Get an Early Start on Retirement

Think you can’t afford to save in your 401(k) when you make $50,000 or less?  You can’t afford not to.

Whether or not you’ve just thrown your graduation cap in the air or you’ve been building a career for a few years now, you’ve probably had more pressing financial concerns than saving for retirement.  Like how you’ll make the rent and also eat.  Or whether you’ll ever get out from under the crush or your student loans.  No wonder that a recent Wells Fargo survey found that fewer than half of millennials ages 22 to 32 were socking away cash for retirement—and that nearly 90% of those who weren’t said lack of money was the reason.

Waiting until you’re more secure financially, though, will cost you plenty.  Contribute steadily to your company savings plan starting in your twenties, and you have a good shot at being a millionaire by the time you retire.  Hold off, and that seven-figure stash gets more elusive.  How can you swing it?  These tips will help.

Get Some Perspective

Eight in ten of the nonsavers in the Wells Fargo study said they needed to pay down debt first.  A worthy goal, but one you should pursue simultaneously with, not ahead of, saving for retirement.  For one thing, most employers kick in $0.50 for every dollar you put in, up to the first 6% of your salary.  That’s an automatic minimum of 50% return versus, say, a 6.8% return whey you pay down student loans at that interest rate.  Plus, as Wharton professor Olivia Mitchell notes, “The money you put into a 401(k) or IRA benefits from a lifetime of tax-free compounding.”  That is, you not only earn money on your investment, but your earnings earn money.  The sooner you start, the greater the magnifying effect.  The bite from your paycheck may also be more manageable than you think, since you contribute with pre-tax dollars.  The after-tax cost of saving $3,000 a year, or 6% of a $50,000 salary: just $43.00 per week.

Free Up Cash

To come up with that scratch, eat a brown-bag lunch a couple of times a week, and drink the office swill instead of caramel macchiatos.  Opting for income-based repayment of your federal student loans instead of your standard plan can also help—if you make $50,000 and owe $30,000 you’d reduce payments by $68 a month, says financial aid advisor Kal Chany of Campus Consultants.  Sure, that will extend the life of your loan, but it’s worth it if you put the cash in your 401(k) and get an employer match.

Take Baby Steps

Start contributing a modest amount—say, 3% of your salary—then bump up by a percentage point a year, until you’re up to the recommended savings rate of 10%.  Time the hikes to your annual raise, and you won’t even feel the pinch.  Or, if your employer offers this feature, elect automatic annual increases.  Research shows that workers who use this set-it-and-forget-it approach end up with substantially bigger balances.

Article by Zain Asher in the September, 2013 issue of Money Magazine.

Tom Newsad has been building relationships in the Middletown area for over 20 years.  Newsad Insurance Services offers life, health, disability and long term care insurance as well as fixed and fixed index annuity products.  Tom serves clients in Butler, Hamilton, Montgomery, Preble, Miami, and Warren counties and beyond.

Executive Bonus Plans: Rewarding Employee Performance

Executive Bonus Plans: Rewarding Employee Performance

Rewarding employee performance strengthens the stability of a business and reduces employee turnover among the ranks of valuable employees.  Losing an important employee to a competitor can disrupt current and future business profitability.

Privately-held businesses entities have limited options when designing compensation packages for their employees.  Many small companies are unwilling to establish qualified retirement plans because of the high cost of the plans and because they have to include all eligible employees.

Nonqualified deferred compensation plans are an option but participation is restricted to certain highly paid management employees.  Having benefits in addition to normal compensation is a proven method for improving employee morale and job satisfaction and thereby reducing costly employee turnover.

An Executive Bonus Plan (also known as a Section 162 plan after the section of the Internal Revenue Code that permits an employee to deduct compensation paid to employees) offers the opportunity to reward any employee.  It could be a one-off bonus for exceptional work in any year or, more commonly, an on-going arrangement to provide additional compensation annually.  To enhance the future value to the employee and the employee’s family, the payment is usually paid as the premium for a cash value life insurance or annuity contract owned by the employee.

