Monitor your progress
Reaching your financial goals takes time, and you can expect to
encounter bumps along the road. So review your comprehensive financial
plan at least yearly and revise it as needed. The following events
should definitely trigger a review:
- Marriage, divorce or death of a
spouse,
- Birth of children or grandchildren,
- Catastrophic illness or disability,
- Substantial tax law changes,
- Retirement, significant income loss
or business failure, and
- New goals.
Insuring against postmortem
financial crunches
If you’re buying life insurance as part of your estate
plan, what type should you get? Companies offer two basic policy types:
term and permanent. If you buy term insurance, you pay a premium for
protection over a specified time. Initial policy costs are relatively
low, but coverage becomes more costly and difficult to obtain as you
age. So unless you die prematurely, this type of insurance won’t support
your long-term estate planning goals.
Permanent insurance offers wealth accumulation in addition to the
standard protection of a term policy. The insurance company invests a
portion of your cash outlay for a period of years, allowing the cash
value to grow. Initial premiums are higher and increase as you age, but
investment earnings help offset the added costs. Policies remain in
force for life, so they can support long-term estate planning goals.
Even better, investment earnings accumulate on a tax-deferred basis, and
flexible policies provide multiple investment options. |
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Tax Tips
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Check out solo 401(k)s
If your company employs only you and your spouse,
consider a solo 401(k) plan with a profit-sharing
contribution. You can contribute significantly more to
it at lower income levels than most other retirement
plans: In 2005, the limit, with some additional
restrictions, is $42,000 or 25% of compensation,
whichever is less
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Plan your route to
long-term financial security
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When you travel to a new place, you’re
more likely to arrive on time if you know what roads to
take. Reaching your monetary goals requires
comprehensive planning too. The difference? You’re not
mapping out a vacation, but your lifetime financial
security.
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Life insurance
increases heirs’ cash flow
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Making an estate plan? Be sure to
consider how much cash your heirs will need immediately
after your death and in the ensuing months. If it’s
evident these difficult times will leave them
financially strapped, think about buying life insurance.
It can smooth the way for loved ones suddenly faced with
funeral expenses, daily living costs and estate taxes
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