professional” section to connect directly. For a personal referral to an independent, licensed advisor, call us at 877.476.9723 or contact us here to book your first appointment.

Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities. Learn more about my extensive background and expertise here

The post Get a Second Opinion on Your Retirement Plan first appeared on SafeMoney.com.

In today’s rapidly evolving and complex financial environment, achieving financial security and preparing for retirement requires a nuanced and integrated approach to managing personal finances. Gone are the days when a simple savings account or a stock portfolio could suffice for long-term financial planning. Instead, the contemporary financial landscape demands a holistic financial planning strategy that incorporates all facets of one’s financial life to achieve cohesive, long-term goals. This article delves into the significance of holistic financial planning and the indispensable role that annuities play within this comprehensive strategy, particularly emphasizing their contribution to financial stability and predictability.

Understanding Holistic Financial Planning

At its core, holistic financial planning is a strategy that encompasses the entirety of an individual’s financial situation. Unlike traditional financial planning, which might focus on isolated aspects of one’s finances, holistic planning takes a bird’s-eye view, considering every element from investments and estate planning to tax strategies, life insurance, and notably, annuities. It’s about crafting a personalized plan that acknowledges your unique goals, needs, and circumstances, ensuring that every financial decision is made within the context of your overall financial landscape.

The essence of holistic planning lies in its integrated approach. Rather than viewing each financial decision in isolation, it recognizes the interconnectedness of various financial components. This method is crucial in today’s financial world, where different elements of one’s financial life can significantly impact each other. For instance, investment choices can affect tax liabilities, and estate planning can influence retirement planning. Holistic financial planning ensures these aspects work in harmony, aiming for a balanced and secure financial future.

The Vital Role of Annuities

Annuities are a cornerstone of holistic financial planning, especially in the realm of retirement planning. They offer a guaranteed income stream, which is a game-changer for achieving financial peace of mind. Knowing that you have a consistent source of income, regardless of market fluctuations, can provide significant psychological and financial comfort. This guaranteed income ensures that essential expenses are covered throughout retirement, allowing for a more relaxed and secure retirement period.

Key Benefits of Annuities

• Guaranteed Income Stream: The hallmark of annuities is their ability to provide a steady, guaranteed income, which can serve as the foundation of your retirement finances, reducing your reliance on more volatile investment sources.
• Tax-Deferred Growth: Annuities offer the advantage of tax-deferred growth. The investment gains within an annuity are not taxed until withdrawals begin, potentially enhancing the growth of your retirement savings significantly.
• Diversification and Estate Planning: Adding annuities to your retirement plan introduces an additional layer of diversification, potentially lowering overall risk. Furthermore, certain types of annuities offer estate planning benefits, such as enabling the designation of beneficiaries to receive the annuity’s remaining value, facilitating a more tax-efficient wealth transfer.

Seamlessly Integrating Financial Planning Components

A well-crafted holistic financial plan skillfully integrates its various components, ensuring that each element complements and supports the others.

Here’s how annuities fit into the broader financial planning picture:

• Investments and Annuities: A balanced approach to financial planning involves combining growth-oriented investments with the stability provided by annuities. This balance helps manage risk while pursuing financial objectives.
• Estate Planning: Annuities can enhance estate planning by offering mechanisms to secure income for beneficiaries, working in tandem with traditional estate planning tools like wills and trusts.
• Tax Strategies: The tax-deferred growth of annuities is a critical component of a comprehensive tax planning strategy, potentially minimizing tax liabilities and maximizing financial efficiency.
• Life Insurance and Annuities: These elements together offer a robust approach to financial security, ensuring a stable income during retirement and a safety net for beneficiaries.

Conclusion:
Navigating Towards a Secure Retirement
Embracing holistic financial planning, with a particular emphasis on the inclusion of annuities, charts a course towards a more secure and fulfilling retirement. This approach fosters informed decision-making by illuminating the interplay between different financial decisions and their cumulative impact. It leads to a more effective allocation of resources and instills confidence, knowing that there is a comprehensive strategy in place. By integrating annuities into your broader financial strategy, you make a significant stride towards achieving a balanced and secure retirement, fully equipped to navigate the complexities of the modern financial world.

If you are looking for someone to help you, many independent financial professionals are available here at SafeMoney.com. Get started by visiting our “Find a Financial Professional” section, where you can connect with someone directly. If you would like a personal referral for a first appointment, please call us at 877.476.9723 of contact us here to schedule an appointment with an independent trusted and licensed financial professional.

Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities. Learn more about my extensive background and expertise here

The post Embracing Holistic Financial Planning first appeared on SafeMoney.com.

Nevertheless, at various points in time, some life insurance companies go under. You might wonder about what can happen when your insurance company goes out of business. The good news is that this sort of event is relatively rare.

When they fail, banks have FDIC insurance and investment firms have SIPC coverage. Life insurance companies are regulated at the state level, so they don’t have federal insurance coverage, but there are other financial protections to guard policyholders against the risks of this scenario.

Here’s what you need to know if the life insurance company with which you have your policy becomes insolvent.

Life Insurance Companies Rarely Go Bust

According to historical data, very few life insurers have gone under in the past. An average of less than 20 insurers become insolvent every year, and many of these are either health or property-casualty insurance companies.

There are hundreds of life insurance companies in the marketplace. Because of that, the odds that your particular company will become insolvent are likely pretty small. All states require that every insurance company that does business within its borders meet certain financial requirements.

For example, all 50 states require life insurers to maintain at least one dollar in their cash reserves for every outstanding dollar of annuity premium that they issue. This requirement has helped the insurance carriers in the annuity market maintain their obligations to contract holders. Similar cash reserve requirements for life insurance policies have had the same effect for life insurance companies.

Why Do Life Insurance Companies Go Out of Business?

There are a handful of reasons why a life insurance company can become insolvent. Perhaps the most obvious reason is due to simple mismanagement of the company. Of course, all businesses everywhere in every industry are subject to this risk.

Another possible reason is an excessive rate of claims by contract holders. That can deplete the insurance company’s cash reserves below the state-required limit.

Yet another possible cause of bankruptcy is due to economic conditions, such as a period of low interest rates and high market valuations. Life insurance companies must invest most of their revenues into conservative, fixed-income investments.

When interest rates are low, the companies can get squeezed between reaping low returns and paying a ‘normal’ level of claims. This usually happens when the insurance company misprices the cost of its coverage to its annuity and/or life insurance owners, thus resulting in a negative cash outflow.

How Are You Protected if Your Life Insurance Company Fails?