Attaching conditions, such as job performance or continued employment, to the right to continue receiving this additional compensation increases the attractiveness of such a plan to the employer and further increases the likelihood that the employee will remain with the company. 

The employee is responsible for payment of income tax on the bonus paid by the employer.  In some cases, the employer will pay an additional amount to cover the associated income tax liability in which case the plan is known as a “double bonus” plan.

As long as the bonus represents “reasonable compensation”, the business can deduct the bonus used to pay the life insurance policy premium.  The employee owns the life insurance policy and names his or her beneficiary.

An employer can place certain restrictions on the policy as an incentive to the insured employee to remain with the company.  One such restriction can be limiting access to policy cash values by the employee for a selected period of time, such as the employee’s expected date of retirement.

Additional Considerations

Employers should seek legal counsel regarding creating a formal agreement between the employer and the employee governing the Executive Bonus Plan.  Any corporate records notation or agreement should spell out who will participate in the executive bonus program, why such employee or employees were selected for participation, and the nature of the benefit these employees will receive.  Any restrictions on an employee’s rights to access insurance policy cash value, or any “golden handcuffs” arrangement, should be spelled out in the written agreement between employer and employee.

Actual restrictions on the policy itself, such as limiting the employee’s access to cash values, can be enforced using a policy endorsement filed with the insurance company. The endorsement should indicate the time period during which policy restrictions will remain in effect, and list the conditions for removal of any restrictions on the employee’s access to the policy.

The purposes of a permanent cash value life insurance Executive Bonus Plan include growing funds on a tax-deferred basis to be made fully available to the employee for supplemental income in retirement.

From an employee’s perspective there are two concerns with this type of arrangement.  If this is not a “double bonus” plan, the employee may be concerned about having the funds to pay the income tax liability.  Also the employee may be concerned about the viability of the life insurance contract if the employer does not pay the bonus each year.  To address some of these concerns, the employer and the employee could agree to establish the plan for a limited period and make payments in an amount sufficient to sustain the policy after the payment period.

With a properly structured executive bonus plan, both the employer and the employee win.  The employer benefits from greater employee loyalty and lower staff turnover; the employee benefits from expanded compensation options.

Article written by Columbus Life appeared in Columbus Life Advanced Market Insights October 2011 edition.

Tom Newsad has been building relationships for over twenty years in his community.  Newsad Insurance Services offers life insurance, fixed index annuities, health insurance, and disability and long term care insurance.  For more info see www.newsadinsurance.com . Tom serves clients in the Butler, Hamilton, Montgomery, Warren, Miami, and Preble county areas and beyond.

Indexed Annuity Magic: How Do They Do It?

One of the greatest mysteries in the indexed annuity market is how insurance companies are able to offer market-linked gains on an annuity with a principal protection feature.  Many are familiar with the strong guarantees that fixed annuities offer, but it comes at the cost of low potential for gains.  On the other hand, variable annuities provide unlimited potential for gains, but you must be willing to stomach unlimited risk to achieve it.

The indexed annuity is a unique gem amidst a pebble-lined beach—but how is this awesome feat accomplished?  How can insurance companies offer purchasers market-linked interest without the risks associated with VAs and still afford to offer a guarantee?  It is actually pretty amazing and extraordinarily simple to accomplish.

For comparison, let’s explore what the insurer does with the purchaser’s money when offering fixed annuities.  When an annuity purchaser makes a premium payment into a fixed annuity, the insurance company turns around and uses that premium to purchase bonds.  Generally, the bonds are high quality and they mature at the same time the surrender charges expire on the purchaser’s annuity (i.e. I buy a 10 year surrender charge annuity and the insurance company then purchases 10 year Grade “A” bonds to cover my annuity’s guarantees).  This provides a relatively safe investment vehicle for the insurer to make enough interest off of in order to earn their spread/profit.

