Dollars and Sense

Table of Contents

 

 

#1 The Reality

6

Tough Economic Times

6

Inflation and Retirement

7

Inflation Definitions

7

What exactly is inflation?

8

Measuring Inflation

Calculating Annual Inflation Rates

9

10

Causes of Inflation

10

Consequences of Inflation

13

Unanticipated Inflation

14

Do the Math

16

Insufficient Planning

17

Longevity

18

Retiring Too Soon

21

Retirement Funding

23

Rising Medical Costs

23

Long-Term Care Insurance Policies

27

Selecting the Appropriate Insurance Policy

29

Preserving Retirement Plans / Debt

30

Debt Affects Insurance Rates

Saving for the Future

33

33

An Aging Nation

36

Employing the Right People

38

Compounding Power

40

Retirement Income

40

Social Security Benefits / Age of Collection

41

Supplementing What We Have Saved

42

Women Live Poorly in Retirement

42

Primary Insurance Amounts (PIA)

43

  Benefit Based on PIA and Age / Other Methods

45

  Average Indexed Monthly Earnings

45

Special Minimum Benefits

46

Old-Law Benefit Tables

46

Summary / Monthly Benefit Amounts

47

Old Computing Methods

47

Average Indexed Monthly Earnings

47

Indexing Yearly Income

48

Computation

48

Employer Pension Benefits

49

Tax Deferred Retirement Benefits

49

Individual Savings

50

Managing Income in Retirement

50

Pre-Retirement Income

50

Retirement Shortfalls

51

Getting a Return on Savings

53

Receiving Income from Investment Vehicles

56

Taxation

Withdrawals Prior to Age 59 1/2

56

57

 

 

#2 Retirement Considerations

59

Medicare Supplemental Insurance

59

Long-Term Care Insurance

61

Forward Planning

62

Become Involved / Safety and Security

63

An Emergency Fund

64

Durable Power of Attorney / Estate Planning Tools

65

Necessary Steps

66

Good Decision Making Requires Knowledge

69

Deferred Compensation Plans and Divorce

70

Types of Retirement Assets

70

457 Deferred Compensation Plan

72

 

 

#3 Individual Retirement Accounts

73

IRAs are legal due to the IRCs

73

IRA Choices

73

Tax Free Retirement

74

Differences Between Roth and Traditional IRA

76

    Roth Advantages

76

    Roth Disadvantages

78

Double Taxation

79

Roth IRA Eligibility / Conversion Limits

80

Advantages of the Traditional IRA

80

Traditional IRA disadvantages

81

Transfer Versus Rollovers

82

IRA Loans

82

Coverdell Educational Savings Account

83

IRA Funding Limitations Exist/IRA Investments

83

Fund Distributions

84

Bankruptcy

85

Creditor Protection

86

 

 

#4 Life Insurance

87

Policy Provisions / Defining the Contract

88

Policy Application

89

Policy Ownership

90

Preventing Money Laundering Activities

90

Terrorism Produces Insurer Risk

91

Legal Requirements Adopted

92

Broker-Dealer Requirements

94

AML Program Requirements

95

Know Your Customer (KYC)

98

Compliance

98

Suspicious Activity Reports Filing Requirements

98

A Change in Thinking

99

A Global Problem                                                             

100

Covered Products

102

Nine Identified Money Laundering (ML) Methods

103

Money Laundering Indicators Not Unique to Insurance Products

 

106

Policyholder Characteristics and Behaviors

107

    Known Criminal, Associate, or Relative

109

    Erratic or Abnormal Use of Policies

109

    High Premiums Compared to Verifiable Income

109

    Lack of Concern for Charges or Costs

110

    Undue Interest in Payout Options

110

    Change of Beneficiary

110

    Insurance on Assets Inconsistent With Income

110

Early or Suspicious Claims

111

Product Characteristics and Maintenance

112

Customer Due Diligence (CDD)