Fortunately, some protection is available at the state level if your life insurer becomes insolvent.

All 50 states, plus Puerto Rico, have state guaranty associations that will step in and reimburse policyholders of insolvent insurers at least a set minimum amount for each type of insurance policy that they hold with the distressed insurer. All insurance companies in each state are required by law to be paying members of these associations.

There are also other forms of financial protection that are put in place to help distressed insurers. Most life insurance companies purchase reinsurance contracts from other commercial insurers. The reinsurance will kick in if the company’s cash reserves fall below a certain threshold.

Then, if the insurer still can’t solve their financial problems through reinsurance contracts, then the state or district insurance commissioner will step in and move the company into receivership. They will try to financially resuscitate the company, which sometimes works and sometimes doesn’t.

In some cases, the commissioner will sell off some or all of the company’s assets in an effort to pay the company’s policyholders. It’s only after all of these preliminary measures have been taken that the state guaranty associations will step in.

How Much Protection Do You Have If the Life Insurance Company Goes Under?

If your life insurance company reaches the point where the state guaranty association must step in, then one of two things will most likely happen.

The first possibility is that your company’s financial obligations will be transferred to another (financially solvent) carrier. The second possibility is that the state guaranty association will step in directly and reimburse all policyholders up to certain limits. Or, the guaranty association may be the one who liquidates company assets to meet policyholder needs.

If the state guaranty association directly reimburses the policyholders, certain limits per policyholder apply. These limits are broken down as follows:

• $300,000 in life insurance death benefits
• $100,000 in cash surrender or withdrawal values from life insurance
• $250,000 in present value annuity benefits
• $300,000 in disability insurance benefits
• $300,000 in long-term care insurance benefits

Of course, if you have more money than the limits listed above sitting in a policy, then it may be unpleasant to consider that you may not be fully reimbursed. But you do have the option of filing a claim against the estate of the company for full reimbursement.

However, there are no for-sures with this, and it could be a long time before you see any additional reimbursement. Keep in mind that your claim will also be pooled with the claims of all other creditors of the company, so that can affect how much you might receive, even if you do get an additional reimbursement.

How Can You Avoid Having Your Life Insurance Company Go Under?

Nothing is failproof, but one track is to look at the financial ratings of a given company before you give that company any of your money. There are several companies out there that rate insurers according to a specific schedule.

Fitch’s, Moody’s, Standard and Poor’s, and A.M. Best all rate insurance companies on a scale from A or A+ to D.

A-rated companies have less financial risk of becoming insolvent than those with lower ratings. Meanwhile, those with C or D ratings carry a much higher risk of insolvency. Even so, many savvy people look to insurers with ratings of B+ or BBB because these companies often offer more competitive products than higher-rated insurers.

What’s more, many financial advisors generally feel comfortable offering BBB or B+ rated companies to their clients because they often carry very high solvency ratios. In other words, these insurance companies have substantial cash reserves compared to the amount of premiums they have outstanding.

Your financial advisor can also be a valuable resource when it comes to choosing an insurance company. They will probably have business relationships with many very financially stable carriers, so you can lean on their guidance as a factor in deciding where you can put your money.

Your financial advisor is also as incentivized as you are to make sure that you don’t lose your money to an insolvent insurer. Chances are that they have already done their homework on which companies are likely to remain in business.

A third strategy is to spread your money out amongst several different life insurance companies, so that if one goes under, you can get fully reimbursed under the limits described above. If you buy different annuities from, say, five different companies, then you should be well-covered, even if some of them have lower financial ratings.

Some Final Thoughts About Life Insurance Companies

Statistics show that it’s unlikely that you will have to worry about your life insurance company going into insolvency, unless you commit to one that has a very low financial rating and a low solvency ratio.

Just be sure to do your homework (or make sure that your advisor has done this) before writing out a check to any given insurer. Don’t be afraid to ask your financial professional about any questions or misgivings you have about a specific life insurance company.

This is your money – you deserve to have peace of mind and confidence in knowing that the insurance company will take good care of it, and of you. Your financial professional can also help you think about these important questions in an overall scope of retirement and income planning strategies.

Are you looking for a financial professional to help you with your personal financial situation? Perhaps you want a second opinion of your current retirement plan or want to explore additional steps to reach your goals. For convenience’s sake, many independent and experienced financial professionals are available at SafeMoney.com, where they can be contacted for a complimentary initial appointment.

Use our “Find a Financial Professional” section to connect with someone directly. You can discuss your goals, concerns, situation, and anything else important to you at that time. If you prefer to have a personal referral, please call us at 877.476.9723.

The post What Happens if Your Life Insurance Company Goes Under? first appeared on SafeMoney.com.

Unfortunately, they also don’t usually tell you how to find those ratings or what they mean. In this article, we will give a quick rundown of life insurance company rating basics, who gives them, and what these ratings mean for you.

What Are Insurance Company Ratings?

The idea of an insurance company rating is to give you a succinct, comparable description of the financial strength of insurance companies. The ratings companies look at many factors but mostly at how well the insurance company performs financially, how well it’s run, and its vulnerability to financial shocks (events that have a negative effect on its financial well-being).

Essentially, various rating agencies maintain what are, in effect, ‘credit scores’ for insurance companies. These ratings consider more than just financial standing, however. They examine customer satisfaction, the availability of the insurer’s products, how many options they offer, and whether their pricing is competitive with the market.

The score will also consider how well the company has historically responded to major events that could affect, or even compromise, its ability to uphold its obligations to its policyholders.

Other Ways to Check on Insurance Company Financial Strength

 There are other means that you can use to evaluate an insurance company’s ability to make good on its long-term promises, such as a company solvency ratio. A solvency ratio refers to how much in surplus reserves above the dollar-for-dollar reserve requirement which an insurance company must maintain.

For example, a solvency ratio of 105 means that a life insurance company has a dollar and five cents in reserves above every dollar of annuity premium that it holds. In this case, the surplus reserve is five cents above the minimum dollar-for-dollar reserve.

Solvency ratios and life insurance company ratings often can vary. What’s more, a high solvency ratio isn’t necessarily correlated with a strong insurance company rating.

This is why it always makes a difference to do your due diligence on the annuity product and issuing life insurance company that you are exploring.