So, just for simplicity’s sake, let’s make the assumption that the bonds are paying 4% interest and the insurance company is crediting 3% interest on its fixed annuities.  This means that the difference of 1% is what the insurance company is using to cover its expenses and anything that is left of its spread/profit.  Makes sense, right?

OK, let’s move over and apply this to fixed annuities: instead of putting 100% of the purchaser’s premium payment in bonds, with an indexed annuity, the insurance company puts about 97% of the premium payment in bonds.  (Some companies might use 96%, 98%, etc. of the premium payment; you get the idea!)  The bond covers the indexed annuity’s annual 0% floor, which protects the annuity purchaser from market losses.  It also covers the minimum guaranteed surrender value, providing a return of premium plus interest to the beneficiaries in the event of death, in addition to providing the same benefit to the purchaser if the indexed crediting does not perform.

Now, let’s get to the other 3% of the purchaser’s premium payment, where the real magic happens: this portion of the purchaser’s premium payment is used to purchase options.  It is the options that provide the index-linked interest on indexed annuity contracts. Today, we might take that three cents of our one dollar to the options-seller and ask that he sell us an option for the S&P 500, using an annual point-to-point crediting method with a cap being used to limit the exceeded interest.  The option-seller might tell us that our three cents will buy our customers a cap of 3.85%, which isn’t so hot.  Then again, the S&P 500 is relatively low right now.

However, if the market suddenly goes back up, and the S&P 500 returns to 1500 the next month, that option-seller will likely offer a much higher cap for our three cents.  (After all, if it is already at 1500, what is the likelihood that the S&P 500 will increase tremendously over a one-year period?)

So there you have it, folks.  No tarot cards, no voodoo dolls—just plain and simple math.  And even though the logic behind indexed annuities is rather simple, it is magical nonetheless.

Author: Sheryl Moore, President and CEO of AnnuitySpecs.com and LifeSpecs.com

Taken from Annuity News.com from article posted 9/7/2011.

Tom Newsad has been building relationships for over 20 years in the financial services industry.  Newsad Insurance Services of Middletown, Ohio, offers life insurance, health insurance, fixed index annuities, long term care insurance, and disability income insurance and serves Hamilton, Butler, Warren, Montgomery, Clermont, and Miami Counties and beyond.  Visit www.newsadinsurance.com for more information.

Now More Than Ever

Now More Than Ever

Market volatility. Pension Plans being killed off. The future of social security in flux. All of these factors-and more-conspire against. Consumers, who are trying to create a solid stream of income for their retirement, enter or, perhaps better phrased, re-enter annuities.

 According to LIMRA (Life Insurance Marketing Research Association), an organization that does life insurance marketing and research, “will retirement assts last a lifetime?”

 One in five retirees receives income from individually purchased annuities! While data from LIMRA recent “sources of retirement income.” Studies show that just 4 percent of retiree’s income currently comes from annuities (most come from pension plans-38 percent, and social security 34 percent.) It’s becoming clear that annuities will have a growing place in consumer’s plans for retirement,

 At Newsad Insurances Services we guide our clients through an education process on current plans and designs. “Fear of the unknown is a bug reason clients have a version to annuities.” So I try to explain to people you need to know what you’re saying no to.

Everybody has two forms of expense in retirement Living Expenses and Life Style Expenses.

Our goal at Newsad Insurance Services is to provide financial information to our clients so they don’t make income retirement mistakes!

Tom Newsad of Newsad Insurance Services consults with clients in the surrounding areas:  Middletown, Trenton, Franklin, Miamisburg, West Carrollton, Hamilton, Preble County, Lebanon, and more.

We currently offer Life Insurance and Financial Services with over 60 companies.

