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Stretch IRAs

February 27, 2019


The term “stretch IRA” has become a popular way to refer to an IRA (either traditional or Roth) with provisions that make it easier to “stretch out” the time that funds can stay in your IRA after your death, even over several generations. It’s not a special IRA, and there’s nothing dramatic about this “stretch” language. Any IRA can include stretch provisions, but not all do.

Why is “stretching” important?

Earnings in an IRA grow tax deferred. Over time, this tax-deferred growth can help you accumulate significant retirement funds. If you’re able to support yourself in retirement without the need to tap into your IRA, you may want to continue this tax-deferred growth for as long as possible. In fact, you may want your heirs to benefit–to the greatest extent possible–from this tax-deferred growth as well. But funds can’t stay in your IRA forever. Required minimum distribution (RMD) rules will apply after your death (for traditional IRAs, minimum distributions are also required during your lifetime after you reach age 70½). The goal of a stretch IRA is to make sure your beneficiary can take distributions over the maximum period the RMD rules allow. You’ll want to check your IRA custodial or trust agreement carefully to make sure that it contains the following important stretch provisions.

Key stretch provision #1

The RMD rules let your beneficiary take distributions from an inherited IRA over a fixed period of time, based on your beneficiary’s life expectancy. For example, if your beneficiary is age 20 in the year following your death, he or she can take payments over 63 additional years (special rules apply to spousal beneficiaries).

As you can see, this rule can keep your IRA funds growing tax deferred for a very long time. But even though the RMD rules allow your beneficiary to “stretch out” payments over his or her life expectancy, your particular IRA may not. For example, your IRA might require your beneficiary to take a lump-sum payment, or receive payments within five years after your death. Make sure your IRA contract lets your beneficiary take payments over his or her life expectancy.

Key stretch provision #2

But what happens if your beneficiary elects to take distributions over his or her life expectancy but dies a few years later, with funds still in the inherited IRA? This is where the IRA language becomes crucial. If, as is commonly the case, the IRA language doesn’t address what happens when your beneficiary dies, then the IRA balance is typically paid to your beneficiary’s estate. However, IRA providers are increasingly allowing an original beneficiary to name a successor beneficiary. In this case, if your original beneficiary dies, the successor beneficiary “steps into the shoes” of your original beneficiary and can continue to take RMDs over the original beneficiary’s remaining distribution schedule.

What if your IRA doesn’t stretch?

You can always transfer your funds to an IRA that contains the desired stretch language. In addition, upon your death, your beneficiary can transfer the IRA funds (in your name) directly to another IRA that has the appropriate language.

And if your spouse is your beneficiary, he or she can roll over the IRA assets to his or her own IRA, or elect to treat your IRA as his or her own (if your spouse is your sole beneficiary). Because your spouse becomes the owner of your IRA funds, rather than a beneficiary, your spouse won’t have to start taking distributions until he or she reaches age 70½. And your spouse can name a new beneficiary to continue receiving payments after your spouse dies.

Stretching your IRA–a case study

Jack dies at age 78 with an IRA worth $500,000. He had named his surviving spouse, 69-year-old Mary, as his sole beneficiary. Mary elects to roll over the funds to her own IRA. Mary names Susan, her 44-year-old daughter, as her beneficiary. At age 70½, Mary begins taking required minimum distributions over a period determined from the Uniform Lifetime Table. (Mary is allowed to recalculate her life expectancy each year.) At age 79, Mary dies and Susan begins taking required distributions over Susan’s life expectancy–29.6 years (fixed in the year following Mary’s death). Susan names Jon, her 30-year-old son, as her successor beneficiary. Susan dies at age 70 after receiving payments for 16 years, and Jon continues receiving required distributions over Susan’s remaining life expectancy (13.6 years).

Year 1 Mary becomes owner of Jack’s IRA
Year 3 Mary begins taking distributions at age 70½ over her life expectancy
Year 12 Susan begins taking distributions the year after Mary’s death over Susan’s life expectancy
Year 28 Jon begins taking distributions over Susan’s remaining life expectancy
Year 40 All of Jack’s IRA funds have been distributed

Under this scenario, total payments of over $2 million are made over 40 years, to three generations.

Note: Payments from a traditional IRA will generally be subject to income tax at the beneficiary’s tax rate. Qualified distributions from a Roth IRA are tax free.

Assumptions:

  • This is a hypothetical example and is not intended to reflect the actual performance of any specific investment portfolio, nor is it an estimate or guarantee of future value.
  • This illustration assumes a fixed 6% annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
  • All earnings are reinvested, and all distributions are taken at year-end.
  • The projected figures assume that Mary takes the smallest distribution she’s allowed to take under IRS rules at the latest possible time without penalty.
  • The projected figures assume that tax law and IRS rules will remain constant throughout the life of the IRA.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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The Roth 403(b)

February 26, 2019

Some employers offer 403(b) plan participants the opportunity to make Roth 403(b) contributions. If you’re lucky enough to work for an employer that offers this option, Roth contributions could play an important role in maximizing your retirement income.

What is a Roth 403(b)?

A Roth 403(b) is simply a traditional 403(b) plan that accepts Roth 403(b) contributions. Roth 403(b) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there’s no up-front tax benefit, but if certain conditions are met, your Roth 403(b) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (401(k) and 457(b) plans can also allow Roth contributions.)

Who can contribute?

Once you’re eligible to participate in a 403(b) plan, you can make Roth contributions regardless of your salary level. (This is in contrast to a Roth IRA where your contributions may be reduced, or you may not be eligible to contribute at all, if your income exceeds certain amounts.)

How much can I contribute?

There’s an overall cap on your combined pretax and Roth 403(b) contributions. In 2016, you can contribute up to $18,000 of your pay ($24,000 if you’re age 50 or older)1 to a 403(b) plan. You can split your contributions any way you wish. For example, you can make $10,000 of Roth contributions and $8,000 of pretax 403(b) contributions. It’s up to you.

