Let's say you want to save for a big vacation. You can do that. You should do that. There is no reason to go into debt for a vacation. Save the money in an account where you can get a reasonable return and a guarantee that the money will be there when you need it.
You could use a money market account or a savings account, but if you are saving for a big vacation like a trip to Hawaii or Europe, you'll want more interest and you'll probably have to save for a longer period of time. A great rate in a money market account is less than 1% right now. If you have a little more time to save, why not combine your savings and purchase a whole life contract. What are the downsides and upsides of this strategy.
A downside is that you'll need to save for at least six or seven years before you'll want to take money out of your life insurance policy.
An upside is that you'll get a little bit of life insurance along with your savings. Since most people are inadequately insured, you'll get that benefit as well.
In addition, you'll already have the policy set up to begin saving for your next vacation as well.
The rate of return on a good life insurance policy will be between 3% and 4% tax free. This is equivalent to about a 6% return on a taxable investment. Over time, this will provide a much greater rate of return on your "savings" account that a money market or other savings account.
Another downside is that you'll actually be loaning yourself money from your policy in order to pay for your trip. However, there is no specific payback period and you can simply ensure you continue to pay your annual premiums.
Another upside is that you can use your policy to save for everything you want to buy over time. So, let's say that you want to save for a new car, a big vacation, and a new motorcycle. You can plan out how much you need to save each year, then you can put all of that money into your life insurance policy. Consolidating your money into the policy provides you with more insurance, and a better return.
A downside of this strategy is that you have to be disciplined and wait until you've really saved the money before using it. This could be seen as an upside because most people who save and invest say that building wealth is largely done by consistent saving and investing over time and not using sophisticated investments. Developing a habit of disciplined saving is a great character trait that will benefit you in all aspects of your life.
Again, a savings account can be a great vehicle for basic savings, but a whole life insurance policy is the only vehicle that will guarantee you a decent minimum return, potential dividends, and a life benefit on the side, just in case. The younger you are when you being this process, the more insurance you can buy and the more you can have the benefit of the long term returns.
Tuesday, May 6, 2014
Monday, May 5, 2014
Disability Insurance: Do you need it?
Disability insurance may be the least understood and lease owned insurance, especially when compared to its common counterpart--life insurance.
Few people think about disability insurance, even though a person is about 3 times more likely to become disabled than to die (this depends on age and occupation). Only a very small percentage of people have in individual disability policy, even though only about 40% of Americans have disability insurance at work.
While few people have disability insurance, disability claims continue to rise. Many people believe that Social Security disability insurance will cover them, but do not realize how long the waiting period is and how many people are rejected.
Increasing disability claims are related to a number of factors. Medical technology saves people who might have died in the past, but instead they live with a disability. Cancer rates are up. Obesity rates are up. In addition, the number of disabilities classified as diseases or syndromes is on the rise.
While disability insurance may not be cheap, it may be necessary. Some financial advisors believe that disability insurance is a key part of a personal financial plan, yet few people have a policy.
Contact me, and I can give you more information about disability policies, how they work and the options available.
Few people think about disability insurance, even though a person is about 3 times more likely to become disabled than to die (this depends on age and occupation). Only a very small percentage of people have in individual disability policy, even though only about 40% of Americans have disability insurance at work.
While few people have disability insurance, disability claims continue to rise. Many people believe that Social Security disability insurance will cover them, but do not realize how long the waiting period is and how many people are rejected.
Increasing disability claims are related to a number of factors. Medical technology saves people who might have died in the past, but instead they live with a disability. Cancer rates are up. Obesity rates are up. In addition, the number of disabilities classified as diseases or syndromes is on the rise.
While disability insurance may not be cheap, it may be necessary. Some financial advisors believe that disability insurance is a key part of a personal financial plan, yet few people have a policy.
Contact me, and I can give you more information about disability policies, how they work and the options available.
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