Life Insurance and Income Annuities
Written By: Alex Hammersley, CPA
Life is unpredictable, and one of the most significant responsibilities we have is to ensure financial security for ourselves and our loved ones. Life insurance and income annuities are two financial tools that can play a vital role in this endeavor. They offer distinct benefits and can be tailored to meet your specific needs, providing peace of mind and financial stability. In this blog, we will explore what life insurance and income annuities are, how they work, and why they are essential for securing your financial future.
Life insurance is a financial contract between an individual (the policyholder) and an insurance company. The primary purpose of life insurance is to provide a death benefit to your beneficiaries in the event of your passing. Here are some key points to understand about life insurance:
- Types of Life Insurance:
- Term Life Insurance: Provides coverage for a specific term, typically 10, 20, or 30 years.
- Whole Life Insurance: Offers lifelong coverage and builds cash value over time.
- Universal Life Insurance: A flexible policy that allows you to adjust premiums and death benefits.
- Death Benefit: When you pass away, the insurance company pays a lump sum to your beneficiaries, tax-free. This money can be used to cover living expenses, pay off debts, or fund educational expenses.
- Protecting Loved Ones: Life insurance ensures that your loved ones are financially protected, helping them maintain their quality of life and achieve their financial goals, even in your absence.
- Estate Planning: Life insurance can also be a valuable tool for estate planning, as it can provide liquidity to cover estate taxes and distribution of assets.
Income annuities are financial contracts that provide a steady stream of income for a specified period or for the rest of your life. They are designed to help individuals secure a regular income during retirement. Here’s what you need to know about income annuities:
- Types of Annuities:
- Immediate Annuities: Start providing income right away after a lump-sum payment.
- Deferred Annuities: Allow you to invest funds and receive income at a future date. This is the type of annuity we recommend here at Carlson Financial. Specifically the deferred fixed indexed annuity.
- Lifetime Income: One of the primary benefits of income annuities is that they can offer income for life, ensuring you won’t outlive your savings.
- Predictable Cash Flow: Annuities provide a predictable and reliable source of income, which can be essential for retirement planning.
- Customization: You can tailor your annuity to your needs, choosing options like joint and survivor benefits, and inflation protection, and you can even attach long-term care benefits to your income stream.
Life insurance and income annuities are powerful financial tools that can provide peace of mind and financial security throughout your life. They each serve specific purposes, whether it’s protecting your loved ones in the event of your death or securing a reliable income source in retirement. Understanding how these financial products work and how they can be integrated into your overall financial plan is essential for building a stable and secure future. While life insurance and income annuities serve different purposes, they can complement each other in a comprehensive financial plan. To make informed decisions about life insurance and income annuities, please contact us with any questions you might have. Your advisor is equipped and ready to help you set up a resilient financial plan.
Social media influencers say there are “generational wealth” benefits of parents adding their kids to their credit card accounts.
- One influencer says, “If you have a kid and a credit card do this: add your kid as an authorized user and pay the bill on time. By the time they turn 18 – boom: 800 credit score for them to succeed.”
- Another post says, “My parents did this for me and I actually have a credit history that’s older than I am because one of their cards was opened years before I was born. It gives me a much higher credit score.”
- Of course, financial professionals say parents should also be mindful of the downside risk. While there are benefits of helping your kids establish a solid credit history, there could also be some expensive lessons about racking up too much debt.
This week in history
1913 – American citizens receive information about the new national income tax for the first time. A married man living with his wife, who is in receipt of an income of $5,000 pays $10 a year and if his income is $10,000, he pays $60 per year.
1938 – Orson Welles’ “War of the Worlds” radio play is broadcast.
2007 – TV, film and radio writers went on strike, stalling production of TV shows and movies. Key issues included writers’ demands for a larger share of DVD revenues and payment for films and TV shows distributed over the Internet and other forms of new media.
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