But keep in mind that if you also contribute to a 401(k), SIMPLE, SAR-SEP, or another 403(b) plan, your total contributions to all of these plans—both pretax and Roth–can’t exceed $18,000 (plus catch-up contributions) in 2016. It’s up to you to make sure you don’t exceed these limits if you contribute to plans of more than one employer.

If you also participate in a Section 457(b) plan, any pretax contributions you make to the 457(b) plan are in addition to your 403(b) contributions. This means you can contribute up to $18,000 of pay, Roth or pretax, to the 403(b) plan and an additional $18,000 pretax to the 457(b) plan in 2016 (plus catch-up contributions)–a significant savings opportunity.

Can I also contribute to a Roth IRA?

Yes. Your participation in a Roth 403(b) plan has no impact on your ability to contribute to a Roth IRA. You can contribute to both if you wish (assuming you meet the Roth IRA income limits). You can contribute up to $5,500 to a Roth IRA in 2016, $6,500 if you’re age 50 or older (or, if less, 100% of your taxable compensation).2

Should I make pretax or Roth 403(b) contributions?

When you make pretax 403(b) contributions, you don’t pay current income taxes on those dollars. But your contributions and investment earnings are fully taxable when you receive a distribution from the plan. In contrast, Roth 403(b) contributions are subject to income taxes up front, but qualified distributions of your contributions and earnings are entirely free from federal income tax.

The better option depends on your personal situation. If you think you’ll be in a similar or higher tax bracket when you retire, Roth 403(b) contributions may be more appealing, since you’ll effectively lock in today’s lower tax rates. However, if you think you’ll be in a lower tax bracket when you retire, pretax 403(b) contributions may be more appropriate. Your investment horizon and projected investment results are also important factors. A financial professional can help you determine which course is best for you.

Are distributions really tax free?

Because your Roth 403(b) contributions are made on an after-tax basis, they’re always free from federal income tax when distributed from the plan. But the investment earnings on your Roth contributions are tax free only if you meet the requirements for a “qualified distribution.”

In general, a distribution is qualified only if it satisfies both of the following requirements:

• It’s made after the end of a five-year waiting period

• The payment is made after you turn 59½, become disabled, or die

The five-year waiting period for qualified distributions starts with the year you make your first Roth contribution to the 403(b) plan. For example, if you make your first Roth contribution to your employer’s 403(b) plan in December 2016, then the first year of your five-year waiting period is 2016, and your waiting period ends on December 31, 2020.

But if you change employers and roll over your Roth 403(b) account from your prior employer’s plan to your new employer’s plan (assuming the new plan accepts Roth rollovers), the five-year waiting period starts instead with the year you made your first contribution to the earlier plan.

If your distribution isn’t qualified (for example, you receive a payout before the five-year waiting period has elapsed or because you terminate employment), the portion of your distribution that represents investment earnings on your Roth contributions will be taxable and subject to a 10% early distribution penalty unless you’re 59½ or another exception applies.

You can generally avoid taxation by rolling your distribution over to a Roth IRA or to another employer’s Roth 401(k), 403(b), or 457(b) plan, if that plan accepts Roth rollovers. (State income tax treatment of Roth 403(b) contributions may differ from the federal rules.)3

What about employer contributions?

Your employer can match your Roth contributions, your pretax contributions, or both. But your employer contributions are always made on a pretax basis, even if they match your Roth contributions. That is, your employer’s contributions, and investment earnings on those contributions, are not taxed until you receive a distribution from the plan.

What else do I need to know?

Like pretax 403(b) contributions, your Roth 403(b) contributions and investment earnings can be paid from the plan only after you terminate employment, incur a financial hardship, attain age 59½, become disabled, or die.

You must begin taking distributions from a Roth 403(b) plan after you reach age 70½ (or after you retire if later). But this isn’t as significant as it might seem, since you can generally roll over your Roth 403(b) dollars (other than RMDs themselves) to a Roth IRA if you don’t need or want the lifetime distributions.

Employers aren’t required to make Roth contributions available in their 403(b) plans. So be sure to ask your employer if it is considering adding this exciting feature to your 403(b) plan.

  Roth 403(b) Roth IRA
Maximum contribution (2016) Lesser of $18,000 or 100% of compensation Lesser of $5,500 or 100% of compensation
Age 50 catch-up (2016)* $6,000 $1,000
Who can contribute? Any eligible employee Only if under income limit
Age 70½ required distributions? Yes No
Potential matching contributions? Yes No
Potential loans? Yes No
Tax-free qualified distributions? Yes, 5-year waiting period plus either 59½, disability, or death Same, plus first-time homebuyer expenses (up to $10,000 lifetime)
Investment choices Limited to plan options Virtually unlimited
Bankruptcy protection Unlimited At least $1,245,475 (total of all IRAs)

*Special Section 403(b) catch-up rules may also apply.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Women and Money: Taking Control of Your Finances.

February 25, 2019

person in red coat sitting on gang chair

As a woman, you have financial needs that are unique to your situation in life. Perhaps you would like to buy your first home. Maybe you need to start saving for your child’s college education. Or you might be concerned about planning for retirement. Whatever your circumstances may be, it’s important to have a clear understanding of your overall financial position.

That means constructing and implementing a plan. With a financial plan in place, you’ll be better able to focus on your financial goals and understand what it will take to reach them. The three main steps in creating and implementing an effective financial plan involve:

• Developing a clear picture of your current financial situation

• Setting and prioritizing financial goals and time frames

• Implementing appropriate saving and investment Strategies

Developing a clear picture of your current financial situation

The first step to creating and implementing a financial plan is to develop a clear picture of your current financial situation. If you don’t already have one, consider establishing a budget or a spending plan. Creating a budget requires you to:

• Identify your current monthly income and expenses

• Evaluate your spending habits

• Monitor your overall spending

To develop a budget, you’ll need to identify your current monthly income and expenses. Start out by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support.

