Annuities and CDs (bank certificates of deposit) are similar in that they are safe, secure investments with guaranteed rate of returns based on interest rates, both issued by large financial institutions. The difference is that Banks issue CD”s and Insurance Companies issue Annuities.  But that is not where the difference ends.

(Have you ever wondered a Bank would sell Annuities for insurance companies even though the banks design and offer their own CD’s?)

Here are some of the reasons why …

Annuities offer everything CDs offer with some very real advantages …

1. Generally Higher returns
2. Tax-Deferral
3. Liquidity

[CDs are insured by the FDIC (a branch of the government), while Annuities have safety measures in place by the state to ensure Insurance companies have reserve pools in place. Insurance companies are also generally rated by independent rating firms -- i.e. A.M. Best, Standard & Poor's, etc..]

Higher Returns:
Annuities, like CDs, pay interest. CD’s move with the market, as do Annuities, but Annuities have a minimum guarantee in place. Your investment will never dip below the guaranteed minimum interest rate during times of falling or low interest rates.

Again, low interest rates mean CD returns will be low as well. To offset the problem of low or falling interest rates, insurance companies equip annuities with guaranteed minimums. This is an agreed minimum rate of interest so that your investment is assured not to fall below the minimum performance even if CD rates do.

Tax Treatment:

• You pay annual taxes on CD interest earned without being able to withdraw funds until your investment term is over.
• Annuities also have  set term, however, … the earnings are tax-deferred. You only pay taxes on interest earned when money is withdrawn. So you defer taxes to a time when your tax rate is expected to be lower.

Liquidity:

• With CD’s, you may not withdraw money during the term that you agreed to.
• Annuities are generally issued for longer terms than CD’s. However, annuities do have z provision that allow you to withdraw money, generally 10% of your account value annually without penalty, if you are 59 1/2 or older or have another qualifying event. In addition to this provision, many contracts allow you to remove money for many reasons, generally related in some fashion with health or other calamity. Each contract is different, so it’s important to ask this question.  Another advantage to annuities is that they often may be structured to pay-out over a period of time – even your lifetime! This spreads the tax burden and makes it much more manageable.  To sum it up, Annuities are flexible and are an excellent tool in a persons retirement planning.

Look over the chart below and then call me if you have money in a CD or even in a 401K or another Annuity. There is a very good chance that I can offer you something you will find more to your liking.

It’s not uncommon for people to have the view that insurance is like the lottery … a big gamble.

For a person who has never filed a claim, I guess I understand them having this view. However, I want to examine this conclusion for just a moment.

According to information posted on the Internet:

The odds of winning the California Super Lotto Jackpot are 1 in 18 million! Other lotteries may have slightly better “odds”, such as 1 in 15 million! (Feel better now?)  Here is another way of looking at it:  If one person purchases 50 Lotto tickets each week, they will win the jackpot about once every 5,000 years.

How do those odds compare to the odds of an insurance claim being filed?  For instance, what about the chances of ever needing disability income?

If you are currently 25 years of age, there is a 1 in 44 chance you will be disabled and unable to work at some point in your life.  This statistic increases with age, so that, when you are 55 years of age, the chances have increased to 1 in 27!

Similarly, what about the chances of  needing some type of in-home or facility care (non-hospital) when a person gets older?  To answer this, I will quote from the respected, Wall Street Journal, which stated

… a couple turning 65 has a 75% chance that one of them will need long term care.

This high risk can also affect the entire family where the children are at risk of a negative inheritance, also according to the Wall Street Journal.

Along these same lines, The National Academy of Elder Law Attorneys did a study and compared the risk of needing long term care with the risk of other financially devastating risks, such as a major auto accident, or a fire in a person’s home. According to that study, the rates of risk were:

• Automobile accident 1 out of 240 [0.4%]
• Fire damaging your home 1 out of 1,200 [0.08%]
• Needing long term care assistance 1 out of 2 [50%]

Of course the chance of dying is 1 in 1 [100%].

The biggest difference between the two “products” is – the lottery appeals to peoples desires, while properly selected insurance provides “Real Solutions for Real Risks”.  Sometimes the real reason we do not make decisions about insurance coverage, is that we “know” we can’t afford all the types of insurance we could buy, so we just kind of dismiss them all.

I am here to help you.

I will never pressure you to buy this or buy that. I will provide you objective and well-researched information to tailor the product to your need and circumstances.  This is true whether you’ve bought insurance in the past, or if you’ve put off buying insurance. I will help youget the best value for your hard earned dollars.