Financial Issues Reviewed

The financial health of the company will be looked at first. Some of the financial and economic issues the rating companies consider are:

• Revenue streams available to the company (diversity is important)
• The company’s cash reserves and cash on hand
• Debt-to-assets ratio of the company (divide debt total by financial asset total)
• Ethics and risk management protocols
• Quality of the policies the company has underwritten (not all or even most policies are high-risk)

It’s important to note that the various rating companies measure and weigh all of these statistics differently. These differences are probably why the ratings may differ from one rating company to another.

Who Rates the Insurance Companies?

Various rating agencies evaluate and ‘rate’ insurance companies, but there are four whose ratings are generally considered the most important. We look at these four below.

A.M. Best

A.M. Best is the most well-known company that focuses on insurance company ratings. A.M. Best’s ratings and scores are the benchmark for evaluating financial strength in insurance. Their highest rating is A++ (Superior), and the lowest is D (Poor). A.M. Best only rates insurance companies.

A.M. Best doesn’t provide information only on US markets and issuers. It researches and makes available data on insurance companies and economies worldwide.

Standard & Poor’s

Standard & Poor’s is a much broader financial information company than A.M. Best. It provides stock indices and rates businesses in many market sectors, including insurance.

S&P’s focus is on the ability and willingness of an insurance company to meet its financial obligations in full and on time. In other words, they are telling you how likely your insurance company is to pay your (or your beneficiaries’) claims in a timely manner. Its scores range from AAA (Extremely Strong) to D.

Moody’s

Moody’s is another ratings business generalist but includes insurance companies in their overall business ratings mix. Their focus is financial stability, the market risk the company faces, and its overall performance.

They look at these areas to determine the likelihood of the company paying your claim on time and in full. Their ratings are Aaa (Highest Quality) to C (lowest rated, often in default).

Moody’s works to help decision-makers manage risk and identify opportunities by providing its trusted standards and insights. Moody’s ratings are forward-looking opinions on the relative credit risks of financial obligations of various financial institutions, including issuing insurance companies.

Its “A’ ratings are generally considered investment grade. Meanwhile, Baa and below feature higher risks and may not be considered investment grade under a particular state’s laws.

Moody also offers a short-term rating scale focusing on an issuer’s ability to repay all its short-term obligations rather than any specific short-term borrowings. The ratings range from P-1 representing a superior ability to repay, down to P-3, which is acceptable. NP means that the entity doesn’t fall within any of the payment ratings.

Do Insurance Company Ratings Matter?

Insurance company ratings are an important part of due diligence for finding the right product for your financial goals. You are giving a company a lot of money over the short or long term and expecting a long-term return on your money.

If the life insurance company goes under, then it will disrupt payments from your annuity or potentially affect the assets held in your annuity or life insurance policy. That long-term financial obligation means you need to be comfortable with the security of your money and the stability of your insurer.

The good news is that life insurance companies have a remarkable history of low company failure and standing strong in all sorts of economic cycles.

What Stands Behind the Life Insurance Companies?

Insurance companies don’t have a federal insurance program like FDIC insurance. Instead, state guaranty funds cover the failure. In some cases, they can take a long time to reimburse you.

Coverage limits for this can vary from state to state. Starting with a highly rated life insurance company in the first place will significantly reduce your risk of needing to care about these issues. Also, keep in mind that life insurance companies have tended to perform quite well in many kinds of market and economic conditions.

The ratings help you determine whether a policy that looks great on paper may have issues arising from the issuing company.

Even a great-looking annuity with the most incredible benefits won’t be so wonderful if the issuer can’t pay for it in the long run. Because you are looking for long-term financial security, you should be at least relatively sure that your annuity will be there when you need it.

It’s also prudent to look at more than just insurance company ratings as part of this decision-making. We will go over other things to consider in a moment.

What About an Unrated Company?

Occasionally, you may find a product that you find really interesting with an unrated company. Although your first instinct will (and mostly should) be to move past that policy, the company may be unrated because it’s new or regional and doesn’t get rated as a national issuer.

You can look at customer reviews, but always look at an unrated company with a bit of suspicion before committing.

Other Things to Think About

Don’t forget about various other issues when thinking about going with a particular life insurance company.

Companies that meet all financial tests well may fall on the range of offerings, customer service, or claims handling. To discover how these issues work with a company you are considering, look at their customer complaints.

The National Association of Insurance Commissioners (NAIC) is an organization whose membership is composed of the head of the insurance regulatory agency in each of the fifty states, the District of Columbia, and five U.S. territories.

NAIC maintains a database of complaints against insurance companies. It might be worth a check-up, because even a financially sound company with poor customer service won’t be great for you, or your beneficiaries, over the long haul.

The higher the insurance company’s score, the more complaints it will likely have. You should also look for online reviews about their customer service, annuity and life products, and more.

Some Final Thoughts on Life Insurance Company Ratings

Remember, though, that insurance company ratings are predictions. They are forward-looking statements giving the rating agency’s best judgment on what an issuer will do in the future.

The ratings companies don’t guarantee these statements and would be in regulatory trouble if they tried to do so. Nonetheless, they perform a valuable service by providing thorough and easy-to-understand information about insurance companies to the public. 

Don’t be afraid to ask your financial professional about any questions that you have about their recommendation, or the insurance company that they are suggesting. These are your life savings, and you should feel comfortable with any decision that you make.

Your financial professional can help you make well-informed decisions about your annuity or life policy, or retirement planning in general, by combing through companies that don’t seem promising for long-term financial obligations.

What if you are looking for a financial advisor or agent to help you find retirement products that make sense for your situation? Or perhaps you would like for an experienced financial professional to give an independent, second opinion of your current retirement strategy.

For your convenience, many independent financial professionals are available at SafeMoney.com to assist you. Get started by using our Find a Financial Professional section and connecting with someone directly. You can request an initial appointment to discuss your goals and situation. Should you need a personal referral, please call us at 877.476.9723.

The post How Life Insurance Company Ratings Work first appeared on SafeMoney.com.

Indeed, it’s not uncommon for this question of “banks vs. insurance companies” to come up when someone is exploring whether to buy a certificate of deposit or fixed annuity. For the reason, this article will focus on life insurance companies for the insurer side of the discussion.

Here’s a look at some of the core differences between banks and insurance companies, including how they back customer dollars with financial reserves of their own.

Both Institutions Have Different Roles

While both are financial institutions, insurance companies and banks have very different business models. They also have highly different roles in the economy.

Life Insurance Companies

Life insurance companies are in the business of risk management and pooling. They sell life insurance and annuity policies to customers to protect them against different kinds of risk. Some of the risks that these policies guard against include premature death, loss of income or possessions, depletion of assets, and costly healthcare bills.  

