Using Business Interruption Insurance to Protect Your Income

Using Business Interruption Insurance to Protect Your Income

Picture it now…

You own a thriving art supply store in your home town of New Orleans.  You’ve put years of your life and thousands of dollars into building the store into what it is now.  You make a nice living, and the business mostly runs itself at this point.

Then Hurricane Katrina comes to town.  The building you lease is ruined.  Your storefront and merchandise are ruined.  You have no cash flow to pay creditors, and are forced to close the store.

This is a pretty extreme example, but is exactly what happened to thousands of businesses in the wake of the disaster in 2005.  It’s also a risk that can be completely covered with business interruption insurance.

Virtually any disaster that is out of your control and risks your business’s profitability can be covered in a business interruption policy.  In other words, you can protect business profits and your personal income from a fire, flooding, earthquake, or other disaster.

This post will cover the ins and outs of business interruption insurance.  We’ll address what it does and doesn’t cover, when you should consider buying it, how much coverage you need, and how to purchase a policy.

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How to Tell Whether You Have Enough Money to Retire

How to Tell Whether You Have Enough Money to Retire

“I’m not sure I have enough saved up to retire.”

“How can I know for sure my savings will last after I stop working?”

“I”m concerned I’ll spend through my savings too fast and run out of money when I’m 80.”

These are a few common phrases I hear from people who are approaching retirement.  Many people I speak with in the their mid 50s and early 60s these days have saved diligently for years for their own retirement.  But now as they approach the transition from accumulating wealth to spending their savings, the question of whether they’ve saved enough becomes extremely important.

Plus, when you mix in longer life expectancies, rising health care costs, and expensive stock and bond markets, there’s a lot of uncertainty surrounding the issue.

So in today’s post, I’ll cover some of the leading ways you can determine whether you have enough saved up to stop working.  Without putting you and your family’s future at risk, that is.

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What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

You’ve seen the stats.  Long term care is expensive, and we’re all likely to need it at some point in our lives.  The cost of spending time in a nursing home or assisted living facility adds up quickly, which is why many retirees choose to insure against it through a long term care insurance policy.

Problem is, since there’s a high likelihood of requiring long term care, insurance is an expensive proposition in its own right.

Are you better off crossing your fingers and hoping you don’t need expensive care for a long period of time?  Or is it better to cover this risk through an insurance policy that will cost you an arm and a leg anyway?

This post will cover the essentials of long term care insurance, including exactly how to decide whether picking up a policy is a good decision for you and your family.

 

Long Term Care: The Stats

So here’s the big question.  What are the chances you’ll ever need long term care?  According to longtermcare.gov, about 70% of people turning 65 will need long term care services at some point in their lives.  With the average annual cost of a nursing home totaling about $96,000 these days, this can be a scary proposition.

The stats can be misleading, though.  Many people who need long term care services only need them for short periods of time.  And since most long term care policies have elimination periods (the period before the policy starts paying out) of around 90 days, many people won’t even need care long enough for their coverage to kick in.

What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

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You've Inherited an IRA. Now What?

You’ve Inherited an IRA. Now What?

Inheriting an IRA is quite a bit different than inheriting any other asset.  Unlike cash or investments in a traditional investment account, if you inherit an IRA you’ll need to start withdrawing from the account in order to avoid hefty penalties.  In this post we’ll cover what your options are when you inherit an IRA, and how you can best manage it for you & your family.

 

How IRAs are Passed After Death

Whereas many of your assets will be distributed to heirs according to your will, IRAs are instead distributed by contract. Your custodian (the brokerage firm that holds your account, like Vanguard or TD Ameritrade) lets you designate as many beneficiaries and contingent beneficiaries as you like.  Once you die, your account bypasses your will, the probate process, and is distributed according to this beneficiary designation.

When account holders don’t designate any beneficiaries things get a little murkier.  When the account holder dies, their account is distributed according to their custodian’s default policy.  At most custodians this default policy diverts the IRA back to their estate (and goes through probate) but at some it’s diverted to their spouse first.  Unfortunately, if the account holder didn’t designate a beneficiary while they were alive, you’re at the mercy of your custodian’s policy.

If the account is indeed diverted back to their estate, it’ll be distributed according to your state’s interpretation of their will.  And if they didn’t have one (meaning they died intestate), the state will make its own decision on who should inherit the asset.

The moral of the story?  Take advantage of the opportunity to bypass probate, and designate your beneficiaries formally while you’re still alive.

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How to Hire an Accountant

How to Hire an Accountant

Managing your financial affairs is a big job.  You have to keep track of your income, manage your assets for long term growth, pay taxes, and arrange for your estate to be distributed after you die.

You can do some of these things on your own.  But others, like writing a will, are jobs you’ll probably want to hire a professional for.

Since we’re in the middle of tax season, I thought it might be helpful to cover exactly what to look for when hiring an accountant.  Paying taxes is a fact of life.  But if you can find creative ways to reduce the amount of tax you pay, there will be more left over for you and your family.  It’s for this reason that an accountant is often one of the professionals families hire for money advice.

You can certainly prepare your own taxes if you prefer.  Programs like TurboTax and TaxAct provide quick and affordable ways to compile your financial records and file your taxes.

There is no program that can help you with tax planning, though.  TurboTax and TaxAct are great for tax compliance, where you’re reporting on transactions that’ve already happened.  But if you’d like to know how you might reduce your tax burden in the future, you’ll need some help making decisions on transactions that haven’t happened yet.  This is tax planning, and something that many accountants are very good at.

