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IRS Announces 2018 Retirement Plan Contribution Limits | Maryland Benefit Advisors

On October 19, 2017, the Internal Revenue Service (IRS) released Notice 2017-64 announcing cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items. The following is a summary of the limits for tax year 2018.

For 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plans:

  • The elective deferral (contribution) limit increases to $18,500 for 2018 (from $18,000 for 2017).
  • The catch-up contribution limit for employees aged 50 and over who participate in these plans remains at $6,000.

For individual retirement arrangements (IRAs):

  • The limit on annual contributions remains unchanged at $5,500 for 2018.
  • The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000 for 2018.

For simplified employee pension (SEP) IRAs and individual/solo 401(k) plans:

  • Elective deferrals increase to $55,000 for 2018, based on an annual compensation limit of $275,000 (up from the 2017 amounts of $54,000 and $270,000).
  • The minimum compensation that may be required for participation in a SEP remains unchanged at $600 for 2018.

For savings incentive match plan for employees (SIMPLE) IRAs:

  • The contribution limit on SIMPLE IRA retirement accounts remains unchanged at $12,500 for 2018.
  • The SIMPLE catch-up limit remains unchanged at $3,000 for 2018.

For defined benefit plans:

  • The basic limitation on the annual benefits under a defined benefit plan is increased to $220,000 for 2018 (from $215,000 for 2017).

Other changes:

  • Highly-compensated and key employee thresholds:
    • The threshold for determining “highly compensated employees” remains unchanged at $120,000 for 2018.
    • The threshold for officers who are “key employees” in a top-heavy plan remains unchanged at $175,000 for 2018.
  • Social Security cost of living adjustment: In a separate announcement, the Social Security Administration stated that the taxable wage base will increase to $128,700 for 2018, an increase of $1,500 from the 2017 taxable wage base of $127,200. Thus, with respect to higher-income employees, the maximum Social Security tax liability will increase slightly for both the employee and employer.

The chart below summarizes some of the more common adjustments to employer-sponsored retirement plans.

 

 

Originally posted by www.ThinkHR.com

3 Ways Life Insurance Can Help Maximize Your Retirement | Maryland Benefit Advisors

If you’re one of the millions of Americans who owns a permanent life insurance policy (or are thinking about getting one!) you’ve probably done it primarily to protect your loved ones. But over time, many of your financial obligations may have ended. That’s when your policy can take on a new life—as a powerful tool to make your retirement more secure and enjoyable.

Permanent life insurance can open up options for you in retirement in three unique ways:

1. It can help protect you against the risk of outliving your assets. Structured correctly, your policy can provide supplemental retirement income via policy loans and withdrawals. Having a policy to draw from can take the pressure off investment accounts if the market is sluggish, giving them time to rebound. Some policies may also provide options for long-term care benefits. At any time, you may also decide to annuitize the policy, converting it into a guaranteed lifelong income stream.

2. It can maximize a pension. While a traditional pension is fading fast in America, those who can still count on this benefit are often faced with a choice between taking a higher single life distribution, or a lower amount that covers a surviving spouse as well. Life insurance can supplement a surviving spouse’s income, enabling couples to enjoy the higher, single-life pension—together.

3. It can make leaving a legacy easy. According to The Wall Street Journal, permanent life insurance is “a fantastically useful and flexible estate-planning tool,” commonly used to pass on assets to loved ones. Policy proceeds are generally income-tax free and paid directly to your beneficiaries in a cash lump sum—avoiding probate and Uncle Sam in one pass. Your policy can also be used to pay estate taxes, ensure the continuity of a family business, or perhaps leave a legacy for a favorite charity or institution.

Having a policy to draw from can take the pressure off investment accounts if the market is sluggish, giving them time to rebound.

If you do expect your estate to be taxed, you can even establish a life insurance trust, which allows wealth to pass to your heirs outside of your estate, generally free of both estate and income taxes.

Where to start? A policy review
If you’ve had a life insurance policy for awhile, schedule a policy review with your life insurance agent or financial advisor. By the time you reach mid-life, you may have a mix of coverage—term, permanent, group or even an executive compensation package.

Your licensed insurance agent or financial advisor can help you assess your situation and adjust a current policy or structure a new policy to help you achieve your retirement planning goals.

If you have no coverage at all, there’s no better time than today to get started. Life insurance is a long-term financial tool. It can take decades to build permanent policy values to a place where you can use them toward your retirement goals. And, health profiles can change at any time. If you’re healthy, you can lock in that insurability now and look forward to years of tax-deferred (yes!) policy growth.

Retired already? The best thing you can do is meet annually with your personal advisors to ensure your plans stay on track. Market conditions and family circumstances change, so that even the best-laid plans require course adjustments over time.