Policyholders pay premiums, either as a lump sum or regular payments over time, to life insurance companies. In turn, life insurers put this money into long-term investments such as Treasury securities, investment-grade bonds, and commercial real estate holdings.

The insurance companies use these monies to uphold their insured promises to their customers. Since they are investing and overseeing these dollars for their own benefit, life insurance carriers don’t create money in the financial system.

Banks

On the other hand, banks are largely in the business of making money through lending. They collect deposits from customers and pay interest for use of the money. From there, banks lend the money to borrowers who need capital for business reasons. In return, these borrowers pay a higher rate for their loans than the interest rate paid to bank depositors.

In this way, banks use money from customer deposits to build a larger base of loans and make money on the payments they collect from borrowers. Bank customers want only so much access to their deposits each day. As a result, banks are able to keep a certain amount of deposits in reserves and then use the remaining deposits for their lending.

Since banks use deposit monies to make multiples on their money via lending, they do create money in the financial system, unlike insurance companies.

Banks and FDIC Insurance

Another distinction for banks is that they enjoy the backing of the U.S. government.

Banks have been backed by FDIC insurance ever since the Great Depression. The failure of many banks in the wake of the market crash led to the establishment of the Federal Deposit Insurance Corporation.

Known more commonly as the FDIC, it guaranteed that it would insure banks that became financially insolvent up to a certain amount for each customer. When the FDIC was first created, that amount was $100,000. Since then, it has been raised to $250,000 per account in order to keep up with inflation.

Since the FDIC is ultimately backed by the federal government, FDIC insurance makes bank savings and checking accounts as safe as Treasury securities in the eyes of most consumers. This backing from the federal government comes from the “full faith and credit” clause of the U.S. Constitution.

What About Money in Excess of the Coverage Limits?

Those who want to maintain savings in excess of the FDIC coverage limits must spread their money around to different banks so that they can keep all of their cash safe.

For example, a bank customer who wants to put $1,000,000 into CDs would have to deposit $200,000 at five different banks to ensure that all of their money remains insured. Not only that, this money would have to be deposited at different banks.

This insurance wouldn’t apply if the money sat in deposits at several different branches of one bank. FDIC insurance limits apply to each bank, not each location.

More on FDIC Coverage

But there is something that most bank customers are unaware of. The actual insurance fund that the FDIC uses to help insolvent banks is only backed by a few cents on the dollar.

If all of the banks everywhere became insolvent at once, the FDIC would be unable to meet its obligations to everyone. Of course, the federal government would most likely step in at that time. The government might inject a large amount of cash into the insurance fund, and it may even raise taxes or print more money in order to cover the shortfall.

But the fact remains that banks only have to carry a few cents for every dollar that they take in.

Life Insurance Companies and Reserve Requirements

Life insurance companies, on the other hand, have much stricter requirements regarding the cash reserves that they maintain. By law, life insurers in all 50 states must have at least one dollar in cash reserves for every dollar of premium that is issued in the form of annuities or life insurance.

In other words, life insurers must keep at least 100% of their ‘deposits’ as minimum reserves. Many insurance companies actually go beyond this, maintaining a reserve surplus above 100% so they can make good on their guarantees to policyholders.

Of course, the life insurance industry can’t raise taxes or print more money. But for all practical purposes, it doesn’t matter because life insurance companies already have the money. Furthermore, there is no limit on the amount of money that is backed by cash reserves.

Another Key Difference

The investor mentioned above would need to spread their money out among several banks in order to make sure that it’s all insured. Alternatively, they could put the entire $1,000,000 with a life insurance company and enjoy the guarantee of dollar-for-dollar cash reserves backing the entire amount.

Many life insurance companies can accept purchases for even millions of dollars. However, they must be able to track the source of money to ensure that it came from a legal venture.

Life Insurance Company Failures

What if a life insurance company was to become insolvent? Then reinsurance companies would step in and cover policyholder losses up to a certain amount.

Although the exact amount can vary by company, state, and situation, the limit is usually quite high, such as $300,000. Check with your financial advisor or insurance professional for details about limit amounts for your state.

What to Expect When a Bank or Insurer Goes Under

While most bank and life insurance customers enjoy the peace of mind that comes with these guarantees, there is something to note if a bank or insurer fails. The actual process of getting their money back from their bank or life insurance company can take quite a while.

If a bank or life insurance company goes belly up, then the bureaucratic process for refunding customers’ and policyholders’ money can take several weeks at the very least. It may even take quite a while longer in many cases.

Life Insurance Companies Have a Strong Record

That being said, retirement savers should know that very few life insurance companies have ever failed. State regulators closely monitor the cash reserve status of insurance companies.

They take action to ensure that possible financial problems will be prevented from happening in most cases. Because of this, strict state insurance regulations, and other safeguards at the state level, the number of people who have ever lost money with a life insurance company failure is arguably quite small.

Back in 2005, A.M. Best published a 27-year study of health and life insurance company insolvencies. The study showed how the failures of insurance companies tend to be significantly lower than those of banks.

Overall, insurance company failures were relatively few during the 27-year period. Insurer impairments ranged from 1 to 250 companies in a stable economy to 1 in 35 companies in an unstable economy. The average of impairments was 1 to 109 companies throughout the 27 years of study.   

Not only that, another study of Canadian and U.S. financial institution failures from the 1980s to 2010 had similar insights. According to the researchers, there were 1,681 commercial bank failures in the United States from 1982 to 2010. In contrast, 291 life and health insurance company failures took place during that same period.

What Is the Better Option?

This isn’t to say that insurance companies are “better” than banks – or even vice-versa.

Rather, the point is that life insurance companies have a very strong record of keeping their promises to policyholders. As a whole, the life insurance industry has held this record with success for hundreds of years.

So, if the bottom falls out of the economy or our economic system otherwise fails, which institution would fare better? The answer to that would probably depend heavily on the specific factors involved in the fallout and how the public reacts to it.

But most serious financial experts today know that in the end, your money is pretty darn secure with a life insurance company just as it is in your local bank.

Making Confident Choices for Your Future

If you are looking for a dependable place to put your money, and you think that banks or Treasury securities are the only place to put them, think again. It would realistically take the end of the world as we know it for the insurance industry to fail, with its trillions of dollars in collective cash reserves.

Consult your financial advisor for more information on the guarantees for your money by these two institutions and how this can affect you.

What if you are looking for a financial professional to help you with your overall financial goals? No sweat. For your convenience, many independent financial professionals are available at SafeMoney.com to assist you.

