Understanding Life Insurance Basics

Understanding Life Insurance Basics

It’s not a topic anyone particularly enjoys thinking about, but life insurance can be a crucial pillar of financial protection for those who mean the most to you. It helps ensure your loved ones are better able to meet their future expenses — no matter what should happen to you.  

In return for your policy premium payments, the insurer promises to pay a predetermined benefit upon your passing. Your beneficiary can use the money toward whatever financial needs they may have at that time or in the future. Depending on the provisions of your policy, your beneficiary may receive their benefit as a single lump-sum payment, a series of installment payments or by some other means. Here are some things the payout from a life insurance policy could be applied toward:  

  • Paying off the mortgage on a family home. 
  • Sending your children or grandchildren to college.  
  • Supporting a favorite charitable cause. 
  • Paying estate taxes. 
  • Covering funeral expenses. 
  • Helping your spouse pay everyday bills. 
  • Providing for long term care. 
  • Paying off student, credit card or other debt. 
  • Protecting a business. 
  • Supplementing retirement income. 

But you have a number of decisions to make before you purchase a policy. First, youll have to choose between the two basic types of life insurance: term life and permanent life.  

Term life insurance provides protection for a predetermined period of time: That could be 10, 20 or 30 years, for example. If the loss occurs within the period you’re covered for, your designated beneficiaries receive the benefit. If not, no benefit is paid out. You might be interested in this type of policy for income replacement prior to retirement or to provide care for your children until they become financially self-sufficient 

And you also have two options when it comes to permanent insurance: whole life or universal life insurancewith either able to provide lifetime coverage. Permanent life generally costs significantly more than term life policies, but it also accumulates cash value that you may even be able to borrow against should the need arise. 

Whole life insurance coverage is more predictable as the premiums, rates of return and amount of benefit are guaranteed and fixed. These policies can be useful to help provide for longer term needs such as ongoing care for an adult child. Universal life insurance, on the other hand, can offer an adjustable death benefit as well as premiums, within certain parameters. Cash value growth is dependent on the interest rate climate, so it’s important to consider that potential impact when looking at this type of coverage. Finally, look into fees, no matter what type of policy you select. 

Life insurance can be an important foundation of financial protection for your family. And while it may seem complicated, it doesn’t have to be. Your financial professional can explain the options available and help you determine which type of insurance best meets your needs and budget. 

Source 

How to Afford a House With Rising Prices and Interest Rates

How to Afford a House With Rising Prices and Interest Rates

In the third quarter of 2022, the median home price in the U.S. was around $400,000. That means the average homebuyer required a six-figure income to afford their purchase — and the $2,682/month payment that accompanied it. If that seems steep, don’t lose hope. Here are six strategies to help you afford that new home you’ve been dreaming of when prices and mortgage rates are high.

 

1. Choosing a property. There’s an old real estate saying: “Location, location, location.” And that’s because location is such an important driver of price and value. While picking a prime location can drive price up, moving a little further from a city or choosing a less sought-after neighborhood can help control costs. You can also consider an older home — taking into account the cost of potential repairs — or one with a smaller footprint. These moves may also lower your property taxes.

 

2. Adjustable-rate mortgages (ARMs). Unlike a fixed-rate mortgage, the interest rate of an ARM can vary over the loan term. The “start rate,” also called an intro or teaser rate, is fixed for a predetermined period (such as five years for a 5/1 ARM), but then can fluctuate according to an index — typically the secured overnight financing rate, or SOFR, plus a margin. The 1 in a 5/1 ARM means that the interest rate can subsequently adjust every (one) year. ARMs typically carry a lower rate than fixed-rate mortgages but carry the risk of going higher over time. An ARM may make more sense if you’re confident you will sell the home within the period of your start rate; otherwise you risk not being able to afford your payments in the future.

 

3. Higher down payment. If you can scrape together a higher down payment, it can lower your monthly payment significantly. And by exceeding the 20% threshold, you can save even more by dropping private mortgage insurance, or PMI.

 

4. Put time on your side. Real estate deals may be few and far between in a competitive real estate environment, but you have a better chance of scoring one if you’re not in a hurry. Allow plenty of time to shop around so you can take advantage of any lulls in the market.

 

5. Negotiate and lowball. It may be a tougher sell in a hot market, but you still may get lucky by putting in low offers. Consult with an experienced real estate professional for advice on getting your best chance of having a seller accept a lowball offer, knowing you may need to make a bunch of them before someone bites.

 

6. Get preapproved. Do what you can to make your offer more attractive by getting your financing preapproved by your lender. If a seller needs more time to get out of their home, you may be able to contract to let them stay and rent it out from you. Waiving contingencies comes with risks, so don’t do this without careful consideration.

