What if I die before I have a chance to build assets and see my children through college and having children of their own.
Life insurance can step in to cover the financial loss of not being able to finish funding a retirement account, social security and children’s college.
Sometimes, the harder thing that happens is not going through cancer and dying, but going through cancer and living.
49% of foreclosures are due to medical problems. 62% of bankruptcies are due to medical bills.
There are multiple plans that can provide income or lump sums if you become critically ill.
We help our clients to create a strategy that will fund ALL their retirement years!
The last thing you want to worry about is running out of money when you retire.
There are multiple plans that can provide lifetime income as well as providing tax efficient ways to pass on a legacy to your family.
Do I save for retirement or do I save for my children’s college?
Most parents want to help their children with the rapidly growing costs of college. It is admirable that many parents put their children’s needs ahead of their own, but keep in mind, that your children can always get student loans. There is no such thing as a retirement loan.”
We simply encourage you to put a financial foundation in place for your own future first. We can show you how to save for your retirement as well as your children’s future college needs.
The most common college savings plan is a 529 plan. A 529 plan is an investment account that allows you to save money for your children’s college education. The primary benefit of a 529 plan is that IF it is used for qualifying educational expenses then the funds will be tax free. It is referred to and called a 529 plan because Section 529 was written in the Internal Revenue Code, authorizing tax free status for qualified tuition programs. Just like any account, there are pros and cons to it, so let’s discuss if a 529 plan makes the most sense for you and your family.
As cited above, the primary benefit is that it can be tax free if used for qualifying educational expenses. Qualifying expenses are things such as tuition, fees and books, however there are some expenses the IRS does not consider a qualifying expense, so it is always better to double check than be left paying unnecessary taxes. If your child ends up not needing the funds, the 529 plan can be handed down to the next child.
Another benefit is some states do offer a state income tax deduction and state tax credits for 529 contributions. It also grows like any other mutual fund and will gain and lose money based on the market, and that can be a pro or a con depending on your capacity to handle the volatility of the market.
One of the drawbacks is that it must be used for qualifying educational expenses. We never know what the future holds for our children. And they may join the military, get college scholarships or choose not to attend college and now these funds will be withdrawn and taxes must be paid. Another potential drawback and something to take into consideration is a 529 plan owned by a grandparent or third party could have an impact on financial aid eligibility. And as previously mentioned it can lose value as the stock market goes down or gain value.
An alternative to a 529 plan can be to save money tax free in an insurance policy. You can see a side by side comparison and if the growth time frame you are looking at as a parent is over 15 years, this will typically yield better results.
This option gives you more flexibility because the funds can be used for anything and not just for education. It can be used towards a down payment on a house or purchase a vehicle or anything that comes along the path of life.
See this article in Forbes: 6 Legal Ways to Get More Tax Free Savings, about how this plan can be used for your children and also for yourself to have flexible tax free growth.
Tax Free.
Must be used for educational purposes.
Can gain or lose money based on the market.
Can affect financial aid qualification.
Tax Free.
Can be used for any purpose, not just education.
Cannot lose money in the market only gain.
Does not affect financial aid.
Also has a life insurance component.
Becoming critically ill or hurt to the point where you cannot work or need to take time off of work can have a dramatic impact on your finances and your future plans.
None of these things are something we want to think about, however if we plan, we can have peace of mind knowing, whatever life throws our way, we have a plan.
Disability Income will provide a monthly income if you are unable to perform your duties at your job. There are customizable short term and long term options to make sure you are protected.
Life insurance has traditionally been referred to as “death insurance,” because it only paid when someone died. The life insurance of today offers living benefits if you are diagnosed with a critical or chronic illness at no additional cost to you.
Do you know someone who has had to go into the hospital for a day or two or seven within the past couple of years? Most of us do. Imagine how helpful it could be to come home not just to medical bills but to receive a check for every day you had to be in the hospital?
Waiting for test results for a diagnosis is one of the defining moments of life, one we never think we will have to go through. Life does happen, if there is a cancer diagnosis or a sudden heart attack or stroke, it offers a lump sum that can be used for medical bills or anything your family needs.
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Denise@CoveringYou.com
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