The American Medical Association recently revealed that at least 25 cents of every health care dollar is spent on the treatment of diseases or disabilities that result from potentially changeable behaviors. Whether the cause is smoking, alcohol abuse, poor diet, lack of exercise, failure to use seat-belts, or overexposure to the sun, preventable health care costs are the first concern of many U.S. health care critics. I'm surprised it's that low.
So the best revenge against the health care system is to stay out of it. I once heard a person say that if you want to be successful then stop doing the things unsuccessful people do. Point: If you want to reduce your chances of needing medical care then stop doing the things that unhealthy people do. That is the best revenge.
Sunday, August 2, 2009
Saturday, August 1, 2009
Squeezing more out of your IRA or 401 (k)
So last year you were arriving at retirement feeling pretty good about how things were shaping up. You were even searching the web for taking a European vacation to start things off.
Scratch that idea. Today you are still planning on retirement, but Europe will have to wait a few years, if you can go at all. Your portfolio is still down over 30% from last year and you and the spouse are cutting corners as much as possible to avoid drawing down from your retirement next egg.
Because of the bruising you took in the market, you have decided to put at least half your remaining 401 (k) retirement assets into an annuity. This way, at least there will be a lifetime income to cover some of the basic expenses. This could turn out to be a smart move. But there is one more wrinkle.
Annuities come in several forms. There is a straight life annuity that pays a lifetime income for just you for your life. When you die, that’s it. Most would agree it is not a good idea to risk your next egg like that. So you conclude that it would be best to take a reduced annuity in exchange for a guarantee of your annuity for both you and your spouse. This guarantee can take many forms. The most popular is a 50% joint and survivor annuity that pays one-half of your annuity to a surviving spouse for his or her lifetime. The net result is a “haircut” of your monthly annuity by about 15%.
But here is where you may be better off: Instead of taking the reduced annuity, consider purchasing a life insurance policy on your life payable to your spouse. Then, you elect to receive the highest payment form (straight life) while protecting your spouse with a less costly insurance policy.
There are at least two potential advantages to this approach:
1. The amount of reduction in the payment to guarantee the annuity for both you and your spouse will usually be more than the cost of a term insurance policy based on your life expectancy. At 65, for example, a 15 year level term policy would be about right.
2. If your spouse should predecease you, there is no need to continue the insurance at all unless it would be continued in a reduced form for last expenses or redirected to another beneficiary like family or the Rotary Foundation
The potential downside is if you are not in good health and the insurance policy must be rated substantially higher, wiping out the financial advantage. Other factors to consider are the age differences between you and your spouse, which can be a positive or negative, depending on the spread.
Planning your financial security is serious business. This enhanced annuity option may be a good thing to consider in your planning.
So last year you were arriving at retirement feeling pretty good about how things were shaping up. You were even searching the web for taking a European vacation to start things off.
Scratch that idea. Today you are still planning on retirement, but Europe will have to wait a few years, if you can go at all. Your portfolio is still down over 30% from last year and you and the spouse are cutting corners as much as possible to avoid drawing down from your retirement next egg.
Because of the bruising you took in the market, you have decided to put at least half your remaining 401 (k) retirement assets into an annuity. This way, at least there will be a lifetime income to cover some of the basic expenses. This could turn out to be a smart move. But there is one more wrinkle.
Annuities come in several forms. There is a straight life annuity that pays a lifetime income for just you for your life. When you die, that’s it. Most would agree it is not a good idea to risk your next egg like that. So you conclude that it would be best to take a reduced annuity in exchange for a guarantee of your annuity for both you and your spouse. This guarantee can take many forms. The most popular is a 50% joint and survivor annuity that pays one-half of your annuity to a surviving spouse for his or her lifetime. The net result is a “haircut” of your monthly annuity by about 15%.
But here is where you may be better off: Instead of taking the reduced annuity, consider purchasing a life insurance policy on your life payable to your spouse. Then, you elect to receive the highest payment form (straight life) while protecting your spouse with a less costly insurance policy.
There are at least two potential advantages to this approach:
1. The amount of reduction in the payment to guarantee the annuity for both you and your spouse will usually be more than the cost of a term insurance policy based on your life expectancy. At 65, for example, a 15 year level term policy would be about right.
2. If your spouse should predecease you, there is no need to continue the insurance at all unless it would be continued in a reduced form for last expenses or redirected to another beneficiary like family or the Rotary Foundation
The potential downside is if you are not in good health and the insurance policy must be rated substantially higher, wiping out the financial advantage. Other factors to consider are the age differences between you and your spouse, which can be a positive or negative, depending on the spread.
Planning your financial security is serious business. This enhanced annuity option may be a good thing to consider in your planning.
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