What is the cost of the insurance? Obviously this depends on you and your needs, but one thing I will assure you: it’s a lot less than buying lottery tickets!

Just ask … I can help! Call me at 209-390-1163 and I will show you the best way for you.

You Need a Budget

Keep reading. I promise you this makes sense and there are health insurance options for you out there.

We all need to budget.

Why?

It makes sense for YOU to be the one who decides how to spend your hard-earned dollars.

Quite likely, most have been in that situation where we feel like we’re just putting out “fires.” As soon as we have one doused we turn around and there’s something else that needs immediate attention because it’s about to burn the place down so now all of your resources are aimed at putting that “fire” out.

That’s letting the figurative financial “fires” determine how you spend your money. It’s exhausting. And consumes too much energy and resources – and all too often the important stuff gets postponed. Like health care.

Now, it’s a given – health insurance is not “cheap”. Health care is expensive too. The government continues to come up with new and innovative Band-Aids for the whole health care system.   Time will tell what will come of all of that.

Meanwhile there’s really too much at stake to postpone taking charge of YOUR health care.

One of the most affordable options can be a high-deductible, HSA-qualified health insurance plan.

What??

Why bother with an insurance plan with a really high deductible? You’ll be buying insurance AND STILL having to pay for the doctor, right?

This is what I want you to do. I want you to reframe that thought. Do you have a home? Do you make payments on your home? Do you pay the taxes on your home?

Why do you do that? Likely because you like your home and you want to keep it. You are protecting your investment – because if you don’t pay those things, you could lose it. Think of a high-deductible insurance plan as yet another way to protect your investment. If you get sick and have a major expense (and it does not take much to qualify as “major”), health insurance will keep that particular “fire” from consuming your most valued asset.

So…how do you AFFORD health insurance on top of everything else in this miserable economy?

Careful planning and choosing the right insurance policy can make health insurance affordable. You may be surprised to find that there are health insurance options that will fit your budget and and give you the peace of mind you need as one more way to protect your assets.

One option – an H.S.A.

What is an H.S.A.?

It stands for Health Savings Account. It is provided for in our tax code to allow a person to have a high deductible health insurance plan, and also contribute tax-deductible money to a Health Savings Account (at a bank). Money going into the account is tax deductible. Any money coming out of that account – when spent on health care (i.e. paying the doc from this account) is not taxable.

Another benefit to funding your H.S.A. – if you are in the 28% tax bracket, and you do fund the account and you do pay medical expenses from this account, it is as if you are paying the doctor, dentist, optometrist, chiropractor – whomever your helath care professional may be – with 72 cent dollars. I’ll bet you like the sound of that! Your health care is CHEAPER!!!!

But what if….

What if I cant do it? What if I can’t get my H.S.A. funded with enough $ in it to cover my deductible? Now what good would it be to have purchased this high-deductible insurance policy?

OK…let’s just come up with a hypothetical situation here. I’m not suggesting or recommending you do this – but let’s talk about this particular “what if?”

You’re self-employed.  You end up injured on your job, or that funny pain in your gut turns out to be a bad gallbladder/appendix – whatever. You land in the hospital. You have insurance, so at least they TOOK YOU as a patient right? But oh no…the deductible is terribly high.  You know you don’t qualify for any of the charity programs because you own your house and your business etc.  This sure does look like the straw that will break the camel’s back. Oh worry. Why didn’t I at least save for that blasted deductible?  Or… Why didn’t I just bite the bullet and pay for a more expensive policy? How fast can I get out of this place?! Worry. Worry. Worry.

You leave the health care facility with a payment plan – which you now add to your budget. Each month you’ve agreed to pay the health care facility $100 – or whatever. Why don’t you just put that $100 in your H.S.A. and pay them out of THAT account? $100 in (tax-deduction for you) – $100 out – paying back the debt to the hospital – no penalties for withdrawal from H.S.A. because it’s for a medical expense you incurred after establishing your H.S.A. – if you’re in that 28% tax bracket – you’re paying them back with a .72 dollar.  It’s not the best way to plan for the future – but it’s still better than NOTHING.

Did you know?

When you turn age 65 – ANY money that has not been used and is still in your H.S.A. can now be converted to an I.R.A. and used for retirement purposes.  Again:  No penalties or taxes?

I can help you with this.

Call me or e-mail me and let me explain what’s available. You might just be surprised that it actually will fit into the budget.

