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What is the “Life with Period Certain” Option?

In a “life with period certain” annuity payout option, the insurance company will pay the annuitant a set income for as long as the annuitant lives. If the annuitant dies before the “period certain” expires, the company will continue to pay the income to the beneficiaries until the period certain expires. If the period certain is 20 years, it would be called a “Life with 20 Years Certain” payout option. Continue reading...

What is a Lifetime Payout Annuity?

Lifetime income annuities provide a guaranteed payout over the life of the annuitant. “Payout” is not a term used officially, but it denotes that the principal amount invested in the annuity is designed to be paid out and depleted over the life expectancy of the annuitant. The payout rate is competitive with other sources of retirement income. Life insurance companies created annuity products as a way to guarantee a client never runs completely out of money. Statistically, according to some surveys, elderly people are more afraid of outliving their money than of nearly anything else. Today medicine can keep people alive longer and longer but not functioning at full capacity, and certainly not able to generate more income in most cases. Continue reading...

What if My Life Insurance Doesn’t Pay the Death Benefit to My Survivors?

Generally a life insurance company will have to pay a death benefit once the contestability period of two years has passed. Policies may have certain exclusions, such as suicide or death while committing a felony, but these will appear in the contract language. Even if it turns out that an insured person lied about smoking or their age, the insurance company will have to pay a death benefit that will simply be reduced to account for the premiums paid and what should have been the correct risk rating for the person. Most life insurance will pay out a death claim if death occurs for any reason after the contestability period has passed. Continue reading...

What are Periodic Distributions from a 401(k)?

Periodic distribution is a planned intermittent payment of cash from a 401(k). If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is. The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer. Continue reading...

What Happens If I Withdraw Money From My Pension Plan After I Retire?

Usually such withdrawals will be in the form of income payments, but there may be other options. If the plan administrator allows it, you can make non-recurring (one-time) withdrawals from a pension fund. This is usually not allowed, however. The regular qualified plan distribution rules will apply as far as the IRS is concerned, and they may charge a 10% penalty if the withdrawals are taken before age 59½. After you retire, you’ll typically have two options: a fixed monthly payment for the rest of your life (also known as a Life Annuity), or a lump-sum payment. Continue reading...

What are the Different Types of Annuities?

There are fixed annuities, fixed/indexed annuities, variable annuities, hybrid annuities, income annuities, period income annuities, and possibly more. Insurance companies, and the insurance subsidiary wings of investment companies, have had many years to develop strategies and marketing ploys that help clients accumulate, protect, and distribute assets within various kinds of annuities. Variable annuities allow the annuitant to participate in the market through mutual funds — or, more accurately, “separate accounts” that mimic mutual funds. Continue reading...

What is a Life Estate?

A life estate is often created by an older parent when they sign over the house to their adult children but stipulate that the parent can remain in the house until they pass away. In some estate planning cases, this is the easiest and most advantageous way to transfer property. The resident is called the Life Tenant and the beneficiary is the Remainder Owner. One of the most daunting threats to elderly people is the risk an extended care need. Continue reading...

What is Life Insurance?

Life insurance is one of the oldest financial products in existence, with roots going back beyond the ancient Roman Empire. Today, there are many different kinds of life insurance available, most representing variations on the main categories of term life, whole life, and universal life. It can be written in a private contract, but most often it is offered as packaged products to the public. Life Insurance’s main purpose is to ensure that dependents of a deceased provider or caretaker will have some financial resources to fall back on, but it can also be used as a means to create a guaranteed legacy or a tax-advantaged pool of money. Continue reading...

If I Want to Establish a SIMPLE IRA, Do I Have to Establish One for All Employees of My Business?

In general, the answer is “Yes,” but there are a few exceptions. If you decide to establish a SIMPLE IRA, every eligible employee must be offered a SIMPLE IRA account. An employee is eligible if they have earned $5,000 in compensation during any two previous years, and are expected to earn $5,000 the current year. If an employee is unwilling to participate, the employer must open up a SIMPLE IRA on behalf of the employee. Continue reading...

What is a Life Annuity?

Annuities are primarily designed to pay a substantially similar sum at regular intervals until the annuitant dies. Life insurance companies write these contracts since they are designed as a kind of longevity insurance. A lifetime income annuity, sometimes called a life annuity, is a stream of guaranteed payments for the duration of the annuitant’s life, based on the sum used to purchase the lifetime income and the age of the annuitant at the time of purchase. Life annuities can also be joint-life, meaning the contract will pay an amount to either of two people as long as one is alive. Continue reading...