 

Buying a home is one of the biggest purchasing decisions anyone ever makes. A consultation with a qualified financial professional can help you weigh your options.

 

Sources

https://www.statista.com/statistics/272776/median-price-of-existing-homes-in-the-united-states-from-2011/

https://money.com/six-figure-income-needed-to-afford-home/

10 Ways to Save Money on Health Care Costs

10 Ways to Save Money on Health Care Costs

We all know that health insurance can cost a lot. In 2022, the average American who received coverage through their employer paid more than $6,100 for a family plan — or about $500 per month. That’s nearly 10% of the typical household budget.

 

But there are also many expenses outside of premiums to contend with, including copays, deductibles, medications and medical devices. Here are 10 strategies to save on out-of-pocket medical costs.

 

1. Health Savings Account (HSA). HSAs are available to employees with a high-deductible health plan (HDHP). They let you set aside pre-tax dollars to cover certain qualified health care costs. In 2022, the minimum deductible for an HDHP was $1,400 for an individual and $2,800 for a family, and you could contribute up to $3,650 for individual coverage and up to $7,300 for family coverage. The money invested in an HSA is tax deductible, and it can grow and be withdrawn for qualified medical expenses tax free, giving it a triple tax advantage.

 

2. Flexible Spending Account (FSA). FSA funds can be used to pay for qualified medical expenses, such as health plan deductibles, copayments, prescriptions and medical devices. Your employer sets the limit on deposits, and this money isn’t taxed. You may be allowed to roll over up to $500 of whatever you don’t spend from one year into the next, or your employer may allow up to 2.5 additional months to use up those funds. See your human resources department for more information.

 

3. Pharmacy discount programs. Pharmacy discount programs offered by major chains as well as independent companies operate outside your insurance plan and can help save you money on prescriptions. Discounts may vary, so research a number of different programs.

 

4. Urgent care. Some facilities that look like urgent care clinics are actually associated with hospitals and bill at much higher “emergency room rates.” So it’s important to understand which type of facility you visit.

 

5. Generic medications. Once a drug manufacturer’s patent lapses, other companies can make it in a less expensive but chemically equivalent generic form. Ask your doctor how much a prescribed medicine will cost and if a generic would be appropriate.

 

6. Free health services. Many free preventive and wellness benefits, as well as maternity and newborn care, are provided under the Affordable Care Act (some restrictions may apply, contact your health plan provider for more information). Take advantage of those you qualify for.


7. Shop around. We routinely shop around for a new phone or TV, yet often fail to do so when it comes to our medications, provider services and medical procedures. Hospitals are now required to publish prices for many services, which makes comparison shopping easier. Shop the cost of nonemergency procedures to see where you can save, but also research your providers’ health and safety outcomes.


8. Time your procedures. Health plan deductibles renew yearly. Be mindful of the calendar and get nonemergency procedures scheduled before your deductible rolls over each year.


9. Hire a medical billing advocate. If you have a serious medical condition, consider hiring a medical billing advocate to review bills to look for errors that can cost you money. They can challenge any discrepancies and negotiate with health care providers on your behalf.


10. Protect your health. One of the best ways to save on health care is to do what you can to keep yourself healthy. Stay up to date on screenings and recommended vaccinations, don’t smoke or drink excessively, maintain a healthy weight, stay active and manage stress.

Medical bills can be overwhelming and threaten your financial wellness, but armed with information and smart strategies, you can fight back.


Sources

https://www.usatoday.com/story/news/health/2022/10/29/health-insurance-cost-not-yet-hit-inflation-could-soon-spike/10620266002/

https://www.healthcare.gov/glossary/health-savings-account-hsa/

https://www.fool.com/the-ascent/research/average-monthly-expenses/

https://www.healthcare.gov/glossary/flexible-spending-account-fsa/

https://www.consumerreports.org/cro/2012/04/discount-drug-programs-can-save-you-money/index.htm

Where You Retire Matters!

Where You Retire Matters!

Many people dream of relocating when they retire. While some spots are more popular for retirees, these areas often come with higher costs of living. And because most retirees live on a fixed income, it’s important to keep a close eye on costs. If you’re dead set on retiring to a pricier area, you may even need to continue working for a few years longer than you planned to make it happen. Here are things to consider when evaluating your options.

Taxes

From state to state, and even from town to town, the baseline taxes that residents must pay can vary quite a bit. Some states, such as Florida, have no state-level income tax at all. Others have either a flat tax rate — where the state taxes all income at the same rate — or a progressive tax — in which those with higher incomes pay a higher rate. But even if your state has no income tax, your town’s property taxes may cut into your savings. It’s also important to assess the sales tax rates in the area where you’re hoping to move, as these could also add up. Some municipalities have local sales taxes as well, so be sure to do your research to determine if an area is truly affordable for your retirement budget.