Next, add up all of your expenses. If it makes it easier, you can divide your expenses into two categories: fixed and discretionary. Fixed expenses include things that are necessities, such as housing, food, transportation, and clothing. Discretionary expenses include things like entertainment, vacations, and hobbies. You’ll want to be sure to include out-of-pattern expenses (e.g., holiday gifts, car maintenance) in your budget as well.

To help you stay on track with your budget:

• Get in the habit of saving–try to make budgeting a part of your daily routine

• Build occasional rewards into your budget

• Examine your budget regularly and adjust/make changes as needed

Setting and prioritizing financial goals

The second step to creating and implementing a financial plan is to set and prioritize financial goals. Start out by making a list of things that you would like to achieve. It may help to separate the list into two parts: short-term financial goals and long-term financial goals.

Short-term goals may include making sure that your cash reserve is adequately funded or paying off outstanding credit card debt. As for long-term goals, you can ask yourself: Would you like to purchase a new home? Do you want to retire early? Would you like to start saving for your child’s college education?

Once you have established your financial goals, you’ll want to prioritize them. Setting priorities is important, since it may not be possible for you to pursue all of your goals at once. You will have to decide which of your financial goals are most important to you (e.g., sending your child to college) and which goals you may have to place on the back burner (e.g., the beachfront vacation home you’ve always wanted).

Implementing saving and investment strategies

After you have determined your financial goals, you’ll want to know how much it will take to fund each goal. And if you’ve already started saving towards a goal, you’ll want to know how much further you’ll need to go.

Next, you can focus on implementing appropriate investment strategies. To help determine which investments are suitable for your financial goals, you should ask yourself the following questions:

• What is my time horizon?

• What is my emotional and financial tolerance for investment risk?

• What are my liquidity needs?

Once you’ve answered these questions, you’ll be able to tailor your investments to help you target specific financial goals, such as retirement, education, a large purchase (e.g., home or car), starting a business, or increasing your net worth.

Managing your debt and credit

Whether it is debt from student loans, a mortgage, or credit cards, it is important to avoid the financial pitfalls that can sometimes go hand in hand with borrowing. Any sound financial plan should effectively manage both debt and credit. The following are some tips to help you manage your debt/credit:

• Make sure that you know exactly how much you owe by keeping track of balances and interest rates

• Develop a short-term plan to manage your payments and avoid late fees

• Optimize your repayments by paying off high-interest debt first or take advantage of debt consolidation/refinancing

Understanding what’s on your credit report

An important part of managing debt and credit is to understand the information contained in your credit report. Not only does a credit report contain information about past and present credit transactions, but it is also used by potential lenders to evaluate your creditworthiness.

What information are lenders typically looking for in a credit report? For the most part, a lender will assume that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. As a result, a history of late payments or bad debts will hurt your credit. Based on your track record, if your credit report indicates that you are a poor risk, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate. In addition, too many inquiries on your credit report in a short time period can make lenders suspicious.

Today, good credit is even sometimes viewed by potential employers as a prerequisite for employment–something to think about if you’re in the market for a new job or plan on changing jobs in the near future.

Because a credit report affects so many different aspects of one’s financial situation, it’s important to establish and maintain a good credit history in your own name. You should review your credit report regularly and be sure to correct any errors on it. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. You can go to www.annualcreditreport.com for more information.

Working with a financial professional

Although you can certainly do it alone, you may find it helpful to work with a financial professional to assist you in creating and implementing a financial plan.

A financial professional can help you accomplish the following:

• Determine the state of your current affairs by reviewing income, assets, and liabilities

• Develop a plan and help you identify your financial goals

• Make recommendations about specific products/services

• Monitor your plan

• Adjust your plan as needed

Tip: Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make financial recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them. There is no assurance that working with a financial professional will improve investment results.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Common Factors Affecting Retirement Income

February 24, 2019

monochrome photo of high rise buildings

When it comes to planning for your retirement income, it’s easy to overlook some of the common factors that can affect how much you’ll have available to spend. If you don’t consider how your retirement income can be impacted by investment risk, inflation risk, catastrophic illness or long-term care, and taxes, you may not be able to enjoy the retirement you envision.

Investment risk

Different types of investments carry with them different risks. Sound retirement income planning involves understanding these risks and how they can influence your available income in retirement.

Investment or market risk is the risk that fluctuations in the securities market may result in the reduction and/or depletion of the value of your retirement savings. If you need to withdraw from your investments to supplement your retirement income, two important factors in determining how long your investments will last are the amount of the withdrawals you take and the growth and/or earnings your investments experience. You might base the anticipated rate of return of your investments on the presumption that market fluctuations will average out over time, and estimate how long your savings will last based on an anticipated, average rate of return.

Unfortunately, the market doesn’t always generate positive returns. Sometimes there are periods lasting for a few years or longer when the market provides negative returns. During these periods, constant withdrawals from your savings combined with prolonged negative market returns can result in the depletion of your savings far sooner than planned.

Reinvestment risk is the risk that proceeds available for reinvestment must be reinvested at an interest rate that’s lower than the rate of the instrument that generated the proceeds. This could mean that you have to reinvest at a lower rate of return, or take on additional risk to achieve the same level of return. This type of risk is often associated with fixed interest savings instruments such as bonds or bank certificates of deposit. When the instrument matures, comparable instruments may not be paying the same return or a better return as the matured investment.