114

Policy Features and Provisions

116

Premiums

117

Policy Options

117

    Nonforfeiture Options

117

    Dividend Options

118

    Settlement Options

119

State Required Provisions

120

    Incontestability

121

    Misstatements in the Application

121

    Deferment Clause

122

    Non-forfeiture / Loan Values

122

    Grace Periods and Reinstatement

123

Allowed Policy Provisions

124

    Suicide / Aviation / War

124

General Provisions

125

    Deduction of Indebtedness and Premium Refund

125

    Change of Beneficiary

125

    Assignment

126

Beneficiary Designations

126

Policy Payments

128

    Cash Values

128

    Dividends / Proceeds

129

    Special Clauses

130

Contract Use

132

Group Insurance Principles

132

Eligible Groups

132

    Single Employer Groups

132

    Multiple Employer Trusts (METS)

133

    Unions, Associations, and Other Groups

133

Creditor-Debtor Groups

133

Underwriting Advantages

134

Keeping Current with Business Needs

135

The Informed Consumer

136

Providing a Quote

136

The Contract Participants

138

    The Insurer

138

    The Insured

138

    Insurance Contract

139

    Underwriting and Rating

139

    Finance

140

A Public Interest

140

Key Person Insurance

141

Buy-and-Sell Agreements

142

The Key Person Principle

143

    Insurable Interest for Life Insurance

143

    Disability Insurance on Key Employees and Owners

145

The Small Company’s Exposure

147

    Loss of the Small Business Owner

147

Planning Ahead for Death or Disability

151

Insuring Entities

152

Private and Government Insurance

152

Private Insurers

152

    Life Insurance

153

    Property and Liability Insurance

153

Government Insurance

154

    Voluntary Government Insurance

154

    Compulsory Government Insurance

154

Mutual Companies

155

    Assessment Mutuals

156

    Non-assessable Mutuals

157

    Conversions

158

Reciprocal or Inter-Insurer Associations

159

Stock and Mutual Underwriting

160

Factory Mutuals

160

Superior Agents and Brokers

162

 

 

#5 Insurance Trusts

165

Creating the Trust

165

Types of Trusts

167

Trust Establishment

169

Trust Situs (Location)

170

Duties and Obligations of a Trustee

170

The Life Insurance Trust

171

Life Insurance Trusts and Federal Estate Taxes

172

Disadvantages of Life Insurance Trusts

174

Providing Financial Structure

175

Avoiding Estate Taxation

176

The Annual Exclusion

177

The Final Payoff

177

Charitable Trusts

178

Charitable Remainder Trusts

178

    Advantages

180

    Disadvantages

180

Bypass Trusts

181

Crummey Trusts

182

Inheritance Tax versus Estate Tax

183

Trust Longevity

184

Taxes / Trust Fees

184

Trusts and Wills

185

 

 

#6 Annuities

187

Annuity Choices

187

    Joint and Survivorship Annuities

187

    Guaranteed and Life-Time-Certain Annuities

188

    Level Annuities

188

    Capital-Back Guaranteed Annuities

188

    Escalating Annuities

189

    Inflation-Linked Annuities

189

    Enhanced Annuities

189

Annuity History

189

Annuity Terminology

193

Annuity Basics

197

    Choosing Between Fixed and Variable Annuities

198

    Choosing Between Lifetime and Term Annuities

199

    Company Financial Strength

201

Annuity Extras

201

    Principal Protection

201

    Cost of Living Protection

201

The Ups and Downs of Annuities

202

    Tax Efficiency

202

Supplementing Other Retirement Income

202

    Reasons to Buy an Annuity

203

    Reasons to Avoid Buying Annuities

203

Making the Right Annuity Choice

204

    Many Annuity Choices

205

Annuities for Retirement

207

    Everyone is Living Longer These Days

207

    Putting Off Retirement

208

Fixed Rate Annuities

210

    How Fixed Period Annuities Work

210

Variable Annuities

211

    Annual Expenses

212

    Funding Variable Annuities

213

    Variable Annuity Fees

213

    Variable Annuity Death Benefit

214

    Surrender Fees

214

    Early Withdrawal Penalty

214

    Taxation

214

Equity Indexed Annuities

214

 