Use our “Find a Financial Professional” section to connect with someone directly. You can request an appointment to discuss your questions and your overall situation. Should you need a referral, please call us at 877.476.9723.

The post Banks vs Insurance Companies: How Are They Different? first appeared on SafeMoney.com.

Recently, “IUL,” or indexed universal life insurance, has emerged as an alternative to the 401(k). It’s important to note that IUL is not an investment strategy but a type of permanent life insurance. Be cautious of discussions that treat IUL as an investment vehicle, especially compared to a 401(k) plan.

IUL might appeal to retirement savers, including younger professionals, because of its tax-efficient advantages over the 401(k) and other benefits. These advantages include protection from market downturns, greater flexibility with contributions and accessing funds, and improved tax treatment of future income. However, the suitability of any financial product always depends on the individual client’s needs, circumstances, and objectives.

Here’s a brief overview of indexed universal life insurance and how it differs from a 401(k) as a wealth-accumulating option.

IUL Basics

Like other permanent life insurance products, indexed universal life insurance includes a savings component, also known as an investment component, and offers a cash benefit accessible for various needs.

Unlike other permanent life insurance options, IUL’s interest-earning potential differentiates it. It allows for potential savings growth while protecting your funds during market downturns:

• The account of a policyholder links not to bond funds but to stock indices like the S&P 500.
• Interest credits to the account based on the index’s performance. A rise in the index leads to an increase in your cash balance proportionate to that gain.
• Insurers use a formula to decide how much interest your cash balance earns. If the index rises by 12%, your cash balance might only grow by 6-9% due to this formula.
• Often, there is also a cap on how much interest can credit. For example, if the S&P 500 has an exceptional year and rises by 15%, your cash balance will increase but only up to a set cap.

This structure provides a safeguard against significant losses if the index plummets, ensuring no loss of funds from negative index changes. Some IUL policies even offer a “protection floor” that guarantees a minimum interest credit during market lows.

The growth potential with market protection highlights one of the key differences between IUL and 401(k) plans, which are entirely vulnerable to market downturns.

Unlike with traditional 401(k)s, IUL is funded with non-qualified money, or after-tax dollars. So what you pay into IUL has been taxed already. That’s good news for future income – potentially tax-free retirement income! IUL also offers the advantage of a tax-efficient death benefit for loved ones. And what are some other differences?

401(k) vs. IUL Differences

The distinction between IUL and 401(k) plans largely depends on the specific type of 401(k) plan you have. Here are some of the differences:

• IUL and 401(k) plans fall under different sections of the IRS tax code; life insurance under Section 7702 and 401(k) plans under Section 401(k).
• IUL is funded with after-tax dollars, so contributions have already been taxed, which is beneficial for potentially tax-free future income.
• IUL offers a tax-efficient death benefit for loved ones.

Additionally, 401(k)s may provide an employer match, which IUL policies do not offer. 401(k) funds are susceptible to market losses, lack the borrowing flexibility of IUL, and early withdrawals incur penalties and taxes. In contrast, IUL allows more flexible contributions and tax-free loans against the policy.

For 2024, the contribution limit for a 401(k) was set at $23,000. IUL policies provide contractual guarantees that can preserve your earning power throughout your working years and offer customization options like riders for chronic illness or disability.

While IUL has its downsides, such as potentially high fees and the need for long-term commitment, it might not suit those nearing retirement. It’s essential to work with a knowledgeable, unbiased advisor when evaluating the suitability of IUL or other insurance solutions.

Need Help with Your Planning?

If you’re looking for the right IUL policy or another guaranteed insurance strategy, SafeMoney.com can help. Connect with a financial professional who understands these options and how they fit into a comprehensive retirement planning strategy. Visit our “Find a Licensed Advisor” section to arrange a personal strategy session, and call us at 877.476.9723 with any questions.

The post IUL vs. 401(k): Smart Retirement Choices first appeared on SafeMoney.com.

Identity theft is far more common than you think – it’s one of those things that you hear about but don’t think it will ever happen to you. And it can be a particularly troubling problem to deal with when you are in retirement.

The reality is that millions of Americans suffer from identity theft every year, and it can leave you feeling targeted, vulnerable, and unsafe.

Thankfully, there are ways you can protect yourself against identity theft without having to spend hundreds of dollars on protective services. Keep reading to find out how!

Looking for identity protection for families? Then head on over to Crediful.com and check out our in-depth post on some of the best identity theft protection services.

1 – Use Strong Passwords

Although it may seem air-tight, YourName123 is not a strong password. Neither is your pet’s name, your favorite soccer team, or your hometown.

Hackers and identity thieves are clever and will guess easy passwords if they target you. Passwords should be at least 8 characters, with at least one number and a special character.

If your password is a PIN or a number-only password, then try to make it as difficult as possible. Your birthday or your year of marriage can be easily guessed, so pick something that nobody could possibly associate with you.

There are free and secure internet add-ons that can help you store your passwords safely, which means you won’t have to remember them. One such example is LastPass, which you can use for a secure storage place of your passwords.

Using the same password for everything makes it easy for identity thieves to gain access to your information! They only have one password to crack instead of a dozen.

2 – Be Cautious with Your Credit Report

Credit Bureaus have access to your private information – your credit history, payments, debts, and all kinds of personal information.

If you think your information has been compromised or you just want to be extra safe, then it may be worth considering freezing your credit file.

To do this, you just need to pay the credit bureaus a small fee and they’ll freeze all of your accounts. This is useful in several ways – if a fraudster applies for a credit card or a loan in your name, then it’ll most likely get declined as they can’t run a credit check.

If you’re worried that freezing your credit report will have an effect on your credit score, then you can rest easy knowing that it has no impact on your credit score whatsoever.

It also means a potential fraudster won’t be able to access the information listed in your credit report, which is always good to know.

3 – Check Statements Regularly

Have you ever checked your statement for the first time in months and noticed that an unknown company has been taking from your account at regular intervals?

It happens to the best of us – but it can be prevented by checking our statements regularly. This has been made a lot easier in recent times thanks to the introduction of the mobile app and online banking.

In 2020, you can check your balances and recent transactions no matter where you are on the globe. That makes it easier to see fraudulent or suspicious transactions as they appear.

Regular fraudulent transactions generally start small. So, if you don’t check your statements too often, it won’t seem like anything suspicious or important.

Keep an eye out for transactions of $0.99 or a few dollars – smaller transactions are generally used to test the system. If they go through, they may then go on a spending spree in your name.