Interest rate risk occurs when interest rates rise and the prices of some existing investments drop. For example, during periods of rising interest rates, newer bond issues will likely yield higher coupon rates than older bonds issued during periods of lower interest rates, thus decreasing the market value of the older bonds. You also might see the market value of some stocks and mutual funds drop due to interest rate hikes because some investors will shift their money from these stocks and mutual funds to lower-risk fixed investments paying higher interest rates compared to prior years.

Inflation risk

Inflation is the risk that the purchasing power of a dollar will decline over time, due to the rising cost of goods and services. If inflation runs at its historical long term average of about 3%, the purchasing power of a given sum of money will be cut in half in 23 years. If it jumps to 4%, the purchasing power is cut in half in 18 years.

A simple example illustrates the impact of inflation on retirement income. Assuming a consistent annual inflation rate of 3%, and excluding taxes and investment returns in general, if $50,000 satisfies your retirement income needs this year, you’ll need $51,500 of income next year to meet the same income needs. In 10 years, you’ll need about $67,195 to equal the purchasing power of $50,000 this year. Therefore, to outpace inflation, you should try to have some strategy in place that allows your income stream to grow throughout retirement.

(The following hypothetical example is for illustrative purposes only and assumes a 3% annual rate of inflation without considering fees, expenses, and taxes. It does not reflect the performance of any particular investment.)

Equivalent Purchasing Power of $50,000 at 3% Inflation

Long-term care expenses

Long-term care may be needed when physical or mental disabilities impair your capacity to perform everyday basic tasks. As life expectancies increase, so does the potential need for long-term care.

Paying for long-term care can have a significant impact on retirement income and savings, especially for the healthy spouse. While not everyone needs long-term care during their lives, ignoring the possibility of such care and failing to plan for it can leave you or your spouse with little or no income or savings if such care is needed. Even if you decide to buy long-term care insurance, don’t forget to factor the premium cost into your retirement income needs.

A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the long-term care policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

The costs of catastrophic care

As the number of employers providing retirement health-care benefits dwindles and the cost of medical care continues to spiral upward, planning for catastrophic health-care costs in retirement is becoming more important. If you recently retired from a job that provided health insurance, you may not fully appreciate how much health care really costs.

Despite the availability of Medicare coverage, you’ll likely have to pay for additional health-related expenses out-of-pocket. You may have to pay the rising premium costs of Medicare optional Part B coverage (which helps pay for outpatient services) and/or Part D prescription drug coverage. You may also want to buy supplemental Medigap insurance, which is used to pay Medicare deductibles and co-payments and to provide protection against catastrophic expenses that either exceed Medicare benefits or are not covered by Medicare at all. Otherwise, you may need to cover Medicare deductibles, co-payments, and other costs out-of-pocket.

Taxes

The effect of taxes on your retirement savings and income is an often overlooked but significant aspect of retirement income planning. Taxes can eat into your income, significantly reducing the amount you have available to spend in retirement.

It’s important to understand how your investments are taxed. Some income, like interest, is taxed at ordinary income tax rates. Other income, like long-term capital gains and qualifying dividends, currently benefit from special–generally lower–maximum tax rates. Some specific investments, like certain municipal bonds,* generate income that is exempt from federal income tax altogether. You should understand how the income generated by your investments is taxed, so that you can factor the tax into your overall projection.

Taxes can impact your available retirement income, especially if a significant portion of your savings and/or income comes from tax-qualified accounts such as pensions, 401(k)s, and traditional IRAs, since most, if not all, of the income from these accounts is subject to income taxes. Understanding the tax consequences of these investments is important when making retirement income projections.

Have you planned for these factors?

When planning for your retirement, consider these common factors that can affect your income and savings. While many of these same issues can affect your income during your working years, you may not notice their influence because you’re not depending on your savings as a major source of income. However, investment risk, inflation, taxes, and health-related expenses can greatly affect your retirement income.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

Contemplating Bankruptcy

February 19, 2019

Contemplating Bankruptcy

Filing bankruptcy can be complex and difficult, and it can have lasting effects. You should consider what’s involved carefully before deciding if it’s the right answer for you. Don’t expect bankruptcy to offer you an easy solution to your overspending habits or financial mismanagement. It’s intended to relieve you of burdensome debts incurred due to unfortunate circumstances such as medical problems or unemployment.

To file or not to file

How do you know if you should go bankrupt? If your situation is temporary and will change for the better in the near future, you may just need some breathing room. Contact your creditors; they may offer to lower your payments or interest rate under a hardship program. Or perhaps a credit counseling service can help you restructure your debt and get on your feet again. In fact, for bankruptcy filings, credit counseling is a prerequisite.

Then again, you may not see your income going up in the foreseeable future, or maybe you can’t cut your living expenses any further. Perhaps your pleas to restructure your debt have fallen on deaf ears or the relief you’ve been offered isn’t enough to help. Maybe now it’s time to consider bankruptcy.
Personal bankruptcy in general

There are two types of personal bankruptcy, Chapter 7 and Chapter 13. Under Chapter 7, assets are sold to pay creditors and the debt that’s left is discharged. If you file under Chapter 13, on the other hand, you probably won’t have to sell assets, but all of your disposable income will go to pay creditors for a specified period of time, most likely five years.

Each chapter has its own rules regarding what assets you can keep (so-called exempt property) and what debts you can be discharge (some debts, such as student loans, are nondischargeable), among other things.
How Chapter 7 works

Generally, Chapter 7 is a liquidation proceeding with the court determining what property, if any, you have to sell to pay your debts.

By law, you get to keep certain exempt property. There are federal bankruptcy exemptions and each state has its own exemptions. Depending on the state in which you live, you may be able to choose between the federal or state exemptions, or you may have to use your state’s exemptions. Exemptions generally include specific amounts for your home, car, jewelry, tools of trade, household goods and furnishings, and retirement savings.

