Protecting Your Loved Ones with Life Insurance

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Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you’re young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.

Here are some questions that can help you start thinking about the amount of life insurance you need:

• What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?

• How much of your salary is devoted to current expenses and future needs?

• How long would your dependents need support if you were to die tomorrow?

• How much money would you want to leave for special situations upon your death, such as funding your children’s education, gifts to charities, or an inheritance for your children?

• What other assets or insurance policies do you have?

Types of life insurance policies

The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.

Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash-value account. During the early years of the policy, the cash-value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow–tax deferred–as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you’ll be entitled to receive the cash value, minus any loans and surrender charges.

Many different types of cash-value life insurance are available, including:

• Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability and financial strength of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.

• Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.

• Indexed universal life: This is a form of universal life insurance with excess interest credited to cash values. But unlike universal life insurance, the amount of interest credited is tied to the performance of an equity index, such as the S&P 500.

• Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.

• Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value and death benefit goes up or down based on the performance of investments in the subaccounts.

With so many types of life insurance available, you’re sure to find a policy that meets your needs and your budget.

Choosing and changing your beneficiaries

When you purchase life insurance, you must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, you should also designate an adult as the child’s guardian in your will.

What type of insurance is right for you?

Before deciding whether to buy term or permanent life insurance, consider the policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health, and financial picture change, so you’ll want to build some flexibility into the decision-making process. In any case, here are some common reasons for buying life insurance and which type of insurance may best fit the need.

Mortgage or long-term debt: For most people, the home is one of the most valuable assets and also the source of the largest debt. An untimely death may remove a primary source of income used to pay the mortgage. Term insurance can replace the lost income by providing life insurance for the length of the mortgage. If you die before the mortgage is paid off, the term life insurance pays your beneficiary an amount sufficient to pay the outstanding mortgage balance owed.

Family protection: Your income not only pays for day-to-day expenses, but also provides a source for future costs such as college education expenses and retirement income. Term life insurance of 20 years or longer can take care of immediate cash needs as well as provide income for your survivor’s future needs. Another alternative is cash value life insurance, such as universal life or variable life insurance. The cash value accumulation of these policies can be used to fund future income needs for college or retirement, even if you don’t die.

Small business needs: Small business owners need life insurance to protect their business interest. As a business owner, you need to consider what happens to your business should you die unexpectedly. Life insurance can provide cash needed to buy a deceased partner’s or shareholder’s interest from his or her estate. Life insurance can also be used to compensate for the unexpected death of a key employee.

Review your coverage

Once you purchase a life insurance policy, make sure to periodically review your coverage; over time your needs will change. An insurance agent or financial professional can help you with your review.

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IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

How To Start Investing With A Small Amount Of Money

smallmoneyOutside of a 401(k) or other employer-sponsored retirement plan, do you invest? If you answered no, you are not alone. Investing is often seen as the domain of the wealthy, not for people who only have a small amount of money left over at the end of month. True, brokers may not be rushing to roll out the red carpet for you if you can only invest $300 a year, but there are many investment choices for those of us without a lot of cash to spare.

Why is investing a wise financial move? Because of inflation (the rise in the cost of goods and services over time), if you keep all of your savings in a safe vehicle that provide a low return, such as savings account, certificate of deposit, or shoebox buried in the back yard (just kidding about the last one!), the real value of your money will decline over time. While you should keep your emergency and short-term savings in an easily accessible account that you know won’t lose value, it is a good idea to put long-term savings in vehicles that have the potential for a higher return. (One caveat, if you have credit card or other high-interest debt, it is a good idea to pay that off before investing – chances are that the interest you are being charged is greater than what you will earn on your investments.) Historically, in the long run stocks have provided the highest return, followed by bonds, with cash equivalents (i.e. the safe vehicles mentioned above) providing the lowest return.

Dividend Reinvestment Plans and Direct Stock Purchase Plans
Direct stock purchase plans (DSPs) and dividend reinvestment plans (DRIPs) can be a great option for the small-time investor. Under a DSP, you purchase stocks directly from the company offering them, allowing you to skip using a broker (and the commission charges that go along with that – although be aware, some companies charge a fee for their DSP.) You can make a single purchase (usually the minimum is set fairly low) or set up an automatic regular purchase plan. In order to participate in a DRIP, you must already have at least one share in the company. Instead of receiving cash dividend payments (a distribution of a portion of the company’s profits to stockholders), you receive an equivalent in additional shares of stock. So if the stock is selling at $10 a share and the dividend payment is $20, you would get 2 shares. Many DRIPs also allow you to purchase additional shares after you enroll. To get started, go on-line – there are many websites that list what companies offer a DSP and/or DRIP.