Housing Costs

Home prices and rental rates have increased steadily for years, but this is especially true in places with competitive real estate markets. It may be helpful to research future development plans in your area. If a large company is planning to build or expand a major facility nearby in a few years, for example, expect housing costs to increase as new employees want to move closer to their jobs.

Insurance

Many of the most popular retirement destinations — particularly along the coast — are also in areas that are at particular risk of certain disasters. For instance, Florida’s hurricane season lasts for several months every year, and residents sometimes face catastrophic storm damage. Because of this, currently the average cost to insure a $250,000 home in Florida is $1,648 per year, compared to $681 per year in Delaware. Your car insurance may be higher in certain states, too, which often depends on the average number of uninsured drivers in the area and other factors.

Transportation

Unless you enjoy (and can afford) frequent travel, it’s important to think about the proximity to the places you’ll want or need to go often. Being far away from loved ones could require you to spend a lot of your retirement income on visits, and if you’re an outdoorsy person, living in a city means you’ll be planning — and paying for — frequent getaways. But it’s not just leisure that could cost you. Living far from grocery stores, doctors, pharmacies and other necessary places can add significantly to your household budget, whether you drive yourself or take public transportation.

State Benefits

Depending on where you live, your Medicaid benefits could range from generous to very low, potentially leaving you on the hook for expensive in-home or facility-based care. Medicare premiums vary from state to state as well. If you’re able to self-fund your medical care, this may not affect you as much. But if you need to rely on state benefits, be sure to research the costs and coverage in the state where you intend to retire.

Overall Cost of Living

The cost of everyday items such as groceries, clothing, home services and more can vary tremendously depending on whether you’re located in a big city or rural area. With so many factors to consider for retirement, using an online calculator to help project cost of living in areas you’re considering can be a useful starting point. However, it may also be helpful to speak to a financial professional to help you figure out what you can afford, and which area suits your budget best, so you can adjust your retirement plan accordingly.

Holiday Gifts That Won't Break Your Budget

Holiday Gifts That Won't Break Your Budget

You’ve done a good job of sticking to your financial plan all year, but when it comes to holiday gift giving, it’s easy to let good intentions knock you off your savings path. According to the National Retail Federation, Americans spend about $1,000 on winter holiday gifts. That can be a real budget-buster, but meaningful gifts don’t have to come with a hefty price tag. We’ve got some $25-or-less gift ideas for everyone on your list.

Celebrate Coworkers

Office gifts are part of work culture. Maybe you manage a team and want to give your group a token of appreciation. Or you know one person who always gives gifts, and you want to return the favor. A work-appropriate gift that won’t put your account in arrears could be a nicely bound notebook, a quality writing pen or a gift bag of color-coordinated office supplies like paper clips, magnets and post-it notes. Keep it professional but fun to brighten your coworkers’ day.

Seasonal Presents to Service Providers

Postal workers, hair stylists and even your Grub Hub driver are people you might want to thank during the holidays. A batch of your favorite cookies presented in a festive box or tin is a low-cost way to show your gratitude for a year of good service. Make it extra special by including a handwritten note and a copy of the recipe.

Thank Your Terrific Teachers

Whether it’s your child’s 4th grade teacher or your yoga instructor, there’s lots of reasons to give extra thanks to the people who help us learn and grow. A pick-me-up, like a $10 gift card to a coffee shop, can help any teacher start their day off right. Make it more meaningful by supporting a local business close to your favorite teacher’s place of employment. Bakeries, ice-cream parlors or tea shops often offer gift certificates or cards that you can package in a pretty envelope or decorated box for that personal touch.

Great Gifts for Grandparents

Grandparents, aunts, uncles, cousins — you want to remember your extended family in your holiday giving, but the costs can add up. Go for truly personal, budget-conscious family gifts by using the photos you take during the year to make photo-mugs, photo-calendars or even a family photo t-shirt! You can look online for low-cost, photo-personalized gift services. And at some big-box stores or national pharmacies, you can connect your camera or thumb drive to their in-store kiosk for easy ordering and processing. 

Treat Yourself Too

No one should fault you for indulging in a holiday gift to yourself, but you should be as mindful here as you are in your presents to others. Money you receive as gifts (and funds you save by using our budget gift ideas!) can add up to a special treat and an end-of-year contribution to your retirement savings account. Talk to your WellCents financial professional about how catch-up contributions can help maximize your retirement savings and give your future self the gift that keeps on giving — a more financially secure retirement.  


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