This is why you should always check where your funds have gone to – even if it’s only a dollar or two. If you’re unsure, contact your bank – they will be able to run the transactions through with you one by one, and send out a detailed statement for you.

4 – Understand the Tech You Are Using

Smartphones, mobile banking, and online banking can all be super safe and secure if you know what you’re doing. But, unfortunately, it’s a lot easier for identity thieves to gain access if you aren’t too sure how to protect your devices.

It’s a common misconception that just the elderly click links or accidentally give away their personal data, but anybody can fall victim to this.

Something as simple as clicking a link on an email can put you at risk, which is why it’s necessary to understand the do’s and don’ts of cell phones.

An important thing you should do is arrange for a data wipe if you ever lose your phone. Most smartphones store so much of your personal data which makes it easy for thieves to get your information if they find your cell.

It’s also a good idea to have a PIN or password to access your phone, and for certain apps. Banking apps have 2FA, making it harder for thieves to access your bank even if you lose your phone and you don’t have a password but that same can’t be said for other apps that hold your data.

Your password should be changed regularly and shouldn’t be an obvious pattern of numbers like 1234.

The post How You Can Protect Against Identity Theft: 4 Simple Strategies first appeared on SafeMoney.com.

Watching our parents age can be difficult as they begin to need more assistance with different aspects of their lives. While your parents likely want to maintain as much of their independence as they can, and they should, you should be there to lend a helping hand when they need it.

More than 65 million Americans provide care for an aging, chronically ill, or disabled family member each year. And, since the U.S. has an aging population, with geriatrics outweighing younger demographics, more and more individuals will be taking on this role—many of whom are not adequately prepared.

If you are one of these individuals, or are simply trying to figure out how you can be useful to your parents as they age, there are certain aspects of their lives that you can help them handle to make the transition easier, starting with these 5 things.

#1: Plan Medical & General Healthcare

Unfortunately, as we age, our health typically deteriorates. While this is subtle for others, it can take a substantial toll for many whose health declines quickly. So, how can you get ahead of the situation?

First things, first. If your parent is suffering from a medical condition, or seeing a decline in their health in any capacity, you should make sure you have a firm understanding of the issues they are facing. This will help you better provide for their needs, understand what to expect as their condition develops, and ensure that they are getting proper treatment.

Based on their health outlook, you will want to help them coordinate their healthcare. That might mean simply putting plans in place for when they’ll need a higher level of medical care, scheduling their appointments, helping them process insurance documentation, financial planning for healthcare, or monitoring their treatment.

In some cases, you may even need to help administer their care. Planning ahead can help you ensure that you can be there for them, and that their healthcare needs can be integrated into your lifestyle.

#2: Sort Out Legal & Financial Issues

In the later stages of life, there is a chance that your parents may need you to step in and take on legal responsibilities on their behalf. Officially, this is known as appointing you a Power of Attorney (POA).

This will give you the power to make decisions for them if they become unable to do so. With Power of Attorney, you can make decisions regarding their finances, healthcare, and other legal matters, which can help protect their best interests.

Whether it’s because they have serious health conditions, are experiencing issues with cognitive function, or just need the peace of mind knowing that if anything happens, they have someone to attend to their legal and financial needs, obliging this request is important.

In addition to getting Power of Attorney, you should also help your parents create a will if they haven’t already. That way, they can have a say in how all their affairs will be settled when they are no longer here to have a voice for themselves.

Establishing these protocols can be complex, which is why it is typically recommended that you work with an established firm that can guide you through the process.

#3: Help Them Adapt Their Living Situation

Many people assume that once their parents reach a certain age, they need to be moved to a nursing home or retirement community. While that may be the case for some, every individual has different needs. Before making any decisions, you should consider the following:

• Are they still able to get around their home? Or, is their mobility becoming more and more restricted?
• Can the home be adapted to better suit their needs and make aging in place a possibility?
• Is moving your parents to one of these facilities financially plausible? (Because of the comprehensive services provided, nursing homes can be quite expensive.)
• Are you parents resistant to moving? Or do they feel like it’s the best option for them? (Maintaining a home can be overwhelming for older people.)
• Is their home paid off?
• Will their home be easy to sell? Or, will it require a lot of work and financial investment?
• If your parents were to move out of their home, would they move in with you or into a community where they can be cared for full-time?

This is one of the biggest decisions you will have to help your parents make as they age, so it’s important to carefully weigh your options.

#4: Provide Emotional Support

Did you know that approximately 6.5 million of the 35 million Americans over the age of 65 are affected by depression? That’s why it’s essential to provide emotional support to your parents as they age.

It is important that you facilitate family gatherings, and basically help them maintain relationships with other family members. This could include encouraging their other children and grandchildren to pick up the phone and give them a call regularly. You might also coordinate visits.

Keep in mind that your parents were there for you throughout your life’s biggest challenges and changes. They will need you to provide that same level of support for them as they tackle this new phase of life.

#5: Help Them Maintain Their Quality of Life

Part of maintaining your parents’ health that can slip through the cracks is preserving their quality of life. To help your parents continue to thrive, you should encourage them to remain active—both mentally and physically—which can help them feel their best.

As parents age, it can become difficult for them to remain social and engaged with the world around them. This can leave them feeling left out, alone, or simply bored with what their lives have become.

However, with your help and encouragement, they can take advantage of the time they have to delve into old favorite pastimes, enjoy programs provided by local organizations meant to help seniors socialize, or try things they’ve always wanted to do but didn’t have the time.

A Final Note About Sharing the Responsibility 

One last note about caring for elderly parents. It can often fall on one person to shoulder the burden of caring for aging parents, whether it’s because of physical distance, the depth of relationships, or financial means.

While it might not seem like much at first (and of course you’re happy to do it), it can become a lot to manage over time. If you have siblings or other close relatives who are capable of helping out, try to disperse responsibilities.

This can not only help prevent you from getting overwhelmed and losing sight of the things in your own personal life. It can also help maintain the quality of your relationship with your parents.

It can be hard to keep sight of, but this is an important opportunity for you to help make this phase of your parents’ lives as easy and enjoyable as possible. Make the most of the time you have with them and know that they sincerely appreciate everything you do for them, even if they don’t show it.

The post 5 Things You Should Consider Doing for Your Aging Parent first appeared on SafeMoney.com.

Not only can you review the financial progress that you made during the year. Your annual review meeting also provides the opportunity to go over your investment portfolio, insurance coverage, and overall financial plan. It’s a crucial moment to see whether any changes are needed, especially if your circumstances have changed somehow.