Mutual Funds
One of the most fundamental rules of smart investing is that you should have diversity. Think about it – if your whole investment portfolio consists of shares in Company X and Company X goes out of business, you are sunk, But if you are also invested in Company A, B, and C and have some bonds as well, it will have less of an impact. Purchasing shares in a mutual fund is an easy way to get diversity. In a mutual fund, money from several investors is pooled to buy different stocks, bonds, and/or cash equivalents.

One potential downside to investing in mutual funds is that they can come with sizeable fees that eat away at your profits. When selecting a fund, you should pay attention to its expense ratio – the percentage of the funds assets that are used to pay for expenses. Index funds, which track a particular index, such as the S&P 500, often have a very low expense ratio because there is no advisor actively picking funds. Also look at the load – the sales commission that is charged by the broker and/or financial advisor. There are many no-load funds available as well as on-line/discount brokers that charge low commission fees.

Another challenge for the small-time investor is that the minimum amount required to invest is commonly a thousand dollars or more, so you may have to do some research to see what mutual funds allow you to buy in with a lower amount. Often the minimum amount is lower if you are investing through an Individual Retirement Account (IRA). But because it is a tax-advantaged account for retirement, there are rules about withdrawing money. (See the IRS’s website, www.irs.gov, for more information.) Roth IRAs offer a bit more flexibility than Traditional IRAs – you can withdraw your contributions at any time without paying a penalty.

Invest your pennies today, and you can have dollars tomorrow.

 

© 2013 BALANCE

Keep Investments in the Family

NASA FCU Investment Services

Looking to give money or investments to your children and have access if you need it? It may sound like a “having your cake and eating it too,” but it can be done.

Under certain circumstances, you can, in fact, invest your cash so that your principal is guaranteed, have access to that cash if you absolutely need it and, in the future, pass on an amount to your heirs that is significantly greater than the cash you invested. As always, there are advantages and disadvantages to every alternative and you need to consider all sides of any strategy.

To help you determine if this or other options would be most beneficial to you as part of an overall legacy plan, the knowledgeable CFS* Financial Advisors at NASA FCU are standing by. Contact us today by visiting us at nasafcu.com/investmentservices, or by calling 301-249-1800 or toll-free at 1-888-NASA-FCU (627-2328), ext. 314.

Insurance products and services are offered through CUSO Financial Services, L.P. (“CFS”). Products offered through CFS are not NCUA/ NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. NASA Federal Credit Union has contracted with CFS or SPF to make non-deposit investment products and services available to credit union members.

Estate Planning—Not Just for the Rich and Famous

Estate Planning

Ask yourself this question: Do you own something of value that you wish to pass on to someone one day? If you answered “yes,” regardless of your income or assets, you and your heirs will likely benefit from some basic estate planning.

Do I Need a Will?  

A will, the cornerstone of any good estate plan, is a document that allows you to clearly spell out who is to receive your personal property upon your passing. Leaving this duty to your children, a spouse or the courts after you’re gone means that your wishes may not be fulfilled. Depending upon the complexity of your situation, you may also benefit from legal, financial and tax advice as well.

Review Beneficiary Designation

One critical piece of planning includes making sure you successfully transfer your assets to your designated beneficiaries. Changes in your family situation, which may include a marriage, divorce or birth/adoption of a child, make the regular review of your beneficiary designations a necessity. Knowing that your assets will go to the intended loved ones can bring you greater peace of mind.

Consider Life Insurance

Life insurance can be a crucial component of sound estate planning, especially if you have dependents. It can be a good idea to estimate what it would cost to pay off your debts, such as mortgages, car loans, or credit card debt, or to send a child to college.

Consult a Financial Professional

Given the many components of a proper estate plan, making sure you have all the pieces in place may seem like a daunting task. The qualified CFS* Financial Advisors at NASA FCU can help ensure that your financial assets are positioned in a way that is consistent with your current needs, risk tolerance and long-term goals.

Speak with a CFS Financial Advisor* at NASA FCU today by visitingnasafcu.com/investmentservices, or calling 301-249-1800 or toll-free at 1-888-NASA-FCU (627-2328), ext. 314.

 

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. NASA Federal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.