Feel free to call Newsad Insurance Services at (513) 424-6871 or contact Tom Newsad directly at (513)348-9573, or click on www.newsadinsurance.com for more information

Investment Rollovers and RMDs

Remember, when rolling investment money over the accounts must be of “like kind” to move.  For example, IRA money can come from a 401(k), 403(b) holdings, or self-directed IRA accounts and you must withdraw at least a minimum amount annually after turning age 70 ½.  The amount that you must withdraw is called the Required Minimum Distribution (RMD), and this amount is determined by the Internal Revenue Service on an annual basis.  Most companies require you to take money in the third quarter of each year.  The funds received from an RMD can be reinvested into non-qualified savings accounts (which you pay taxes on) or non-qualified annuities (which you do not pay taxes on until the funds are withdrawn).  Before taking out your money for an RMD, it is recommended that you consult with your financial advisor and your tax professional or CPA.

At Newsad Insurance Services, we guide our clients through this process making it simple and easy to understand.  Tom Newsad has been providing financial services in Middletown, Trenton, Hamilton, Franklin, Carlisle, Dayton, Monroe, and beyond for over 20 years.  Please visit www.newsadinsurance.com for more information.

Annuities

Annuities

In a recent Gallup Poll, people who had been asked about annuities believed:

• Annuities have a competitive rate of return
• Annuities provide a long term savings plan
• Annuities are important sources of retirement planning
• Annuities can ensure that a surviving spouse has a continuing income
• Annuities provide payout  flexibility
• Annuities offer tax deferral
• Multiple beneficiaries can be named on annuities

Annuities can only be purchased through life insurance companies. Prior to purchasing an annuity with a life insurance company it is important to check the company’s ratings.

Annuities purchased through Newsad Insurance Services will give you the peace of mind of knowing that you are investing in a safe plan. At Newsad Insurance Services we believe in knowledge, trust, and service. Let us help you prepare for the future!

Tom Newsad has been building relationships for over 20 years and is based in Middletown, Ohio.  Newsad Insurance Services offers equity indexed annuities as well as life, health, disability, and long term care insurance and serves Hamilton, Butler, Warren, Montgomery, Clermont, and Preble Counties and beyond.

Protect Your Clients and Your Business from Cyber Attacks

     In April 2011, thousands of email addresses were stolen from several major retailers and financial institutions.  One of the major concerns of these types of attacks is that hackers could create phony e-emails, known as “phishing attacks” aimed at defrauding consumers or taking control of their computers.  Consumers could also be tricked into giving out sensitive information like their passwords and bank account information. 

     Fortunately, Columbus Life was not among the companies that were affected.  However, this occurrence should serve as a reminder of the duty we all have in protecting our customers’ nonpublic personal information.

Here are a few reminders regarding email privacy:

Q:  What is “sensitive, personal, or confidential” data?

A:  Client, associate and other business data of a sensitive nature must be protected.  This includes name, date of birth, Social Security Number, credit card information, medical information, and policy of contract numbers. Anything that can be used to identify a person, or identify a person as a client, is important to keep confidential.

Q:  How might this data become exposed?

A:  When information is keyed to a public web site or sent via email, it travels across the public Internet.  If the transmission is not secured (encrypted) there is risk that data contained in it could be compromised.  This risk generally does not apply to email that is sent within a company.  If you send e-mail to clients, business partners or any other outside entity (including your personal email address, like @yahoo or @NetZero), that message is potentially traveling outside of a secure environment.  If it contains sensitive information, that is at risk.

Q:  What should I do to avoid revealing sensitive client data via email?

A:  If you receive an email that contains sensitive information, and need to reply or forward the e-mail, you should do so only after deleting the sensitive data or creating a new message.  You have probably seen Columbus Life replies to your e-mails where sensitive data has been removed and altered.  For example a policy number may appear as XXXXX1234.  A good practice when sending emails regarding your clients is to limit the client’s identifying information to last name and policy number, or just the policy number.

-Article taken from “Inside Columbus Life”  July 2012 

Tom Newsad is an independent agent for life, health, long term care, and disability insurance and equity indexed annuities.  Newsad Insurance Services of Middletown, Ohio serves the greater Butler, Hamilton, Warren, and Montgomery county areas and beyond.