Property that is not exempt may be sold to repay your creditors (at least in part). Unsecured debts that remain unpaid are then discharged, with certain exceptions such as tax debts, student loans, domestic support payments, and debts resulting from fraud or driving while intoxicated.

If you go bankrupt against a secured debt, such as a mortgage or a car loan, the collateral securing the debt–the house or the car–will either revert to the lender or be sold with the proceeds going to the lender as at least a partial satisfaction of that secured debt.
How Chapter 13 works

Under Chapter 13, often referred to as wage earner’s bankruptcy, you aren’t required to sell assets to satisfy creditors. Instead, your debts are reorganized under a plan and you repay them, fully or partially, over a three-year or five-year period with your disposable income (money you have left over after meeting your normal monthly living expenses). If you complete the plan successfully, unsecured debts that remain unpaid are then discharged, with certain exceptions.

Chapter 13 is often used to forestall and ultimately prevent foreclosure on real property, such as your home. To accomplish this, you would have to continue to make your regular monthly payments directly to the mortgage lender, plus you make separate catch up payments on overdue amounts according to a schedule spelled out in the Chapter 13 plan. If you complete the repayment schedule successfully, your mortgage would again be considered up to date.
Determining whether to file under Chapter 7 or Chapter 13

An income eligibility test will be applied to all Chapter 7 petitions; if your income is above the median income level in your state, and you’re capable of repaying a specified portion of your unsecured debt, you’ll be required to file under Chapter 13.
Life after bankruptcy

A bankruptcy notation will appear on your credit report for 10 years. It’s a serious blemish that can affect you in many ways. Aside from the difficulty it will cause when you try to get new credit, insurance companies may correlate your ability to pay your debts with your ability to make premium payments. As a result, a bankruptcy notation on your credit report may make it difficult (and more expensive) to get certain types of insurance. What’s more, an employer may take your credit history into account when deciding to hire or promote you.

Of course, you’ll be able to get credit again, but you may have to pay higher interest rates or provide a cosigner or collateral to get started. Getting new credit will help you establish a new track record. But be careful; you won’t be able to declare bankruptcy again for several years.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Types of Insurance

February 19, 2019

Types of Insurance

Each day, you face a variety of risks–risks to your life, your health, and your property. Although you can’t eliminate many of these risks, you can take steps to guard against resulting financial losses. That’s where insurance comes in. If your coverage is sufficient, insurance can provide both peace of mind and financial security to you and your loved ones. Many types of insurance coverage are available–here’s a brief overview of what’s out there.
Life insurance

Life insurance provides funds for your surviving loved ones when you die. Your family can use the proceeds to meet a variety of goals. For example, they can use them to replace income lost as a result of your death, to meet periodic expenses, to pay debts you’ve left behind, to help with college tuition and retirement, and to pay for your final expenses and estate taxes. The proceeds are typically paid as a lump sum but may also be paid in installments.

You can obtain life insurance coverage through work, through another organization (e.g., a club or association to which you belong that sponsors a group policy), or by purchasing an individual policy directly from an insurance company. The two basic types of life insurance are term life and permanent (cash value) life. Term life provides life insurance coverage for a specified period of time, while permanent insurance provides protection for your entire life. Permanent life insurance can be further broken down into several types, including whole life, variable life, and variable universal life.

Note: Variable life insurance and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy.
Health insurance

Health insurance can safeguard your assets from the high costs of health care. Most people lack the financial resources needed to pay medical expenses associated with a health crisis (e.g., life-threatening illness or significant injury). In addition, the costs of physical exams, prescription drugs, hospital stays, pregnancy, and routine medical conditions can add up and cause you to suffer financial hardship if you must pay for them entirely on your own.

Health insurance pays for all or a portion of specified medical costs. The cost and range of protection that your health insurance provides will depend on your insurance company and the particular policy you purchase. You may be able to obtain health insurance coverage through your employer; through an association, club, or other organization; or on your own by purchasing a policy directly from an insurance company.
Auto insurance

Car ownership involves several risks. In a car accident, people may be injured and vehicles or other property damaged. Liability claims against you can put your assets at risk. Loss can also occur through theft, vandalism, or natural disasters. Auto insurance protects you against these risks. A personal auto policy is a contract between you and your insurer that specifies each party’s rights and obligations. State law and/or your lender may require you to purchase at least a minimum amount of auto insurance coverage. Depending on your circumstances, you may wish to purchase additional protection. You can compare auto insurance policies in terms of price, coverage, exclusions, and reputation of insurer.
Homeowners insurance

Homeowners insurance provides coverage if your home is damaged or destroyed. It can also cover your possessions and provide you with compensation for liability claims, medical expenses, and other expenditures that result from property damage and bodily injury suffered by you or others. If you have a mortgage on your home, your lender may require homeowners insurance. Even if you own your home outright, though, you’ll still need homeowners insurance to protect your interests and safeguard your assets. The cost of homeowners insurance depends on several factors, including the amount of your coverage, any endorsements you add to the policy, and policy deductibles.

