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Matthew_Hanshaw-CFP

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Use Your Annuity to Pay for Long-Term Care Insurance

Posted by Matthew_Hanshaw-CFP on Apr 3, 2018 8:00:00 AM

Use Your Annuity to Pay for Long-Term Care Insurance

The cost of long-term care can quickly deplete your savings and affect the quality of life for you and your family. Long-term care insurance allows you to share that cost with an insurance company. But premiums for long-term care insurance can be expensive, and cash or income to cover those premiums may not be readily available. One option is to exchange your annuity contract for a long-term care insurance policy.

Section 1035 exchange

Generally, withdrawals from a nonqualified deferred annuity (premiums paid with after-tax dollars) are considered to come first from earnings, then from your investment (premiums paid) in the contract. The earnings portion of the withdrawal is treated as income to the annuity owner, subject to ordinary income taxes. IRC Section 1035 allows you to exchange one annuity for another without any immediate tax consequences, as long as certain requirements are met. However, prior to 2010, an annuity couldn't be exchanged for a long-term care insurance policy on a tax-free basis. But the Pension Protection Act (PPA) changed that and, as of January 1, 2010, both life insurance and annuities may be exchanged, tax free, for qualified long-term care insurance.

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Topics: Financial Planning, Retirement, Taxes

Staying on Track with Your Retirement Investments

Posted by Matthew_Hanshaw-CFP on Mar 29, 2018 8:00:00 AM

Staying on Track with Your Retirement Investments

Investing for your retirement isn't about getting rich quick. More often, it's about having a game plan that you can live with over a long time. You wouldn't expect to be able to play the piano without learning the basics and practicing. Investing for your retirement over the long term also takes a little knowledge and discipline. Though there can be no guarantee that any investment strategy will be successful and all investing involves risk, including the possible loss of principal, there are ways to help yourself build your retirement nest egg.

Compounding is your best friend

It's the "rolling snowball" effect. Put simply, compounding pays you earnings on your reinvested earnings. Here's how it works: Let's say you invest $100, and that money earns a 7% annual return. At the end of a year, the $7 you earned is added to your $100; that would give you $107 in your account. If you earn 7% again the next year, you're earning 7% of $107 rather than $100, as you did in the first year. That adds $7.49 to your account instead of $7. In the third year with a 7% return, you'd earn $8 and have a total of $122. Like a snowball rolling downhill, the value of compounding grows the longer you leave your money in the account. In effect, compounding can do some of the work of building a nest egg for you.

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Topics: Financial Planning, Retirement

A Retirement Income Roadmap for Women

Posted by Matthew_Hanshaw-CFP on Mar 27, 2018 8:00:00 AM

A Retirement Income Roadmap for Women

More women are working and taking charge of their own retirement planning than ever before. What does retirement mean to you? Do you dream of traveling? Pursuing a hobby? Volunteering your time, or starting a new career or business? Simply enjoying more time with your grandchildren? Whatever your goal, you'll need a retirement income plan that's designed to support the retirement lifestyle that you envision, and minimize the risk that you'll outlive your savings.

When will you retire?

Establishing a target age is important, because when you retire will significantly affect how much you need to save. For example, if you retire early at age 55 as opposed to waiting until age 67, you'll shorten the time

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Topics: Retirement, Women and Investing

Unit Investment Trusts

Posted by Matthew_Hanshaw-CFP on Mar 22, 2018 8:49:59 AM

Unit Investment Trusts

Despite offering certain distinct advantages for an investor, unit investment trusts (UITs) are not nearly as familiar to most people as, say, mutual funds. According to data compiled by the Investment Company Institute (ICI), in 2016 mutual funds held nearly 192 times as much money as all UITs did. But as a greater diversity of UITs have been introduced, they have become more popular as an investment vehicle.

Historically, most unit investment trusts have invested in bonds, especially municipal bonds. However, in recent years, equity UITs have taken the lead.

What is a unit investment trust?

Like a mutual fund, a UIT represents a collection of individual securities. However, unlike a mutual fund, it has a specified termination date. A UIT can last as little as a year, or 30 years or more. A bond UIT's termination date coincides with the maturity dates of the bonds it holds; an equity UIT specifies its termination date. Once that date is reached, the proceeds are either distributed to investors or, in some cases, reinvested in another trust.

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Topics: Economy & Investing

Advanced Estate Planning Concepts for Women

Posted by Matthew_Hanshaw-CFP on Mar 20, 2018 8:00:00 AM

Advanced Estate Planning Concepts for Women

Statistically speaking, women live longer than men; if you're married, that means that the odds are that you're going to outlive your husband. That's significant for a couple of reasons. First, it means that if your husband dies before you, you'll likely inherit his estate. More importantly, though, it means that to a large extent, you'll probably have the last word about the final disposition of all of the assets you've accumulated during your marriage. But advanced estate planning isn't just for women who are or were married. You'll want to consider whether these concepts and strategies apply to your specific circumstances.

Transfer taxes

When you transfer your property during your lifetime or at your death, your transfers may be subject to federal gift tax, federal estate tax, and federal generation-skipping transfer (GST) tax. (The top estate and gift tax rate is 40%, and the GST tax rate is 40%.) Your transfers may also be subject to state taxes.

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Topics: Estate Planning, Women and Investing

Grantor Retained Annuity Trusts (GRAT)

Posted by Matthew_Hanshaw-CFP on Mar 15, 2018 8:00:00 AM

Grantor Retained Annuity Trust (GRAT)

A grantor retained annuity trust (GRAT) is an irrevocable trust into which you make a one-time transfer of property, and from which you receive a fixed amount annually for a specified number of years (the annuity period). At the end of the annuity period, the payments to you stop, and any property remaining in the trust passes to the persons you've named in the trust document as the remainder beneficiaries (e.g., your children), or the property can remain in trust for their benefit.

A GRAT is generally used to transfer rapidly appreciating or high income-producing property to heirs with the main goal of transferring, free of federal gift tax, a portion of any appreciation in (or income earned by) the trust property during the annuity period.

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Topics: Estate Planning, Financial Planning

Trusteed IRAs

Posted by Matthew_Hanshaw-CFP on Mar 13, 2018 8:00:00 AM

Trusteed IRAs

The tax code allows IRAs to be created as trust accounts, custodial accounts, and annuity contracts. Regardless of the form, the federal tax rules are generally the same for all IRAs. But the structure of the IRA agreement can have a significant impact on how your IRA is administered. This article will focus on a type of trust account commonly called a "trusteed IRA," or an "individual retirement trust."

Why might you need a trusteed IRA?

In a typical IRA, your beneficiary takes control of the IRA assets upon your death. There's nothing to stop your beneficiary from withdrawing all or part of the IRA funds at any time. This ability to withdraw assets at will may be troublesome to you for several reasons. For example, you may simply be concerned that your beneficiary will squander the IRA funds.

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Topics: Estate Planning, Retirement

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