Of course, money matters and retirement are a moving target. So, you can also set new goals and update your estate plan if necessary.

All of that being said, if you do have a meeting on the books, you might be unsure of the “ballpark” questions to ask your advisor during your financial review. Below are four questions to help guide your discussion and make the most of your annual review meeting time.

Questions to Ask Your Advisor During Financial Review

At a minimum, ask these four questions to your financial advisor in your annual review:

1. What can I do to reduce my tax burden, both for myself and my heirs?

If unplanned for, taxes can take a chunk out of a portfolio. In one study by Lincoln Financial, nearly one-third of all income earned by high-income retired households was paid toward taxes.

Another study by Nationwide Retirement Institute found that many retirees have larger-than-expected tax burdens. Nearly half of retirees in that survey wished they had planned better for taxes in their retirement. One in 4 retirees mentioned they were paying thousands more in taxes than they anticipated.

Make Your Retirement More Tax-Wise

Fortunately, there may be a number of things that you can do to reduce your taxes in retirement. Maybe you worry about future tax rates, particularly as political uncertainty and growing national debt weigh in. Then you can convert a portion of one of your traditional IRAs or retirement plans to a Roth account.

While that counts as an upfront cost for taxes, you might benefit from ‘net savings’ on reduced tax liability for your portfolio in the future. Ask your financial professional about this opportunity if it’s of interest to you.

Leverage Tax Advantages with Portfolio Holdings

Also take a look at any losing holdings you have. If you sell them now and wait at least 31 days to buy them back, then you can take a tax deduction for the full amount of the loss if you have capital gains to net against it.

If not, then you can deduct up to $3,000 of losses against your ordinary income for that year. And the more money that you can put into Roth accounts, the less taxes your heirs will have to pay.

2. What can I do to further maximize the financial or charitable impact of my giving?

While the tax law reform of 2017 brought some relief, they also narrowed the window for charitable giving.

However, it’s still possible to take a Qualified Charitable Distribution (QCD) from your traditional IRA or qualified plan. This is a distribution that goes directly to a qualifying charity without coming to you first.

These distributions can be advantageous for two reasons:

• First, they aren’t taxed like ordinary distributions up to the first $100,000 of QCDs.
• Second, they may allow you to make a bigger donation as a result of this tax-free status.

Make sure that any charitable organizations that you are considering for QCDs will qualify.

Most people who have to take required minimum distributions from their qualified plans and accounts can convert them to QCDs. Thus, they can escape the tax bill that would normally come from these distributions. Ask your financial professional about QCDs, and other giving opportunities, that can cut your tax bill as well as help worthy causes.

3. What strategies can we set for emergency healthcare and/or long-term care services?

Being forewarned and proactive is to be forearmed. It’s highly prudent to have complete strategies for future healthcare emergency needs and for long-term care needs before such situations actually arise.

Ask your financial advisor about your options. Among other possibilities, your strategy may call for insurance-based solutions. Many annuity and insurance carriers have specialized products that are built out in their design specifically for these needs.

Solutions That Can Help You Conserve Money

What is beneficial about these insurance contracts is their risk-pooling and risk sharing. The dollars you pay into your policy can have a multiplier effect when you need proceeds for qualifying long-term and healthcare needs.

This turns into cents-on-the-dollar in premiums paid for dollars of proceeds in benefits from the insurance company’s general fund. In other words, you don’t shoulder all the risk yourself. You can leverage the extensive assets of the insurance company for these situations — and to help preserve your other hard-earned money.

Tax-Free Treatment for Long-Term Care Contracts

Some insurance contracts might pay out tax-free proceeds for qualifying long-term care and health situations under the provisions of the Pension Protection Act. A few of these selections are called asset based long-term care policies.

Ask your financial advisor about these opportunities. Be sure to ask about the pros and cons of alternative options like long-term care insurance, dedicated annuities with long-term care or confinement riders, and life insurance contracts with living benefits that can be accelerated for qualifying emergency health as well as long-term care situations.

Be mindful of the terms and conditions of any life or annuity contracts that you may be considering. Some annuity long-term care or confinement riders come with qualifiers.

They might pay out “enhanced” income only for a certain amount of years or until your money in the contract runs to zero. In many cases, the insurance company may provide you an exit for liquidity in your contract for qualifying terminal illnesses or other similar health conditions.

Check the contracts you are considering for details. Don’t forget the other side of planning, including healthcare power of attorney and healthcare directives for your stated wishes in certain situations.

4. What survivorship strategies are there for retirement income for when my spouse or I outlive the other?

When a spouse passes away it’s an emotional time. Life slows down. Daily life priorities take a back seat to grieving and to reorienting your affairs without that person.

It’s also one of the worst times for a grieving spouse to figure out how they will cover the bills. They already are struggling with a new reality.

You can prepare for this by setting the stage ahead of time. What survivorship strategies do you have in place to make financial transitions, income and all, as painless as possible for the surviving spouse?

Don’t Forget the Possibility of Declining Decision-Making Ability

Don’t forget to account for the possibility of declining physical and cognitive abilities with aging. The survivor may not be in a position to make effective financial decisions — or decisions in general — for himself or herself.

So, your survivorship strategies should include provisions for how the surviving spouse will have ongoing dependable income streams as well as the right people to make decisions for them and their situation.

Make sure to include guards against the possibility of elder fraud in your strategies. Consult with an experienced attorney about your legal options in this arena.

Start the New Year Strong

While not an exhaustive list, these four questions are an excellent starting point for making the most of your annual review meeting.

You should be well-prepared for any curveballs that get thrown your way throughout the year. Being prepared is to be forearmed.

If, during the course of this annual financial checkup, you find yourself searching for a financial professional to help you with your goals — or you just want another opinion of your current financial progress — help is a click away at SafeMoney.com.

Use our “Find a Financial Professional” section to connect with someone directly and discuss your concerns. You can request an initial goal-setting appointment to review your situation and talk about ways to achieve your goals. If you need a personal referral, call us at 877.476.9723.

The post 4 Questions to Ask Your Financial Advisor At Your Annual Review first appeared on SafeMoney.com.

But the holidays can also be stressful and fast-paced, as people have cookies to bake, presents to wrap, and shopping to do. Not only that, they may have various other year-end projects at home or at work. Those who have lost loved ones or who hurt in other ways might also find these times unbearable, since the holiday season tends to be an emotional period.

Even so, it’s still an ideal time for families to get together and discuss their financial concerns with their loved ones.