Condominium and co-op insurance, although similar, differ in some respects from standard homeowners insurance. And if you rent your home, you may want to look into renters insurance.
Disability insurance

The threat of a major disability poses one of the greatest risks to your income. A serious illness or injury can put you out of work for a prolonged period or even permanently. If you had to stop working, how would you meet your expenses? Disability insurance policies pay you a benefit that replaces part of your earned income (usually 50 to 70 percent) when you can’t work. You may be able to obtain short-term or long-term disability coverage, or both. In general, disability insurance can be split into three types: private insurance (individual policies bought from an insurance company), group policies typically provided through your employer, and government insurance (social insurance provided through state or local governments).
Long-term care insurance

Your chances of requiring some sort of long-term care increase as you get older. Will you have the financial resources to fund a prolonged nursing home stay for yourself or a loved one? Long-term care insurance pays a selected dollar amount per day (for a set period) for the type of long-term care outlined in your policy. Depending on your policy, care can be provided in a variety of settings, including private homes, assisted-living facilities, adult day-care centers, hospices, and nursing homes. Most policies provide that certain physical and/or mental impairments trigger benefits. The cost of a policy depends on many factors, including the types of benefits, your health, and your age when you purchase the policy.
Business insurance

No matter how careful you are in running your business, accidents happen. If you’re a business owner, you’ll need to plan for these and other risks. You may be interested in several different types of insurance coverage–property and casualty insurance, liability insurance, and group health, life, and disability insurance coverage for your employees. You can buy various types of insurance protection separately, or you can purchase one package that covers many potential hazards. You can also use insurance to protect your business against the loss of a key employee or to transfer a business interest at your death or disability.
Other forms of insurance

There are many other types of insurance, including flood insurance, travel and accident insurance, insurance for your boat or other watercraft, umbrella liability insurance, and even pet insurance. Speak with an insurance professional to learn more about the products available to you.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Traditional Whole Life Insurance

February 19, 2019

Traditional Whole Life Insurance

Traditional whole life insurance, also known as ordinary life or straight life, is a type of permanent (cash value) insurance that provides coverage for your entire life. This kind of policy is sometimes described as plain vanilla insurance. You pay a fixed amount, known as a level premium, each payment period (monthly, quarterly, semiannually, or annually), and a guaranteed death benefit goes to your beneficiary when you die. Your premium amount is guaranteed to remain level for as long as you live, even if the insurance company’s costs rise. When you reach old age, your premium will not increase over the amount you paid when you started the policy.
How a traditional life insurance policy works

The insurance company calculates level premiums sufficient to pay the cost of your insurance coverage (mortality costs) to the end of your life. In the policy’s early years, the level premiums are higher than the mortality costs. The difference between the mortality costs and the level premiums is placed into a cash reserve account known as the cash value. In later years, as mortality costs rise due to your advancing age, your level premiums are lower than the mortality costs, and your policy draws on the cash value to help pay the insurance costs. As the cash value accumulates over the years, the amount of your actual insurance coverage is reduced by an equal amount.

For example, say you buy a $100,000 policy at age 30. Since you have no cash value in the beginning, you are paying for $100,000 of insurance coverage. If you have $10,000 of cash value by age 40, you’ll then be paying for $90,000 of coverage. Your cash value will continue to rise, and the amount of insurance coverage will continue to fall.

If you continue to keep up your premium payments, your cash value will eventually grow to an amount equal to your policy’s death benefit. In fact, if you happen to live to the policy’s maturity date (generally age 95 or 100), the company will pay the accumulated cash value (by then equal to the death benefit) to you. But if you die at any time before you reach the maturity date, your beneficiary receives the full, guaranteed death benefit, no matter what the amount of your cash value at the time of your death.
Accessing your money in the policy

Your cash value can be used as collateral to obtain policy loans from the insurance company at interest rates stated in the policy contract. This rate is often fixed, typically about 8 percent, or it may vary according to an index. These loans are tax free and will not affect the growth of your cash value. But remember, the cash value is designed to support your policy’s death benefit. If you are unable to repay the loan, the proceeds paid to your beneficiary after your death will be reduced by the amount of the loan, plus outstanding interest. The other way to access the cash value of your traditional whole life insurance policy is through a complete or partial surrender (cancellation) of your policy. However, surrender will terminate all or part of your coverage and may have tax consequences.
Policy dividends

For policyowners, an additional benefit contained in some life insurance policies is dividends. In order for a policy to pay dividends, it must be a participating policy. Nonparticipating policies pay no dividends. Dividends are not guaranteed, but are paid at the discretion of the insurance company’s board of directors, depending on a company’s expenses, the performance of its investments, and the amount of death benefit payouts made in a year. The amount you receive is determined by a formula that takes into account the policy series, the size of your policy, your age, and the number of years the policy has been in force.

Policy dividends are free from income tax because they’re considered a return of premiums you have paid and can be taken in cash, used to pay some or all of the policy premium, reinvested to gain (taxable) interest, or used to buy paid-up insurance additions to the policy (for which no further premiums are required). You may surrender accumulated paid-up additions in later policy years and use the proceeds to pay the regular policy premiums.
Other uses of cash value

If the time comes when you feel you are unable to continue making premium payments or you feel you have more insurance coverage than you need, but you don’t want to surrender or take a loan against the policy, you have a number of alternatives. Based on the size of your cash value account, you could use your cash value to purchase what is known as reduced paid-up insurance, whereby your coverage amount is lowered and no further premiums are required. Or, you could turn the cash value into extended term insurance, which would provide the same level of death benefit you now have, but for a limited period of time.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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POS Plans

February 19, 2019

 POS Plans

You’re not alone if you’re feeling confused by health-care plans that offer you benefits with one hand and place restrictions on you with the other. Fortunately, the world of managed care has begun to loosen up. And point of service (POS) plans may be leading the way. A POS plan is a type of managed care health system that maintains a network of physicians, hospitals, medical labs, and pharmacies for the health care of its members. POS plans blend the provisions of two major managed care models, combining the low out-of-pocket costs of health maintenance organizations with the flexibility of preferred provider organizations.

