The Troubled Road Ahead for 401k Investors.

1. Limited funding: Your 401k, SEP IRA, SIMPLE, Traditional IRA, Roth IRA and other qualified plans all contain IRS guidelines on how much money can be funded for your retirement.  Why?  Shouldn’t you be able to fund your retirement on your financial schedule not what the IRS says you can!
2. Participation Requirements: Just another obstacle companies face in providing retirement accounts which can be reduced and or avoided.
3. Unknown Future Tax Rates: If taxes are going to be higher in 20-30 years, why would you want to pay a higher tax rate on a larger balance in your 401k (tax deferred) or other qualified retirement account?
4. No Death Benefit: This is the most OVERLOOKED benefit and I can’t stress this enough!  Would your heirs rather have the small balance in your tax deferred account (then pay taxes on it) or receive a huge death benefit tax free?!  Obvious answer, yet so often overlooked!
5. Social Security Taxation: Upon withdrawal of your tax deferred investment money to supplement your Social Security income, you’ll trigger a HUGE TAX TRAP Uncle Sam has quietly set for you.  This leads to 85% of your Social Security income subject to taxation when you thought it was going to be tax free money.  Uncle Sam has major bills to pay and needs your retirement money.  Also, once the IRS guidelines for your “Required Minimum Distributions” (RMD’s) kick in, avoiding taxation on your Social Security income will be difficult to impossible.
6. Wall Between You and Your Money: Uncle Sam wants to make sure you don’t touch your (his) retirement money until he says it’s OK.  If you decide to access your money, get ready for a 10% IRS penalty and steep income taxes.
7. 100% Market Risk: If you’ve lost 50% of your retirement account in the past several years, it will take a 100% return just to bring your account back to even!  Using the investment rule of 72, if you make 9% each year (avg. of the S&P for the past 30 years), it would take you 8 years to get back to even!  Do you have this amount of time at any age?  The stock market making positive returns for 8 straight years is rare.
8. Negative Returns: This is part of #6 above, but is so significant that it needs to be highlighted.  A 25% loss requires 33% gain to break even; A 50% loss requires a 100% gain to break even; A 70% loss requires a 233% gain to break even!  Can you see how devastating negative returns are which quickly damage your ability to save and threaten the loss of your principal?  These examples define Warren Buffet’s rules of investing:  Rule #1: “Never Lose Money!” and Rule #2: “Never forget rule #1!”  Imagine if you were getting close to retirement age, say 65ish, and one of the above scenarios happened to your retirement account.  For example, your 401k lost 50% (like so many have in the past several years) and you now have to pay another 30% in taxes on the funds that you do withdrawal.  How many years do you think you could retire for?  You will probably never see retirement.  Don’t give Uncle Sam and Wall St. any more control over your future!
9. Fees: I’m talking 401(k) qualified plans here.  Fees are out of control within these accounts and they are so bundled and camouflaged within small print and meaningless words they are often hard to find and not even easily explained by the person selling them.  3%-5% per year is average (if you’re lucky) for plan admin, marketing, accounting, distribution, mutual fund charges and the list goes on.  These are compound fees too!  What you might not be aware of is you’re paying fees to market their plans to other corporations.
10. No More “Open Enrollment”: It’s “Open Enrollment Time”!  This is the biggest marketing tactic ever and the fact that people are buying into it is ridiculous!  The 401k Plan Administrator has “consulted with the mutual fund company Rep” (went to lunch and played golf!) and they’ve added 5 new funds this year that are designed to “keep pace with The Market”.  Haven’t we heard this before?  Wall St. is betting we’ll be lazy;  It’s time to take control of your own retirement!

Ginn Insurance consults with clients on the above issues and helps with 401k (tax deferred) investment alternatives that align with safety, flexibility, your best interest first and the ability to sleep well at night!  Contact us!  We’d enjoy helping you!

Access The Cash in your Whole Life Policy without Surrendering it!

