5 Life Insurance Myths to Free Yourself of Now

Life insurance may not sound all that exciting, but when you do stop to think about life insurance and you, it’s not uncommon to assume that since the concept of life insurance is simple enough, so too are the products. It’s also fairly easy to rationalize the things you really don’t understand about life insurance, and before you know it, you’re harboring potentially damaging life insurance myths.

In addition to your own edification, and frankly, for the safety of your loved ones’ financial futures, it’s important to understand exactly what life insurance is, what it does, and how — not to mention if — you should make a move either to purchase or upgrade your coverage. Read the myths below to see if you need to adjust your thinking when it comes to life insurance.

The coverage you get at work is enough.

While this may, in fact, be the case if you’re single, in good financial standing, have no dependents and aren’t worried about estate taxes, for most people, the term policy offered through their employer just won’t be enough to sustain their families’ needs. After all, your insurance payout must not only support your family financially, it must also pay off any debts, such as the mortgage or even the MasterCard, as well as settle up with Uncle Sam.

Only the working spouse needs life insurance.

This is a curious — and wildly inaccurate — belief, yet it somehow persists. Life insurance on the breadwinner is intended to fill in the gap left by the loss of a paycheck, but that discounts all the valuable work a stay-at-home partner contributes to the relationship. If you’re used to this arrangement, how would you pay for child care or the cleaning, or even manage the household without a little financial help in the event of such a loss? It can be easy to overlook the many contributions of the non-breadwinner, but to do so would be remiss.

The value of your life insurance coverage should equal two years’ salary.

Everyone’s financial circumstances are different, and so are their life insurance needs. You might require more coverage than two years’ salary if you incur medical bills or other debts, have a young family, a mortgage to pay, or any number of life obligations to meet. If your lifestyle is more modest and you’re not financially responsible for anyone, on the other hand, then two years’ salary may even be excessive.

Single people without dependents don’t need to own life insurance.

While it’s true you might not have a family to provide for, odds are you’ll still have to cover the cost of your funeral, pay off a few debts, and maybe leave a little bit behind for your parents. And as one MSNBC article on the topic suggests, using a life insurance policy to fund a gift to a favorite charity can be a wonderful legacy for a single person to leave behind.

You don’t need professional services to buy life insurance.

While this is, in fact true, as any consumer can go online and shop for, and even buy, term and permanent life policies, electing to go it on your own can be detrimental to your financial future. A professional life insurance agent advisor can help you identify the needs you have, what you must protect and how best to protect it. With the knowledge of myriad different policies, if you’re honest about your financial and life circumstances, a professional can not only help you determine how much coverage you need, but also help decide whether a term or permanent policy is right for you. They can even customize a plan to meet your unique needs.

The most powerful benefit of life insurance is transferring wealth to your heirs, so if you have substantial tax deferred wealth like annuities and qualified plan dollars then life insurance can be a wonderful gift to transfer your wealth to your heirs in a tax efficient manner.

To learn how Warren can help you make sound financial decisions based on facts and not emotions, misconceptions, or opinions, please call 877-476-5051 or email Warren at warren@arrenelkin.com today.

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5 Things To Know About Your Parents Financial Future

Parents spend their entire lives planning for their children’s future but, as goes the circle of life, there comes a point when that responsibility starts to shift.  Many children take on the role of caretaker for their parents.  They do all the things that their parents once did for them: drive them to the store, make them their meals, and so on.  Well remember when you were a kid and your parents gave you an allowance, or only let you spend a certain amount of money at the store.  They were, in a small way, helping protect your finances.  Well, one of the most important aspects of becoming involved in your parents’ lives is understanding and managing their finances.  Of course your parents might not take well to you handling their allowances or expenditures, but it’s important that you get involved early and often in your parents financial planning.

More and more children are finding themselves either completely or partially financially responsible for their parents in their retirement.  In some cases, that situation is unavoidable, but there is a way to make sure your parents have financial stability as they age and make that transition from supported to supporter easier on you and them.  The main thing is to discuss the issue early.  It’s easier to plan for your parent’s financial future if you’re not planning out your own retirement at the same time.  Talk about it early, and talk about it often.

Some parents try to avoid discussing their personal finances with their kids, so it could be helpful to start the discussion by asking your parents for advice on your finances.  That gives you a window into the decisions they have made, and allows you to give them bits of advice you think they would find useful, without hurting any egos.  Once that window is open, there are a five different pieces of information you need to discuss about your parent’s financial situation and plans.

1.       Important documents-  All parents have their super clever secret hiding spots where they keep all their important files and documents.  If you are lucky enough that your parents remember where these super clever secret hiding spots are, than you are a step ahead of most of us. It’s important that you ask them where many of their important documents are located.  These are things like their will and living-will, life insurance policies, information on their financial accounts, financial power of attorney and more.   Knowing where these are kept is critical because a) you know your parents actually have the documents and b) you know where they are in the case of an emergency.

2.       Long-term care insurance-  It can seem like an uncomfortable subject, but the earlier you talk to your parents about their long term care, the less expensive it will be for both them and you.  Like any insurance, long-term care insurance is cheaper if you buy it when you’re younger and healthier.  Even with parents as young as 50-years-old, planning for the financial strain that long-term care can present is a conversation worth having.

3.       Social Security Planning-  Social Security is blanket that covers a lot of people in their retirement plans, but it’s important for your parents to determine when they should be tucked in.  The point at which a person should begin to collect Social Security benefits depends on a few details, details which you should ask your parents about.  It’s important that you ask how much they have saved in various contribution plans such as a 401(k) or IRA.  Also, find out how much they can expect to receive from a possible pension.  The funds available to them in these accounts can drastically affect the point at which they should apply for Social Security benefits.

4.       Investment Legitimacy-  We have all have that sweet old aunt who proudly told everyone how she received that letter in the mail informing her that she won the jackpot in some sweepstakes and will receive the prize money just as soon as she sends in her bank account information.  This is obviously a drastic example, but it’s important that you ask your parents about their investments that they have made and ensure that they aren’t involved in anything risky.  Older individuals are often targeted by scammers, so it’s an important conversation to have.  Even investments that are legitimate may involve too much risk to be worthwhile for them.

5.       Plan for their plans-  Trends have shifted to the point where the majority of young people expect to care for their elderly parents in the future.  In order to plan for this care it’s important to know their plans.  Ask them when they expect to retire, where they plan to live, and how much money they have saved.  These answers will allow you to better prepare your finances in way to give them the support they may need.

When it comes to your parents future there is a lot to discuss, and in order to get to all if it, you need to start the conversation early and revisit it often.  It may not be easy or fun, but your parents probably had a struggle or two with you back in the day trying to get you to comply with their conversations.  It’s the circle of life, and embracing your new role to clear up the essentials now can save your parents, and you, a lot of money later.

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