A quick overview of managed care

Managed care systems were developed to provide health care to members at a reasonable price. Costs are controlled in several ways. One way is to limit medical procedures that the plan considers unnecessary or inappropriate. Many traditional health insurance plans, in contrast, generally pay for the medical expenses incurred by its members without imposing stringent cost controls. Another measure that managed care providers use to hold down costs is to subsidize prevention and wellness programs, such as smoking-cessation classes, health education classes, and memberships to fitness clubs. The healthier you are, the less need you may have for medical care.
Your primary care physician is the gatekeeper to further care

As a member of a POS plan, you’ll be expected to choose a primary care physician (PCP) from a network of doctors sponsored by the plan. Your PCP acts as your main contact within the network and is responsible for most of the care you receive on a regular basis. In addition, your PCP is said to act as a gatekeeper by coordinating your access to specialists and other caregivers within the network. But you may go to physicians outside the network if you choose.
If you need a specialist, it’s best to get a referral

If you develop a medical condition requiring specialized care, you must get a referral from your PCP before you seek care from a specialist or another physician within the network. This screening process helps to reduce costs for both the POS and its members. If your PCP doesn’t provide the referral you feel that you need, you can go outside the POS network for treatment and see any doctor or specialist you choose without consulting your primary physician.
You can choose to go outside the network, but at a price

A POS plan allows you the freedom to seek care outside its network of providers. If you choose, you can even mix the types of care you receive. For example, your child could see a pediatrician outside of the network, while you continue to receive health care from network providers. Of course, you’ll pay substantially more out-of-pocket charges for any medical care your family receives from a non-network provider–encouraging you to stay within the network, but notrequiring it. When using health-care services within the plan’s network, you generally pay no deductible and only a minimal co-payment. If you go outside the network, you’ll likely be subject to a deductible and may have to pay a substantial portion of the non-network physician’s charges.
You’ll pay nominal co-payments for network care

Co-payments are usually minimal for POS network care, often running about $10 per treatment or office visit. You always retain the right to seek care outside the network at a lower level of coverage. But substantial co-payments for care outside your POS network give you a strong financial incentive to stay inside the network for most or all of your medical needs. For example, your co-payment may be only $10 for care obtained from network physicians, but you could be responsible for up to 30 or 40 percent of the cost of treatment provided by a non-network provider.
There’s generally no deductible for network care

When you choose to use network providers, there is generally no deductible. So, coverage begins from the first dollar you spend as long as you stay within the POS network of physicians. But an annual deductible must be met for out-of-network care. In most cases, you must pay a specified amount out of your own pocket before coverage begins. On average, individual deductibles are around $300 per year for an individual and $600 for a family. This deductible amount is in addition to your co-payments.
You should expect an annual cap on your out-of-pocket costs

Your annual out-of-pocket costs are generally limited to a maximum dollar amount stated in the policy. The annual limit on your health expenses for a POS plan, including deductibles and co-payments, is typically around $2,500 for an individual and $4,000 for a family. If you don’t know what the cap on your annual payments is, talk to your insurance company or plan administrator.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Life Insurance and Charitable Giving

February 19, 2019

Life Insurance and Charitable Giving

Life insurance can be an excellent tool for charitable giving. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but you may also benefit from tax rules that apply to gifts of life insurance.

Why use life insurance for charitable giving?

Life insurance allows you to make a much larger gift to charity than you might otherwise be able to afford. Although the cost to you (your premiums) is relatively small, the amount the charity will receive (the death benefit) can be quite substantial. As long as you continue to pay the premiums on the life insurance policy, the charity is guaranteed to receive the proceeds of the policy when you die. (Guarantees are subject to the claims-paying ability of the issuing insurance company.) Since life insurance proceeds paid to a charity are not subject to income and estate taxes, probate costs, and other expenses, the charity can count on receiving 100 percent of your gift.

Giving life insurance to charity also has certain income tax benefits. Depending on how you structure your gift, you may be able to take an income tax deduction equal to your basis in the policy or its fair market value (FMV), and you may be able to deduct the premiums you pay for the policy on your annual income tax return. When an insurance contract is transferred to a charity, the donor’s income tax charitable deduction is based on the lesser of FMV or adjusted cost basis.
What are the disadvantages of using life insurance for charitable giving?

Donating a life insurance policy to charity (or naming the charity as beneficiary on the policy) means that you have less wealth to distribute among your heirs when you die. This may discourage you from making gifts to charity. However, this problem is relatively simple to solve. Buy another life insurance policy that will benefit your heirs instead of a charity.
Ways to give life insurance to charity

The simplest way to use life insurance to give to a charity is to name a charity to receive the benefits of your life insurance policy. You, as owner of the policy, simply designate the charity as beneficiary. Designating the charity as beneficiary may allow you to make a larger gift than you could otherwise afford. If the policy is a form of cash value life insurance, you still have access to the cash value of the policy during your lifetime. However, this type of charitable gift does not provide many of the income tax benefits of charitable giving, because you retain control of the policy during your life. When you die, the proceeds are included in your gross estate, although the full amount of the proceeds payable to the charity can be deducted from your gross estate.

Another alternative is to donate an existing life insurance policy to charity. To do this, you must assign all rights in the policy to the charity. You must also deliver the policy itself to the charity. By doing this, you give up all control of the life insurance policy forever. This strategy provides the full tax advantages of charitable giving because the transfer of ownership is irrevocable. You may be able to take an income tax deduction equal to the lesser of your adjusted cost basis or FMV. The policy is not included in your gross estate when you die, unless you die within three years of the transfer. In this case, your estate would get an offsetting charitable deduction.

A creative way to use life insurance to donate to a charity is simply for the charity to insure you. To use this strategy, you would allow the charity to purchase an insurance policy on your life. You would make annual tax-deductible gifts to the charity in an amount equal to the premium, and the charity would pay the premium to the insurance company.

One final method is to use a life insurance policy in conjunction with a charitable remainder trust. This strategy is relatively complex (it will require an attorney to set up), but it provides greater advantages than other, simpler methods. You set up a charitable remainder trust and transfer ownership of other, income-producing assets to the trust. The income beneficiary of the trust (you or whomever you designate) will get the income from the assets in the trust. At the end of the trust term (which might be a certain number of years or upon the occurrence of a certain event, such as your death), the property in the trust would pass to the charity. You’ll receive a current tax deduction when you establish the trust for the FMV of the gifted assets, reduced according to a formula determined by the IRS. Life insurance can then be purchased (usually inside an irrevocable life insurance trust to keep the proceeds out of your estate) to replace the assets that went to the charity instead of to your heirs.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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Are You Covered If . . . ?