Why? Because people usually aren’t as preoccupied by work and day-to-day matters at this time of year. The holiday festivities may be one of the few times when everyone is together. There are also many decisions that must be made before the year ends.

Important Year-End Decisions to Cover

These decision points span many areas, from estate and financial planning to tax planning. It’s also advantageous to “check the boxes” to ensure that your other important life information — such as powers of attorney — is in order.

As you map out the conversation your family will have during the holiday season, be sure to review these areas for accuracy. Ideally, you will review them with your financial advisor, other professionals including your attorney and tax advisor, and whomever will be key players in your estate:

Tax Issues

If you are thinking about converting your traditional IRA or qualified plan into a Roth account, take heed. Pay attention to how long this will take, along with the tax ramifications that come with it.

A Roth conversion may be a good idea if it aligns with your retirement timeline. The Tax Cuts and Jobs Act lowered marginal tax rates, so taxes are essentially “on sale” for now. However, marginal tax rates will return to their higher levels in 2026, unless an extension is passed.  

You might want to take advantage of the lowered marginal rates, as a Roth conversion may be less costly now. Be sure to confer with your tax advisor and financial advisor before making any decisions. Among other tax consequences, you can’t undo a Roth conversion once it has been made.

Likewise, this may be a good time to unload a losing equity position or sell a winning position to adjust your income. That way you can reap the maximum tax benefit from it. Check with your advisor about any selloffs or any decisions in general to see if it makes sense for you.

Estate Planning

When all the relatives are together, it’s an ideal time to take an inventory of your financial picture. Check up on beneficiary designations, wills, trusts, and powers of attorney.

You want to ensure that everything is in order. If it makes sense for your situation, your heirs may also benefit from having some idea of what to expect in the future.

Another good idea is for potential donors to write out a letter of instruction, spelling out exactly where all of their assets are, who manages them, and how to get hold of them when the time comes.

Be sure to include all personal items, income tax returns, ownership in LLCs or other businesses, vehicles, mortgages, car loans, utilities, and credit cards. Of course, these materials are in addition to all of your investment and bank accounts, retirement plans, and property-casualty, health, and life insurance policies.

Having Your Estate Plan in Order

An estate plan can mean the difference between a successful asset transfer and family conflict. While a properly crafted plan can help ensure a more efficient transfer of assets to your heirs, a poor plan – or worse, having no plan at all – can be costly.

The result? Family conflict, which can ultimately lead to an intra-familial legal spat that could take thousands of dollars and years of court hearings to settle. And by then, your family may be in shambles from resentment and strife.

Ask your attorney or an estate planning attorney about your options for how you can avoid unpleasant situations like this.

Charitable Giving

Evaluate your charitable gifts for the year. The IRS allows seniors to gift up to $100,000 of their assets to charity each year. This could help you resolve any required minimum distribution requirements that you have to satisfy.

You can simply direct your RMDs to go to the charity of your choice, so long as the charity qualifies for qualified charitable distributions. In turn, it can help relieve your tax burden for the year.

Involve Your Loved Ones in the Conversation

As you do these sum-ups, think about your preferences and thoughts. Then connect with your spouse, if you are married, and discuss what is on your mind.

Afterward, start bringing others in: the professionals who will help carry out your wishes (financial advisor, accountant, and attorney) as well as key players in your legacy plan. That can include heirs and/or appointed roles including guardians, trustees, executors, and powers of attorney designees.

From there, considering involving anyone whose financial and health statuses may affect you. While this usually means immediate family members, other loved ones or friends may also be part of this circle.

If anyone hesitates to take part, build a bridge. You are reaching out to them out of care and respect for their wishes. Your goal is to set the stage for family unity before when times might become more difficult.

At the very least, you will want your loved ones to know of the professionals who will be carrying out your plans. Make sure that your loved ones know who can answer questions and who will help manage your estate process.

Talking About Finances and Other Life Matters with Family

You can probably see the value in discussing money matters and other affairs with your family. But it may still be difficult to broach the topic. You might use these queries below as guiding points to ease into conversation as you all sit around the fire:

• “If money were not a concern, I would like to do this the most: _____________.”
• “If there was one thing that I wanted you to know about money (and your inheritance), it’s ___________.”
• “If my health reached a point where I was unable physically or mentally to care for myself, I would wish: _______________.”
• “Should the situation arise, my preference for guardianship would be: ___________________.”
• “What would our options for long-term care be if I or your mom/dad/other loved one became impaired?”
• “If I passed away, here is what would be available to your (mother/father/other loved one) for their financial support.” [Then describe income plan and other resources available.]
• “This is what I would wish for my funeral and/or end-of-life arrangements: ______________.”
• “I have this story, anecdote or life lesson that I have always wanted to share with you: _______________.”
• “Here’s a story about something that we have passed down from generation to generation in our family: ______________.”
• “Here is how I have my legal documents stored and protected — and where you can find them: __________________.”

These are just some of the questions that you may need to discuss with your relatives and loved ones.

What If It Brings Up Money Tensions?

With all of this said, it’s common knowledge that money can be a touchy subject. For example, say you have some future heirs with vastly different levels of wealth or assets.

The less-affluent relative may feel like you “owe” him more because he has a greater need. Conversely, the more-affluent relative may feel that he should get the bulk of the inheritance because he has shown better money management skill. Both heirs might still feel resentment even if you gift your assets to them equally.

It’s important that you acknowledge these factors and take adequate steps to prevent them. If you have substantial assets that you plan to pass on to your heirs, it may be wise to have a group discussion to help resolve any potential future conflicts.

Put Your Financial House in Order

Consult with your financial advisor today to go over all of your assets. Among other concerns, you will want to make sure that they are growing the way they should. Also, don’t forget to consult with your attorney and tax advisor and ensure that your estate plan is on rock-solid ground.

The time you spend doing this now can prevent unnecessary heartache and family conflict in the future. Take advantage of this holiday season to discuss your wishes with your family and help everyone get on the same page.

As you work through these important questions, you might be on the hunt for a financial professional for guidance. An experienced financial professional can help identify holes in your plans as well as any gaps in how you are managing money and strategies toward different goals.

If, indeed, you are looking for a guide, answers and peace of mind may await you at SafeMoney.com. Many experienced financial professionals will be available to you here with just a few clicks.

Use our “Find a Financial Professional” section to connect with someone directly. You can schedule a call or an initial appointment to discuss your situation. Should you need a personal referral, call us at 877.476.9723.

The post Have These Financial Conversations During the Holidays first appeared on SafeMoney.com.