By Erica Oh Nataren

Originally posted by www.LifeHappens.com

 

Life Insurance for a Family of One | Maryland Benefit Advisors

We spend a lot of time talking about how couples, families and businesses can protect their financial futures with life insurance. But what about if you are single—do you need life insurance, too?

There are those people who have no children, no one depending on their income, no ongoing financial obligations and sufficient cash to cover their final expenses. But how many of those people do you really know? And, more importantly, are you one of them?

I think it’s important, then, to illustrate how a life insurance purchase can be a smart financial move for someone who is single with no children. Asking yourself these three questions can help you get at the heart of the matter:

  • Do you provide financial support for aging parents or siblings?
  • Do you have substantial debt you wouldn’t want to pass on to surviving family members if you were to die prematurely?
  • Did family members pay for your education?

Don’t Take My Word for It

Life insurance is an excellent way to address these obligations, and in the case of tuition, reimburse family members for their support. But don’t just take my word for it. Instead, “do your own math.” This Life Insurance Needs Calculator can help you quickly understand if there is a need—a need you might not be aware of—that could be easily addressed with life insurance.

“The most important reason for

you to consider life insurance may

be the peace of mind you’ll have.”

In addition to addressing any financial obligations you might have, the current economic climate has made permanent life insurance an attractive means to help you build a secure long-term rate of return for safe money assets. The cash value in traditional life insurance can provide you with money for opportunities, emergencies and even retirement.

For young singles, keep in mind that you have youth on your side. I don’t mean to sound trite. Instead, I’d like you to think about the fact that purchasing life insurance is very affordable when you’re young and allows you to protect your insurability for when there is a future need—perhaps, in time, a spouse and children.

While all of these reasons are valid, the most important reason for you to consider life insurance may be the peace of mind you’ll have knowing that your financial obligations will be taken care of should anything happen.

By Marvin H. Feldman

Originally posted by www.LifeHappens.org

3 Ways Life Insurance Can Benefit a Charity You Love | Maryland Benefit Advisors

Would you like to make a charitable gift to help organizations or people in need; to support a specific cause; for recognition such as a naming opportunity at a school or university? Perhaps you would do it just for the tax incentives. There are any number of reasons, and life insurance can be one of the most efficient tools to achieve these purposes. So the question becomes, how does this work?

Let me list the ways.

1. Make a charity the beneficiary of an existing policy. Perhaps you have a policy you no longer need. Make the charity the beneficiary, and the policy will not be included in your estate at your death. This also allows you to retain control of both the cash value and the named beneficiary. If you want or need to change the charity named as beneficiary, you can.

2. Make a charity both the owner and beneficiary of an existing policy. This gives you both a current tax deduction along with removing the policy from your estate. Once you gift the policy, you no longer have any control over the values.

3. Purchase a new policy on your life. Life insurance is an extremely efficient way to provide a large future legacy to a charity in your name without needing to write the large checks now. The premiums are given directly to the charity which then pays the premiums on the policy. The charity also owns the cash value as an asset. I am using this concept in my own planning.

Many charities would prefer to have their money upfront, but if you cannot write that large check or don’t want to part with your cash today, a gift of life insurance is a most efficient method to leave a large legacy in your name.

By Marvin H. Feldman

Originally posted by www.LifeHappens.org

The Risk of Being Uninsured (and the Hidden Bargain in Addressing It Now) | Maryland Benefit Advisors

With all the expenses of everyday living, it’s tempting to think of insurance as just another cost. What’s harder to see is the potential cost of not buying insurance—or what’s known as “self-insuring”—and the hidden bargain of coverage.

The Important vs. the Urgent
We’ve all experienced it: the tendency to stay focused on putting out fires, while never getting ahead on the things that really matter in the long run. For most people, there are two big things that matter in the long run: their families and their ability to retire. And being properly insured is important to both those concerns.

Life Insurance: a Hidden Bargain?
It’s exceedingly rare, but we all know it can happen: someone’s unexpected death. Life insurance can prevent financial catastrophe for the loved ones left behind, if they depend on you for income or primary care—or both.

The irony is that many people pass on coverage due to perceived cost, when in fact it’s far less expensive that most people think. The 2016 Insurance Barometer Study, by Life Happens and LIMRA showed that 8 in 10 people overestimate the cost of life insurance. For instance, a healthy, 30-year-old man can purchase a 20-year, $250,000 term life insurance policy for $160 a year—about $13 a month.

Enjoy the Benefits of Life Insurance—While You’re Alive
If budget pressures aren’t an issue, consider the living benefits of permanent life insurance—that’s right, benefits you can use during your own lifetime.

Permanent life insurance policies typically have a higher premium than term life insurance policies in the early years. But unlike term insurance, it provides lifelong protection and the ability to accumulate cash value on a tax-deferred basis.