What is Whole Life Insurance?

Whole Life Insurance provides lifelong death benefit coverage as well as a tax-deferred savings account. A large portion of your premium goes into the general account of the insurance company, and this increases the cash value available to the policy holder at a growth rate dependent on the investment and sales experience of the company. Every dollar and amount of interest which is credited to the policy cash value is vested with the policy-owner and will not decrease. Continue reading...

What is Accelerated Life Insurance?

Life insurance contracts sometimes contain provisions by which the death benefits can be paid out to an insured person while they are still alive. This is called “accelerating” the benefits. Certain terms must be met for the benefits to be accelerated, and different policies have different contract language and exclusions. Sometimes these provisions are attached to a regular contract as a Rider, which might require an additional premium, or might be included by default. Continue reading...

What is Retained Earnings?

A company may reinvest earnings instead of paying out dividends. These earnings do not necessarily sit in a retained earnings account, but are used to improve the business and make it more profitable. This could even include paying off debt. Retained earnings is found in the Shareholder’s Equity portion of a company’s balance sheet. Despite the fact that earnings have not been dispensed to them in the form of dividends or share buybacks, shareholders will see the value of their stock appreciate when earnings are retained and used to grow the business. Continue reading...

What are the Basics of Life Insurance?

Life insurance guarantees that a death benefit is paid if an insured person dies while the policy is in effect. Various kinds of life insurance exist, and people buy various amounts of coverage for different purposes, most often to provide for the insured’s dependents if the insured dies prematurely. Life insurance represents a contractual obligation by a company to pay a death benefit to an insured person’s designated beneficiaries if the person dies while the policy is in force. Continue reading...

How Do I Invest Money in My Pension?

Employees are not able to control investments in a Pension Fund, but you can control a few variables. You cannot direct investments in your pension. Since a pension is a type of Defined Benefit Plan provided by your employer, the company worries about the investments, and you will receive a fixed monthly payment that is calculated based on your age, salary, and number of years worked for the company. Continue reading...

What are Accelerated Benefits?

Some life insurance policies allow for death benefits to be accelerated as living benefits under certain conditions. Accelerated benefits are often included in life insurance contracts, but it is possible that they can also be added as Riders for an additional fee. Riders are addendum to a contract that contain additional contractual provisions. What an accelerated benefits rider stipulates is that if certain conditions are met, a portion of the death benefits on a life insurance policy can be paid to the insured person during their lifetime. These conditions may be that the insured person has been diagnosed with less than 12 months to live, or that they have another serious health condition which is covered. Sometimes this includes the payment of monthly benefits if a person requires long-term care. Continue reading...

What is Variable Universal Life Insurance?

Variable Life Insurance is a permanent universal life policy that has a death benefit as long as the cash value and premiums are sufficient to pay the increasing cost per-thousand, while the premiums and cash value have the option of being invested in separate accounts which behave much like mutual funds. Often the policy-owner has a choice of many investment options, and can construct an entire portfolio within the policy. Continue reading...

What is Mortgage Life Insurance?

Mortgage life insurance is any life insurance policy which covers the life of the borrower in a mortgage loan and assigns the mortgage lender as a creditor-beneficiary entitled to recoup their losses from the life insurance policy. The bank or lender will be designated as the assignee for the collateral of the life policy. Historically speaking, mortgage life insurance was a term policy with a decreasing death benefit, also called a face amount, that equaled the remaining amount due on the mortgage loan. As the home was paid off, the amount of life insurance required would decrease, and, in most cases, the premium with it. Continue reading...

What Payout Options Do I Have?

Payout options in the realm of annuities tend to be guaranteed by the insurance company providing the annuity, and may come in many forms depending on the investor’s preference. Annuities can pay income to the annuitant in a few ways. One of the ways is to turn the entire balance of the annuity into a pension-like income stream for life, or jointly on two lives. The payout tends to be higher than the safe withdrawal rate than investors can use in an investment account, and it provide guarantees and surety where it wouldn’t exist otherwise. You can also elect to have these payments start off slightly lower, and then to increase at a guaranteed rate, to keep up with the cost of living. Continue reading...

Can I Take a Periodic Distribution From My Cash-Balance Plan?

Periodic distributions are one of the main ways that former employees enjoy the benefits of a Cash Balance plan. Yes, you can take periodic distributions from your cash-balance plan. As opposed to the other option (lump-sum distribution), opting for the periodic distribution can help you sleep better at night, knowing that you have a fixed stream of income for the rest of your life. This Life Annuity option is mandated by law to be an option to participants of a cash balance plan. Continue reading...