Would you like to access the cash value in your Whole Life Insurance policy without surrendering or canceling the policy?  We can do this for you.  Depending on your situation, you can access up to 90% of the existing cash.  Contact us for details.

Bakersfield, California Life and Health Insurance

Ginn Insurance Services is located in Bakersfield, CA.  We help clients with their life and health insurance needs.  We are an independent company which benefits our clients greatly because we’re not limited to proprietary or “in house” products.  We’re able to shop the market for the best carriers and present these to our clients; Clients appreciate this because they know they’ll get the best coverage at the best price.
Contact us today to schedule an appointment.

1035 Exchange Rules and Ideas:

The IRS allows you to exchange an insurance contract for a new life insurance contract insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. This is governed by Section 1035 of the IRS code and are called 1035 Exchanges.

This benefit comes with some important IRS guidelines:

• 1035 exchange code says that the old insurance policy must be exchanged for a new policy.  You cannot receive a check and apply the proceeds to the purchase of a new insurance policy.
• A life insurance policy to another life insurance policy
• Life insurance policy to an annuity
• You cannot exchange an annuity contract for a life insurance policy

Reasons to Exchange:

• Flight to quality with a new carrier
• Improved Insurability…Meaning you stopped smoking or lost weight
• Better rate of return
• Ownership changes or problems
• Changes in your financial situation
• You currently have too many policies and want to consolidate
• Better features and benefits with a new policy

If you have a policy that you feel meets a reason for exchange, we can help you do a 1035 exchange and will not trigger any tax consequences for you. Contact Us.  Ginn Insurance would enjoy helping you.

• We’ll help compare your current contract with other available options.
• Once you decide to exchange the contract, we can facilitate the completion of the new insurance company’s 1035 exchange and replacement forms, etc.

We represent most all of the top carriers including Blue Shield, Blue Cross, Kaiser and others.
Search for your plan using the links provided.

• Annual “Lock-In” of all profits on your anniversary date each year.
• Unlimited Returns!  Call us for these carriers.
• Guaranteed floor of 0-3% each year.
• No market risk.  ZERO!
• Does not make your Social Security taxable like other traditional tax-deferred qualified plans.
• No participation requirements or administration fees for companies.
• Access to your money at any time without penalty.
• Money grows tax free.
• Unlimited contributions.
• Death Benefit.
• Real Returns not Average Returns.
• Excellent for Retiree’s turning 70 1/2 who are required to take minimum distributions (RMD’s) from an IRA or other qualified plan.

Reasons NOT to invest in any type of “Tax Deferred Qualified Plan”

“Would you rather be taxed on the seed or the harvest?” The seed, for sure!! I can buy the seed for $50 and I’ll make $5,000 on the harvest.  Would you rather pay tax on $50 or $5,000? This being the case, why are so many people using Tax Deferred investments like 401k’s to save for retirement? The second you contribute to a Tax Deferred investment, you’re under control of the IRS and Uncle Sam’s rules; He can change them at any time!  With Social Security going bankrupt and the National Debt growing out of control, I’d bet taxes will be higher in 20-30 years.  These are obvious reasons that are signaling a major change in the way we save for retirement.  There is a better way and it’s called an Indexed Universal Life Policy.

Indexed Universal Life Insurance (IUL) is structured as a Tax Free insurance policy that puts the owner in control of their cash accumulation and not Uncle Sam! It’s perfect for individuals and business owners and has more “living benefits” than the actual death benefit that is included with the policy. The absolute beauty of these policies is their not classified as “Qualified Plans” by the IRS. An IUL is a permanent cash-value life insurance product that is designed to outperform Whole Life, Universal Life and Variable Life without the catastrophic downside risk to the cash value of the policy.  In fact, zero downside risk!  IUL policies are linked to major market indexes like the S&P 500, but your money is never in the market.  The carrier absorbs all market risk.  For example, if the market index returns a negative 30%, your downside protection within the IUL policy will protect you from these losses.  However, you benefit from any positive returns each year and those profits are “locked in” on your anniversary date each year and can never be subject to loss going forward.  This provides the cash value in a an IUL policy with the best of both worlds…all the up side with no downside risk!