I covered in a recent post how you can tell whether you need to hire a CPA.  Today’s post will cover how to go about hiring one if you do.

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How to Afford Rising College Tuition Costs

In general I’m a pretty big nerd when it comes to all things financial.  I love a good spreadsheet, and really enjoy analyzing a solid set of statistics.

Since I do a lot of this in my day job, it’s rare for me to be truly surprised by individual statistics.  But I came across a few recently that really boggled my mind, and they all have to do with college planning:

  • Student loan debt in the U.S. has increased 510% over the last 10 years
  • Across the country, we’re taking on $2,701 in student loan debt every second
  • 16% of student loan borrowers are currently in default, and another 27% are either delinquent or in postponement

These are some pretty astounding numbers.  You may have already heard that tuition costs are going up 7% each year, or that as a country we now have more student loan debt than we do credit card debt.  But a 510% increase over ten years is astronomical.

Since saving for & affording college is relevant to the majority of parents, I thought it’d make a great post on the blog.  So, today’s post covers affording college & need based financial aid.

To get to the bottom of the issue, I’d like to welcome Melissa Ellis to the blog.  Melissa is the founder of Sapphire Wealth Planning, a CERTIFIED FINANCIAL PLANNER, and a subject matter expert when it comes to education planning.

Welcome Melissa!

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The Overwhelming Case Against Whole Life Insurance

The Overwhelming Case Against Whole Life Insurance

Insurance agents love to pitch whole life insurance.

This is sometimes a controversial topic, but the truth is that insurance agents make massive commissions on permanent life insurance when compared to term policies.  Because of this, it’s not uncommon to see agents find creative ways to work permanent life insurance into a financial plan.

The truth is that most people simply don’t need permanent insurance, and are far better served with a term policy.  Whole life insurance is costly, and offers very poor return potential.  This post will cover what whole life insurance is, and why most people are better off with lower cost alternatives.

 

How Life Insurance Works

In order to understand whole life insurance, we really need to understand term life insurance first.  With term life insurance policies, you’re paying an insurance company a monthly premium in exchange for old fashioned, plain vanilla insurance on your life.  If you die while the policy is in force, the insurance company will pay your beneficiaries a death benefit.

Since it’s a term policy, it’s only good for a certain amount of time.  Most term policies are written for 10, 20, or 30 years, and have level premiums throughout the life of the policy.

By and large, term policies are the best way to insure your life.  They’re inexpensive and straightforward.  Plus, the whole reason most people insure their lives is to protect against the chance that they die before becoming financially independent.  Once they become financially independent there’s rarely a need for life insurance.  You have enough assets to pay for your lifestyle, which can be distributed to your heirs after you go.

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Top Strategies for Managing Incentive Stock Options

Top Strategies for Managing Incentive Stock Options

Incentive stock options, or ISOs, are a pretty common way for companies to compensate management and key employees.  Otherwise known as “statutory” or “qualified” options, ISOs are a way to give management a stake in the company’s performance without doling out a bunch of cash.

While they can have wonderful tax benefits, far too many people who own ISOs fail to exercise them wisely.  Some estimates even claim that up to 10% of in the money ISOs expire worthless every single year.  If you own incentive stock options but aren’t sure how to manage them, read on.  This post will cover a few of the top management strategies at your disposal.

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ERISA Section 404(c): Another Way for Plan Sponsors to Limit Legal Risk

ERISA Section 404(c): Another Way for Plan Sponsors to Limit Legal Risk

Sponsoring a qualified retirement plan is a pretty convenient way to defer taxes AND offer your employees a valuable benefit.  It comes with some hefty responsibilities, too.  Among other things, you’re obligated to act in the best interests of your participants, monitor expenses & performance, and make sure everyone’s getting the proper disclosures.

However, to make your life easier ERISA includes six nifty safe harbor provisions.  By following a few additional guidelines your plan can qualify for these safe harbors, which relieves you of certain fiduciary responsibilities.

We covered one of the six safe harbors a few weeks back: auto-rollovers.  Today we’ll cover another safe harbor: section 404(c).  This section has to do with who is responsible for the investment performance in your participants’ accounts.

If you’re responsible for a qualified plan and are curious about how you can limit risk, read on.  You’re in the right place.

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Essential Financial Moves for New Parents

You’ve heard it before: life changes once you have kids.  As the proud parent to a six month old baby boy, I can attest that the rumors are true.

Having kids brings a quite a bit of chaos to your life.  And to try to get a handle on things we’ve read several of the popular contemporary baby books.  In most of them the message is the same: apply a consistent routine.  When your baby knows when to expect sleep time, feeding time, or play time, they gain confidence and often start to excel.  In other words, routine = fewer moving parts, less chaos, and more confidence.

I think our personal finances have a lot do with this as well.  When you have a kid your financial picture changes.  You have different and greater obligations, and need to start thinking about college costs.  The fewer “loose ends” you have with family finances, the less chaotic your family life will be and more you’ll thrive.

So to help us get a feel for the financial side of parenting, I’d like to welcome my guest Josh Brein to the blog.  Josh is a Seattle financial advisor and president of Brein Wealth Management, LLC.  He’s also a proud dad to his daughter Erin.

Today, Josh will share with us how your finances change once you become a parent, as well as essential financial moves new parents should make.

Welcome, Josh!  Let’s get to it:

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