Check it out.

• Budget Software – I use it but I’m not affiliated with YNAB. They make budgeting EASY and maybe a little fun.
• Contact Michael about Insurance and HSA options.

Without being political, I cannot allow my readers to believe that what is being widely reported by the traditional news organizations is truthful. It is not. I have noted repeated misstatements and what I call endrounds (that is saying something that may be true in itself yet serves to obfuscate the listener).

The Health Proposal in Congress is long. Few if any know everything that is in the bill. However, a Duke Professor did an analysis on it and I thought it worth posting. He allows the language in the Bill to speak to the questions. No interpretations … just a reprint of what is in the Bill.

http://www.classicalideals.com/HR3200.htm

This in no way addresses all of the concerns people have about this issue, but it does a pretty good job addressing some of the false reporting going on by those who seemed to have forgot what the word “reporter” means.

There is a lot more to this, but my pupose here is to educate, not editorialize. But, if there is anything I can answer for you, please do call me or email me.

Michael Myers

My wife and I just got back from a trip to her home town.  Her aunt passed away, so we attended the funeral.   My wife’s aunt had things well arranged ahead of time, and so things went very smoothly for the family with arranging for the funeral.

The family was free to concentrate on the things that mattered, remembering her, re-strengthening family ties and visiting with loved ones who were able to make the journey “home” to pay their last respects.  All of the business of funeral planning had been taken care of in advance.

Pre-planning and writing down one’s wishes only makes sense. And one does not need to be “old” to do this.  As it says in the book of Ecclesiastes:  “Time and unforeseen occurrence befalls us all.”  So, it is prudent to plan for the worst and hope for the best.

Do you have a Memorial Guide?  I feel so strongly about their importance, that much of what I offer with regards to completing one, I offer without charge (free).

 If a person’s circumstances change, they can update their Memorial Guide as the need exists. It literally only takes a few minutes to make a change.

Some people might say, “Oh, I have that in my will.”

While I highly recommend having a will, it is often the case that a will is not read until sometime after the funeral. One of the benefits of having a Memorial Guide prepared is that it provides your survivors information as to where your will is located as well as other important matters. (If you do not have a will, I can get you a discount on having one made. It costs less than one hundred dollars).

Your Memorial Guide also provides information as to how you are funding your last arrangements. This could be money you have that is set aside for this purpose or you may have funeral insurance* – a form of life insurance that is designed to provide funds quickly.  All of this important information is contained within your Memorial Guide.

*Funeral insurance is low cost and often available even in situations where traditional life insurance may not be possible.  Ask me about it, and I will be happy to tailor a plan to your specific needs.

I’m here to help you with this. I offer the Memorial Guide and advice free to all who ask for it. Give me a call or email me and I will provide you with your free Memorial Guide.

There was a story in The Record yesterday, apparently picked up from the Wire Services (or so the editor told me), that made the statement that Medi-Cal is California’s version of Medicare. This is not correct, and since this is an ongoing point of confusion, I thought I would take a moment and explain.

Medicare is the government health care system, typically available to you at age 65. There are exceptions to this statement, such as a person may be able to qualify early in cases of disability or sometimes will not elect to go on it until a later age when they are still working. However, for purposes of keeping it simple, it’s the health insurance you get when you retire at age 65.

Medicaid is government health insurance for those of little means. It has many qualifications, but in all cases is income based.

Medi-Cal is California’s version of Medicaid, not Medicare.

I just wanted to clear that small error up.

And remember, if you have Medicare, I offer services that can help you determine what supplemental program may best meet your needs. Give me a call. I can help you.

The Wall Street Journal reported that court-appointed trustee Irving Picard is now looking to Madoff’s clients who got their money in previous years for them to ante up so that the money can be distributed “fairly”.  To this end, he has filed so-called “clawback” suits. In other words, although these people were completely innocent of any wrongdoing, Mr. Picard wants them to become victims also, so that everyone suffers equally. The implications of this are far reaching. How could anyone ever trust any investment if people like Mr. Picard are allowed to back date things?

If you are in this situation, you may wish to consider moving this money into “exempt” assets. One of those assets could be life insurance, annuities and other retirement accounts. You may want to do this quickly.

I can help you with this. Each case is different and will require my services as well as a qualified CPA or tax lawyer that can give you independent advice on this. Let me know if I can help you with this. I work closely with other professionals in complicated matters like this.

But whatever you do, do it now.