Bolstering Your Child's Education

Although we all know that "time flies," it seems to move with particular speed as we watch our children grow. Yet, in considering college for a newborn, it is understandable that parents may tend to procrastinate, since seventeen or eighteen years seems a long way off. Unfortunately, in planning for college, our children progress all too quickly from daycare to the dorm room.

That's why ensuring your child's future education requires setting up a savings plan as early as possible. However, even planning early cannot guarantee adequate future savings if something should happen to you. Can you be certain that the money for your child's college education will be there even if you are not?

Life insurance can play an important role in the overall planning for college funding. It can provide supplemental tax-advantaged funds to help pay college costs. The way this works is: if you have a permanent policy, you can take a tax-free loan against your policy's accumulated cash value to fund college expenses. Life insurance also can help assure continued funding in the event of your premature death.

In addition, if you add a waiver of premium rider to your policy and subsequently become disabled, premium payments will be made for you—with no future repayment required as long as you are disabled (and until age 65 in most cases). Thus you can safeguard your child's education not only against death, but against disability as well.

Remember, it's important to develop a program that can provide your child with the best opportunity for a college education. In fact, one of the factors used to determine how much life insurance you really need is the cost of a college education for your child(ren). Give us a call for more information on how life insurance can become a valuable part of your college funding plan.

Can You Keep a Secret?

Most people are shocked when they find out exactly how much of their personal and financial information is floating around on various consumer lists, especially when some of this information may be fraudulently used. What can you do to help protect yourself?

• Don't give out personal or financial information—including your date of birth, Social Security number, employment information, and your or your mother's maiden name—to telemarketers or solicitors.
• Try to avoid listing income and work-related information on product registration and warranty cards.
• Be secretive about passwords or personal identification numbers (PINs) on bank cards, telephone cards, cellular phones, etc.
• Avoid giving out your home phone number.
• Don't use your Social Security number as your driver's license number. States that do so typically will give you a different number upon request.
• When making purchases over the Internet, only use Websites that offer a secure connection, or use an escrow service.

These are good, common sense steps to secure your interests. Also, remain alert to other situations where your financial privacy may be vulnerable.

Your Ability to Handle Disability

Most people pay little attention to how they might handle their family's living expenses should their income suddenly cease because of a sudden illness or injury. Perhaps this is because most people feel an injury or illness will never happen to them. However, the statistics are unsettling. One in every three men suffers a long-term disability (lasting 90 days or more) before age 65. The likelihood for women is even higher. Believe it or not, young people, between the ages of 25 and 55, are the most vulnerable. According to the National Association of Insurance and Financial Advisors (NAIFA, formerly known as NALU or the National Association of Life Underwriters), you are four times more likely to suffer a disability than death before age 42. This is why disability income insurance should be an important part of your overall financial portfolio.

Disability income insurance protects your most valuable asset—your ability to earn an income. You pay a periodic premium, and in exchange, if you are disabled and cannot work, the insurance company promises to pay you a predetermined benefit amount.

In order to understand the right type and amount of disability insurance for your needs, you'll first need to examine if you already have some coverage in place. For instance, you may have some form of disability insurance through your employer. If you do, it may be a good idea to find out if you have short-term and/or long-term coverage, and exactly how long the benefits last. Knowing what coverage you already have in place will help you to determine if you need additional coverage to help pay for your home or apartment, automobile(s), utilities, food, clothing, education, etc.—if, in the unfortunate event, you ever became disabled.

Likewise, if you're self-employed, you need to carefully examine how a disabling injury or illness could affect you, your family, and your business. Because workers compensation insurance is often confused with disability insurance, you need to know that workers compensation (required of employers in most states) only covers disabilities that occur while you're on the job. Hence, in order to qualify for benefits, the illness or injury must be work-related.

Since disability income insurance protects your potential future income, you should consider it as an important part of your insurance program. Remember that individual contracts can be specifically tailored to meet your personal and/or business needs. Because features and benefits vary widely from policy to policy, you may wish to discuss your needs with a qualified insurance professional. I can answer your questions and concerns, assess your needs, and help you make an informed decision.

Questions & Answers About 401(k) Plan Withdrawals

Q: When can I take money out of my 401(k) account without penalty?
A: You can take money out of your 401(k) account without incurring a 10% penalty if you're older than age 59½, if you take a loan from your 401(k) account, or under limited circumstances outlined in the Tax Code. However, income taxes are due with any withdrawal (not loan) from a 401(k) account.
Q: What are some of the limitations typically placed on borrowing from a 401(k)?
A: Many 401(k) plans allow participants to borrow from their respective accounts. Generally speaking, 401(k) plan loans cannot exceed the lesser of $50,000 or 50% of your vested account balance. The minimum amount you can borrow depends on the plan. However, by law, the plan cannot set a loan minimum that exceeds $1,000.
Q: Is borrowing from a 401(k) a good idea?
A: That depends on your specific situation. Generally speaking, your 401(k) account should only be considered as a source of funds preferably after all other options have been explored. Keep in mind, whether you withdraw or borrow from your 401(k), you may be defeating the original purpose and the benefits of such a plan—that is, saving for your retirement.