[Note: You may have to click "load images" in your email program if you don't see my pix at the right. Also, if you want to see the previous editions of this newsletter CLICK HERE. ]
Dear Everyone!
It's Labor Day Weekend but it could be Easter because it looks to me as if the economy is starting to rise from the dead!
I was at the Sunrise Mall this afternoon and the place was filled with people... and all were carrying shopping bags... so someone is buying stuff out there.
Even the stock market is starting to show life again, although it will be a long time before we see the kinds of numbers we saw two years ago.
Time for optimism? Can't hurt!
As I do from time to time, I like to let people know of other professionals that I've met and whom I think could be an asset to those who read this fish-wrap.
John Deckard of McNeil Insurance is a good man for home and auto coverage. I've known him for a number of years and he will do a good job for you.
I recently opened an account with Folsom Lake Bank. I like doing business with local bankers and Sharon Marshall gave me a good CD rate.
I was in Avanti Salon and Beauty Supply on Greenback Lane near Sunrise (next to the Battery Plus store) and met Rella Moore. She knows all there is to know about hair stuff (I use Nioxin... have for many years now. It won't grow hair, but I'm convinced it keeps it from thinning and falling out. Try it. Rella has it.
Finally, Tony Manos is now out at Keller Williams in the Roseville real estate world... having come in from the cold of the loan brokerage world. Thus, he knows all sides of a home transaction.
If there is someone you know and trust and whom you would like me to check out, let me know.
As always, call me or refer me. Please!
-Al
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Let Me Sell You Ten For Seven!
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I ran into a couple at Gold River Racquet Club this week that I've known for a long time and who are not only tennis players but also avid bass fisher-people. They travel the country via motor-home once or twice a year to fish. I asked them where they've been traveling.
"Oh, we don't use the RV or bass boat anymore. It's too expensive," he said.
I said, "What do you mean? You're not broke. Enjoy your money. You worked hard for it."
She replied, "Well, we have always promised ourselves that we'd leave $100,000 to our son, and over the years we have just about that in a CD. But with business down a bit and the price of everything so high, we don't want to dip into that for luxuries. We never know if we can pay it back."
I told them they should get a single-premium whole life policy... SPWL.
"Huh?" he asked?
It's simple. An SPWL is where you give the insurance company a lump-sum and they guarantee to pay out a larger lump!
My friend is not an idiot. "You mean I can give you five dollars and you will give me six back?"
"Better than that," I told him. "Since you are only in you mid 50s and healthy you can "give me" $70,000 and the company will pay out $100,000 (or more) to your son when you go to the great beyond."
He got it immediately. "That would free up around $30,000 for us to take trips with once or twice a year."
"Not only that, but the money you're putting into a CD for your son, you can use to supplement your retirement knowing your legacy is guaranteed," I told them.
Basically, with an SPWL you are buying ten dollars for seven dollars. There is another nice feature. The money is still YOURS. You can surrender the policy or borrow on it (although that will reduce the legacy amount.)"
"This sounds too good to be true," she told me.
Using my best Billie May voice is said "But wait! There's MORE! What happens to that $100,000 in the CD that you pass on to your son? I'll tell you want happens. The government is going to get about 28% of it if not more. If you want to pass $100,000 to your son, you better put away about $139,000 because 72% of that is $100,000... the amount your son would get after taxes"
They looked at me. "What about the pay-out from an insurance policy?"
I said "Can you spell ZERO TAX? That's right. Life insurance pays tax free. If the policy says it will pay $100,000, that's what your son will get... game, set, match!"
Well, you can guess the rest of the story (As Paul Harvey used to say.)
So, did you learn something from all of this?
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Indexed What?
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People ask me for my opinion on indexed universal insurance where the pay-out is based on the percentage rise of an index... usually the S&P 500.
In a nutshell, here is how these work (grossly oversimplified, of course.)
With regular whole life plans (not term plans) you give the company your money each month or year and some of it goes to the cost of insurance and the rest goes to your cash-value account. You get a guaranteed rate OR a dividend declared on the cash value that builds up... depending on how well the company invested the money (your money and everyone else's)
With indexed products, you get a very low guaranteed rate OR a "dividend" on the cash account that is based on how the INDEX did. For example if the index rises 8% (from some agreed upon point in the past) you get 8% (usually a bit less) added to your existing pot of money.
What happens if the index goes down from the last time? That's the beauty of these plans. You don't lose a penny. You still get the guaranteed rate... but no dividend (and the index "resets" to a new point for next time it is "checked.")
Wars are fought over whether or not indexed products are good or bad... and it is not a black and white issue. For some people "of means" the indexed products make a LOT of sense.
However for most people, I think the only choice is what we call mutual whole life with paid up additions. Reasons:
1. Indexed universal life is simply too complicated to explain to the average person. There are a lot of moving parts.
2. Universal life can lapse. Nightmare. You don't want to go there (ask someone who just got a note saying they need to put in a ton of money to keep their policy in force!)
3. Indexed life plans do not mirror the index, they merely track it. If an index does 10%, you'll be fortunate to do 7%. That's not bad, but you need to know this or you'll be furious when you get your statement!
4. There's every reason to believe that stock growth will under-perform for several years. If you're going to participate in the market, active investing in individual stocks and not indexes might be the only way to go for a while. How long do you want to watch your cash value sit there earning almost nothing (the low guaranteed rate?)
5. With a mutual whole life plan with paid up additions (Assurity, Mutual of Omaha, Illinois Mutual, etc.), you'll get your base interest rate plus dividends. Typically, this will total 6% to 9% depending on how things go. No ups and downs of the market, no sleepless nights, nice and steady. It may not be sexy, but it's an outstanding foundational asset before someone tries the crazy stuff like short ETF's and aggressive growth stock mutual funds (and gets taxed as they go).
Seems to me everyone needs a solid foundation, with guarantees, before going for the more aggressive options. Whole life does that. If it's too boring, well better to make money and be bored than to lose money and be excited!
The funny thing is, the people who scream loudest about "Buy term and invest the difference" are the financial advisors who are trying to maximize their AUM (Assets Under Management) and don't want to see a guy like me near their clients proposing boring old whole life.
My answer to that is to simply ask anyone who took a drubbing in the market vs. someone who still has a strong cash-value balance in their boring old life insurance plan.
Therein lies the true answer (as a Zen master would say!)
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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(Age 61... eat right... run 2 miles a day... say the Maha Mantra...
drink one, very dry, double martini per night. Yes, the sunglasses
help!)
I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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