February 19, 2019

If something just happened and you need to know if you’re covered, you should immediately call your insurer or agent or take a look at your policy. But if you’re simply wondering what’s covered (and what’s not) for future reference, you might start by familiarizing yourself with some real-life scenarios.

A word of caution

It’s important to understand a few things upfront. First, there are several types of standard homeowners policies, and each provides different coverage. What’s more, even policies of the same type often don’t provide exactly the same coverage. Another key point: To say that you’re covered for something doesn’t always mean that you’re fully covered. Out-of-pocket deductibles typically apply to the dwelling and personal-property portions of your policy, and every part of your policy is subject to coverage limits. Losses that exceed these limits must be paid out of your own funds.
Your house: are you covered if . . . ?

  • Lightning strikes a power line leading to your house and starts a fire? Yes. Fire damage is standard coverage.
  • A delivery truck careens off the road and smashes into your house? Yes. Damage from vehicles is standard coverage.
  • A pipe bursts in your cellar and covers your downstairs room with water? Yes. Water damage from burst pipes is standard coverage.
  • A huge gust of wind blows a tree onto your house? Yes. Windstorm damage is standard coverage in most parts of the country.
  • A repairperson damages your walls and ceilings? Yes. It doesn’t matter who caused the damage.
  • The river behind your house floods, and you have water damage? No. Flood protectionrequires separate insurance. So does earthquake coverage.
  • Your house slides down a cliff? No. You need separate insurance to protect against this.
  • Mice infest your home and chew up your insulation? No. The same exclusion applies to infestation by insects and other pests.
  • The market value of your home plummets? No. Market value has nothing to do with insurance that is based on replacement cost.
  • A house that you haven’t lived in for months is vandalized? No. To be covered, the house can’t have been vacant for more than 30 days.
  • You need to upgrade your home to meet local building codes? It depends. You may need an optional endorsement for this.
  • Your home is damaged by water coming in from backed-up sewers? It depends. This coverage may also require an endorsement.

Your personal property: are you covered if . . . ?

  • A wild animal gets into your house and rips apart your upholstery? Yes, unless the animal is a rodent or a pet of yours. If the rodent or pet causes a fire, you’re covered for the fire damage.
  • A thief breaks into your home and steals your stereo, jewelry, and the family silver? Yes, but keep in mind that separate coverage maximum limits apply to some types of personal property.
  • Your golf clubs are stolen from the trunk of your car? Yes (even though the theft occurred off your premises), but you may not receive the full replacement value.
  • Your wardrobe is ruined by the smoke from a fire? Yes. Clothing falls under personal property coverage.
  • The power goes out on your block, causing the food in your refrigerator to spoil? Yes, under most policies ($500 is a standard limit).
  • The laptop computer that you use for your home business is stolen? No. The laptop would be covered only if it were for personal use at home.
  • Your boat is damaged in a storm? No, unless it meets the requirements for a “small-motor” boat. Boats generally require separate insurance.
  • Your central air-conditioning breaks down in the middle of summer? No. Homeowners insurance doesn’t cover heating, cooling, and plumbing systems or home appliances for simple breakdown. If they are damaged by a covered peril, such as fire, they are covered.
  • A repairperson scratches up your furniture? No, in most cases. Damage to your personal property is usually covered only when it’s caused by a named peril (e.g., fire or vandalism).
  • A company dumps toxins into the creek that runs through your yard? No. The company that did this would be responsible for the cleanup bill and other damages.
  • Your fine art collection is stolen? It depends. In many cases, you need a special endorsement to cover valuable art and antiques.
  • The movers you hired damage your belongings? It depends. Some policies will cover insured property during a move. Otherwise, you need separate transit insurance.

Your liability: are you covered if . . . ?

  • You accidentally leave your boots on the front step, and your invited neighbor trips over them, breaking her hip? Yes. This is a straightforward liability question.
  • You accidentally run your shopping cart over a man’s foot at the grocery store, breaking his foot? Yes. Your liability coverage protects you off your premises as well as on.
  • Your son hits a baseball through your neighbor’s window? Yes, as long as your son didn’t break the window on purpose.
  • Your dog bites a passerby on the street? Yes. However, many insurers will cover you only for a certain number of dog bites (in some cases, only one).
  • After an accident at your home, the injured party brings a lawsuit against you, and you’re saddled with legal fees? Yes. Most homeowners policies cover the costs of defending you against lawsuits.
  • A client is injured by falling boxes in your home office? No. Separate liability coverage is needed when you run a business out of your home.
  • You’re renting out part of your house, and your tenant’s stuff is stolen from the premises? No, and you’re not liable, either. Your tenant needs renters insurance to protect his or her belongings.
  • You beat up someone who insulted your wife? No. Homeowners insurance does not cover liability arising from injuries you have intentionally caused.
  • You throw a rock at a squirrel and it hits and injures a neighbor? Yes, because even though throwing the rock was an intentional act, you didn’t mean to hurt your neighbor.
  • You swing the sail on your boat and accidentally hit your passenger with it? No. Homeowners insurance does not cover liability arising from the use of boats and watercraft.
  • You accidentally run someone over while driving down the street? No, because your auto insurance would cover your liability in a case like this.
  • A tree falls from your yard into your neighbor’s yard, breaking his fence? It depends. Your neighbor’s insurance would generally cover damage to his own property. However, if you were negligent (e.g., your neighbor told you the tree was dying, and you did nothing), you’d have to turn to your own liability coverage.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax

or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

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