Indexed Universal life policies are far more advantageous than any “Tax Deferred Qualified Plan” on the market!  IUL policies are not cookie cutter type insurance products.  IUL’s are custom built policies for child savings accounts, individuals, entrepreneurs, business owners, corporations or retirees who may be looking to rescue an IRA from their required minimum distributions (RMD’s).  Ginn Insurance specializes in building these policies.  These are complex products that should be explained by qualified professionals who specialize in selling IUL’s not just Insurance Agents who are “familiar” with these types of products.  Too many variables exist to just be “familiar” with this type of insurance product.  I can’t stress this issue enough!  Contact Ginn Insurance Services for professional advise.  Call us today.  We’d enjoy helping you!

Differences between Tax Deferred and Tax Free:

Investment Question

I’d like to run a sample question and would appreciate a response from all readers in the comment section below.  This is regarding who actually knows the difference between “Real Returns” vs. “Average Returns”.
Consider this example:
Account A: loses -50% 1st year.
Account B: Gains 30% 1st year.

Question: Going into year 2, how far is Account A behind Account B?
Please post your answers below.  Thank you!  The answer will be posted shortly.

Tax Free Retirement

If taxes are going to be higher in 20-30 years (history has shown they will), why are so many American’s using tax deferred investments to save for retirement when they could just pay the tax and invest tax free from the start?  Pay the taxes on your seeds and the harvest will be tax free (the proper way to invest)!  Seems pretty simple!

If you’re one of the million American’s currently saving for your retirement using a tax-deferred investment such as a 401(k), 403 (b), Traditional IRA or other qualified plan, this could have damaging results to your finances in your retirement years.  Why?  Have you ever looked at the front page of your Social Security Statement?  It says right on the front page that it will be exhausted in 2037!  This is a warning signal that taxes are going to be higher in the future.  Using a tax deferred investment to fund your retirement when you know taxes will likely increase; Is this really a wise decision?

These tax-deferred investments will increase your Social Security tax bill and weaken your ability to grow your asset base when you begin drawing on them for income.  Also, you don’t even know what your tax rate will be in 20-30 years when you’ll need the money (Social Security tax rates).  Why would you want the unknown factor (taxes) in your retirement planning when you could eliminate it from the start?  These tax-deferred investments were meant to benefit the government by ensuring future tax revenues – not the individual investor!  American’s need to wake up to this fact!  On paper your retirement may seem possible, but when you’re faced with the reality that Uncle Sam has his hands in your retirement account(s), this might not be possible as soon as you might expect.  With a tax deferred retirement approach, you’re funding your retirement and Uncle Sam’s, and he’s in full control over how those funds will be taxed in the future when you get ready to use them!  He controls, among other things, when you can have YOUR MONEY, how much it will be taxed and penalties if you withdrawal early.  These critical factors are in addition to the accounting, administrative and investment fees that many of these tax deferred products are bundled with.

Ginn Insurance can help clients reduce and even eliminate this burden and put you back in control of your retirement money.  We demonstrate how all your different asset classes fit together.  Meaning, we show the how the impact of all your taxable, tax deferred and tax free investments will impact your Social Security income tax bill and further accumulation of your existing asset base.  Further information can be found here.  Ginn Insurance consults with clients on this issue.  Schedule your appointment today.

Starting June 1, 2010, Blue Shield Medicare Supplemental plans will include a free gym membership through the SilverSneakers Program at 24 Hour Fitness Clubs.  Also, if you’re new to Medicare Part B, subscribers can save $10 each month on their Medicare Supplemental plan rates for the first 12 months.  Call Ginn Insurance at 661-333-1181 for details.