Insure Your Love

Insure Your Love

Many people work to create a legacy of love by protecting and providing for our families, businesses, or favorite charities.  People usually choose to buy life insurance because they “love” someone or want to protect someone that they love financially.  Other products that can be used in this spectrum of financial services are annuities, which are also sold by life insurance companies.  An annuity is a flexible retirement planning tool that allows your retirement savings to grow on an income tax-deferred basis option that best meets your needs for income when you retire.  Many people choose to purchase annuities because an annuity allows savings to grow without any current tax, since earnings on an annuity are not taxed until payout begins.  Many others say they like annuities because an annuity provides a steady stream of income they cannot outlive.

At Newsad Insurance Services, we believe in custom tailoring life insurance products around the needs of our clients.  Tom Newsad believes in “customer relationships built on knowledge, trust, service, and love”.  Not until one sits down with one’s clients and listens to their concerns can one help them fill their needs.  As Tom believes, “your clients look at you and see what they want to see…their hope!”

Tom Newsad has been selling financial services products including life insurance and equity indexed annuities for over 20 years.  Newsad Insurance Services provides service to the Dayton, Middletown, Franklin, Hamilton, and Oxford areas and beyond.

Retirement

            January 1, 2011 marked the day the first Baby Boomer turned 65.  The reality of working longer has set in for many Boomers as life expectancy continues to increase.  Determining the best retirement age has proven to be both a priority and a challenge around the world.  For example, the French Parliament rose the retirement age from 60 to 62 in an effort to enhance their nation’s economy despite weeks of rioting by French citizens and reforms in Spain.  Under the approved reform bill, the retirement age in France will be raised to 62 by 2018, and the age of full pension eligibility will be raised from 65 to 67.  Britain plans to increase the pension age to 65 for both men and women in 2020.

            However, turning 65 does not necessarily mean retirement for you.  My clients can hear and read about retirement changes through the media and should be able to rely on their trusted financial advisor to provide guidance when making important retirement decisions.

            Three areas Boomers should evaluate are:

·         The “lifestyle” they want to maintain during retirement

·         The “life income” they will have available to support their lifestyle

·         The “life boats” they will need to sustain their lifestyle, should the unforeseen occur

At Newsad Insurance Services, we strive to build relationships based upon knowledge, trust, and service.  Tom Newsad sells fixed annuities in addition to life insurance and long term care insurance in Middletown, Trenton, Hamilton, Dayton, Monroe, Franklin, Carlisle, and surrounding areas.

Reaching Retirement Age

Reaching Retirement Age

It is a good idea to review your portfolio with your financial services provider more frequently as you reach retirement age.  Being sure not to draw out more than 6-8% per year in retirement savings can be beneficial in preventing you from spending down your account too quickly.  You may also want to consider moving your risky investments to more secure or fixed investments.  This could help prevent you from losing money in market downturns.  It is also important to have adequate life insurance to offset any losses in your portfolio and to provide your spouse with lost income.


Tom Newsad is a life insurance and financial services provider serving Butler, Warren, Hamilton, and Montgomery counties in Ohio. 

"Insure Your Love"

Many people work to create a legacy of love by protecting and providing for our families, businesses, or favorite charities. People usually choose to buy life insurance because they “love” someone or want to protect someone that they love financially. Other products that can be used in this spectrum of financial services are annuities, which are also sold by life insurance companies.

An annuity is a flexible retirement planning tool that allows your retirement savings to grow on an income tax-deferred basis option that best meets your needs for income when you retire. Many people choose to purchase annuities because an annuity allows savings to grow without any current tax, since earnings on an annuity are not taxed until payout begins. Many others say they like annuities because an annuity provides a steady stream of income they cannot outlive.

At Newsad Insurance Services we believe in custom tailoring life insurance products around the needs of our clients. Tom Newsad of Newsad Insurance believes in “customer relationships built on knowledge, trust, service, and love.” Not until you sit down with your clients and hear their concerns can you help them fill their needs. “Your clients look at you and see what they want to see…their hope!”

Tom Newsad has been selling life insurance for 19 years in Dayton, Middletown, Franklin, Hamilton, Oxford, and the surrounding areas.