 

#7 Employer Sponsored Pension Plans

216

Private Pension Plans

216

Changing Plan Designs

220

Flexible Spending Accounts

224

Benefit Plans for Retirement

225

    Defined Benefit Plans

225

    Defined Contribution Plans

226

401(k) Plans

226

    “Topic 424 – 401(k) Plans”

229

    “Topic 412 – Lump-Sum Distributions”

230

    “Topic 413 – Rollovers from Retirement Plans”

231

Funding

232

    401(k) Plan Contributions

234

    401(k) Tax consequences

239

    Fund Withdrawals

239

    Minimum Distributions Required

241

    Highly Compensated Employees (HCE)

242

401(k) Plans for Small Businesses

242

Initial Actions

243

    Adopt a written plan

243

    Arrange a trust fund for the plan’s assets

244

    Develop a recordkeeping system

244

    Provide plan information to eligible employees 

244

        Participation

245

        Contributions

245

    Traditional 401(k) Plan

245

    Safe Harbor 401(k) Plan

246

    SIMPLE 401(k) Plan

246

    Vesting

246

    Nondiscrimination

247

    Investing 401(k) Monies

247

Fiduciary Responsibilities

247

        Basic Responsibilities

248

    Limiting Liability

248

    Hiring a Service Provider

249

    Prohibited Transactions and Exemptions

250

    Bonding

250

    Disclosing Plan Information to Participants

250

    Reporting to Government Agencies

251

    Form 5500 series

251

    Form 1099-R

252

    Terminating a 401(k) Plan

252

    Compliance

252

Simplified Employee Pension Plans (SEP)

253

    Rules Governing SEPs

255

    SEP Advantages

256

    SEP Terms

256

    Establishing the Plan

257

    Operating the SEP Plan

258

    SEP Contributions

258

    Employee Communications

259

    Reporting To The Government

259

    Distributions

259

    Monitoring The Trustee

260

    Terminating The Plan

260

    Correcting Errors

260

    Owners Benefit Less than Non-owner Employees

260

Divorce and Retirement Accounts

261

    Retirement Plans at Work

261

        QDRO

261

IRAs and SEPs

263

Women are Receiving More These Days

264

Keep Premarital Assets Separate

264

Protect Your Inheritance

264

After the Divorce

264

Dividing Other Investments

265

Good News for Attorneys

266

 

 

 

 

#8 Sensible Ethics

267

What Ethical Agents Know

267

Insurance Perceptions

268

Establishing Goals

269

Why be Ethical?

272

Following the Law

273

Ethics in the Workplace

274

    Definition of Ethics

274

The Same by Any Name

275

Putting the Past into the Future

277

Companies Set Guidelines

281

Promoting Ethical Behavior

287

Egoism

290

Is it possible to teach ethical behavior to others?

291

What is the scope of ethics?

291

What does it take to be a moral person?

292

What quality of work do you want to perform?

293

What do I want my legacy to be?

293

The Leaders of the Pack

294

What are our responsibilities to other moral persons?

296

Objectivist Ethics

298

Holding our Ethic Code

299

Sympathy versus Empathy

304

Looking the Part

305

Courtesy

306

Mores

306

Education/Continuing Education

311

    Getting Education in a Timely Manner

312

Laying Out Policy Benefits and Limitations

314

Policy Replacement

316

Why would an agent replace their own business?

317

When the Agent Allows Misconceptions

318

When the Premiums Seem too High to the Client

319

Obtaining Proper Application Signatures

319

Keeping in Touch after the Sale

319

Selling the “Fast Buck” Item

320

Commingling Funds

321

The Professional

321

Preparing for Tomorrow

322

Fixed and Variable Income

322

Financial Management

323

Due Diligence

324

Technical Approach or Common Sense Approach?

326

Selecting Insurers to Represent

333

If It’s Legal . . .

334

Last page

336

 

 

Thank you,

United Insurance Educators, Inc.

2015