FINANCIAL PLANNING

We offer many “outside the box” ideas to our clients and view ourselves as specialists in this area. We spend a great deal of time studying the economy and researching opportunities in the industry. This is simply a short list of ideas that you might enjoy reading about. This is not comprehensive in nature and does not include everything.

Please note that this information is not intended to be a substitute for specific individualized advice. We suggest that you discuss your specific situation with a qualified advisor.

In service withdrawal

An “in service withdrawal” is a strategy that exists today that can impact many employees and employers that relates to taking money out of qualified plan (401k) while still remaining employed and “in service” at the current job. This will not apply to everyone and in fact it is rare that a 401k plan would permit to someone under the age of 55 but some plans do offer it. There are many plans that permit this to someone over the age of 55 as well. The opportunity is mainly for diversification away from the options for investing that exist inside the plan. What an in service allows you to do is very similar to a rollover. One can move money (plan permitting) out of a plan and into another qualified account (IRA) and invest the money wherever the person chooses. This could be due to avoid some of the costs that plans may impose, to diversify into alternatives, buy individual stocks or another asset or anything else such as having access to the money. Click here for more on in service withdrawal.

72t or 72q solutions

A 72t (or 72q) is an option that is available to individuals who have qualified money inside an account and need access to that money before the attained age of 59.5. It is common for folks to leave the money in a plan until age 59.5 in order to avoid paying the 10% penalty that could be imposed by the IRS. If one does this and play by the rules, the 10% penalty can be avoided. Call us today to learn how. The rules are clearly written into the tax code. Distributions are still subject to federal and state income tax. Please consult a tax advisor for specific tax advice.

There is a risk that the principal balance of the account could be exhausted in the event that the distributions exceed the net earnings and growth of the investments. Individuals who live beyond their normal life expectancy many find their account values have been completely depleted. 72(t) is a tool to access money prior to age 59 ½ without the 10% penalty. It is not a tool to enable an individual to retire early if they are not otherwise able to. There are substantial penalties for any deviation from a plan once enacted.

NUA (net unrealized appreciation)

This is a complex strategy that relates to a very small number of targeted clients who have highly appreciated company stock inside a retirement plan. If you would happen to fit this category you should call us today to discuss further. This is not a strategy that is good for the average person but if you have over 100k of highly appreciated company stock inside your 401k this may be a great option for you to consider. We can potentially help you save on taxes by working within the rules the IRS has established for us.

Life insurance coordination with long term care

Both life insurance and long term care insurance can be a fairly complex and boring topic to discuss. The downside to life insurance can be overwhelming and tedious and the cost of long term care insurance can be a huge chunk of change per year. The benefit to the new contracts that exist today is that one can combine the two coverages and may help alleviate some of the downsides to each. In our way of thinking and the industry one of the downsides to long term care insurance is that there is a chance that we pay thousands in premiums and never get a benefit for having the coverage in force; this can really drain assets quickly. One of the downsides to the traditional life insurance is that people cannot see the benefit because they feel that the benefit will really only be seen by those who are the beneficiaries on the contracts. The nice feature of this new contracts is that they offer and patch the downsides of each product. The long term care rider will pay if one needs if and if it is never used then it just pays to the beneficiary of the life insurance contract. This also helps feel like people are not just giving money to heirs via a life insurance policy because they may actually use this while living. Guarantees are based on the claims paying ability of the issuing insurance company.

Riders are additional guarantee options that are available to a life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.

We feel there are actually several ways to use a life insurance contract while living but this can certainly be one of them. The best part of all is the cost, the cost of these contracts relative to each priced separately is that they are very competitive relative speaking!

Cost reduction strategies for insurance contracts

The above example is just one simple way to avoid insurance cost among several. We really try to put ourselves in line with our clients and try to focus on the items that matter to them. One of those could certainly be, how can we save money on our insurance. Many of our wealthy clients like the idea of self-insuring and this is just one example among many.

These are just a few ideas of how we can offer different ideas that can potentially enhance what you are doing financially. There are many more but most of them are tailored to the needs of those we serve.

Please note that no strategy can assure success or protect against a loss.

Shielding Retirement Assets From Taxes

This article considers ways to avoid the pitfalls of bequeathing qualified retirement assets. Click here for more information on this topic.


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