Six Points to Consider

1) Five things to know about Fixed Annuities.

  • They are insurance products offered by major insurance carriers.
  • You purchase Annuities by paying a premium.
  • They have no downside market risk because they do not directly participate in any market.
  • They are a good fit for creating a predictable income stream in retirement that one cannot outlive.
  • Taxes are not paid until funds are withdrawn from the contract.

2) Are you thinking about prepaying your mortgage? Consider the families and businesses in the Panhandle when the hurricanes hit last summer. For many of the inhabitants their largest asset was the equity in their house. It is estimated the losses are in the billions, and much of it was uninsured or under-insured. Personal emergency response is about cash flow when disaster hits. You can call it “weathering the storm with cash on-hand.”

3 Hurricane season is just around the corner, and it will affect many Americans. Access to cash is critical, and you might need additional money to survive the disaster. It is important to set-up an equity line of credit on your house prior to hurricane warnings. You need to secure it when you don’t need the money and the skies are clear. The cost to arrange an equity line of credit is usually minimal.

4) Life Insurance is not just for the working spouse! One should consider insuring the non-working spouse, especially if young children are involved. There is significant cost and time in raising children that will need to be replaced. Life Insurance helps mitigate that cost. The surviving spouse could also lose the retirement Social Security benefit of the non-working spouse.

5) Money is both a scarcity and a resource. How we handle it determines how much we control it. In many ways, the quality of our lives is determined by our access to money, and capital. It is more important than rate of return. Understanding how it works helps create income from it, and retain liquidity, use, and control of it. The better our grip is on this resource the more likely we will have a more peaceful life and retirement.

6) Tax Terms

  • Tax free versus tax deferred – Tax free means you never pay tax on it. Tax deferred means you don’t pay the tax now, but you will have to pay it later.
  • Tax bill versus tax law – A tax bill is a proposal to alter existing tax code that spells out possible tax laws changes. It states the parameters of the new legislation. Tax law is the current existing tax code.
  • Marginal tax rate versus average tax rate -the marginal tax rate is the amount of additional tax paid per dollar in a cumulative tax bracket for every additional dollar earned as income. The average or effective tax rate is the total tax paid divided by total income earned.

Recommendation: Secure an advisor, understand these concepts, and let him or her guide you to a worry free and successful retirement!