Cash values can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement.

When you borrow money from a permanent insurance policy, you’re using the policy’s cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value.

In this way, life insurance can serve as a powerful financial cushion for you and your family throughout your life, in addition to protecting your family from day one.

Disability Insurance: For the Biggest Risk of All
The most overlooked of the major types of insurance coverage is the one that actually covers a far more common risk—the risk of becoming ill or injured and being unable to work and earn your paycheck.

How common is it? While no one knows the exact numbers, it’s estimated that 30% of American workers will become disabled for 90 days or more during their working years. The sad reality is that most American workers also cannot afford such an event. In fact, illness and injury are the top reasons for foreclosures and bankruptcies in the U.S. today. Disability insurance ensures that if you are unable to work because of illness or injury, you will continue to receive an income and make ends meet until you’re able to return to work.

It’s tempting to cross your fingers and hope misfortune skips over you. But when you look at the facts, it’s easy to see: getting proper coverage against life’s risks is not just important, but a bargain in disguise.

By Erica Oh Nataren

Originally posted by www.LifeHappens.org

3 Questions to Ask When It Comes to Life Insurance | Maryland Benefit Consultants

Your life insurance needs will ebb and flow throughout your lifetime. Buying a term policy early in your career or taking a basic employer-issued life insurance policy is a common course of action.

However, deciding how much and what type of life insurance you need at each stage of your life will serve you and your loved ones much better.

One simple thing to keep in mind throughout this process is that the more responsibility you have, the more life insurance you need. Here are a few questions to consider:

1. Who depends on me?
Of course, if you have children, a term life insurance policy that is large enough to pay off your home and debts with some money left over to support your family while your spouse or partner grieves and recalibrates the new financial situation is the option that gives everyone peace of mind.

Many times, it’s easy to overlook the other people who depend on you. The care of elderly parents or grandparents, siblings, or people in your family with special needs should also be considered carefully when deciding how much basic life insurance to buy. You can also get a working idea of how much you might need with this Life Insurance Needs Calculator.

2. How much insurance can I afford?
A term life insurance policy that covers the care of your loved ones in the event of your untimely death is an inexpensive option, if you are under 40 and in reasonably good health.

Permanent life insurance insurance is worth researching if you know you have a permanent need for life insurance, such as caring for a special needs child or sibling. It also makes sense if you’d like certain benefits beyond a guaranteed death benefit for your loved ones, like premiums that do not increase with age or changing health conditions, and a cash value that you can borrow against.

If you can afford the additional premium amount and expect your financial situation and income to remain stable long-term, whole life insurance policies offer living benefits that may outweigh the temporary pain of higher premiums.

3. How healthy am I?
People in great health who have only a little bit of wiggle room in their monthly budget may want to consider a combination of term and permanent life insurance coverage.

Your clean bill of health will keep premiums for both types of insurance lower than if you have major health issues. If you have a term life insurance policy but want more coverage, adding a permanent policy to the mix may be the ideal answer.

By adding a permanent policy with a cash-value element to your portfolio, you also open a world of options that could help add to your nest egg in retirement, start a business, or pursue a second career, among other benefits.

It is possible to have multiple policies and customize your life insurance to your changing wants and needs. Choosing a policy or combination of policies that gives you and your family the greatest potential benefit may seem tricky. So, simplifying the process by asking these three questions will set you on the right track.

By Peter Colis
Originally published by www.thinkhr.com

5 Financial Mistakes Millennials Are Making | Maryland Benefit Advisors

Even as the U.S. economy as a whole recovers from the Great Recession, Millennials (those born from the early 1980s through the early 2000s) continue to struggle with student debt and slow job growth. The lackluster economy and student debt aren’t the only things holding back Millennials from attaining financial independence and success.

Let’s take a look at five money mistakes Millennials tend to make—and see how we can correct them.

1. Avoiding a budget.

One of the most basic mistakes—not budgeting—can lead to living beyond your means. This puts pressure on your future financial plans and goals, even if you have a good eye for what things like groceries or car insurance usually cost. Doing the math and knowing if you’re breaking even or able to save more each month is crucial for building a buffer against debt. It can be as easy as starting to use a new online or mobile budgeting tool. You don’t even need to leave your desk.

2. Misusing credit cards.

According to a study by the credit-reporting agency Experian, Millennials are struggling to pay credit card bills on time, while also having one of the highest credit utilization rates of the four generations listed. Credit utilization, also known as the debt-to-credit ratio, accounts for the ratio or rate of your balance (what you owe) compared with your overall credit limit.

From the study, Millennials’ average rate is 37%, which is above the 35% or less that creditors prefer. As a result of these two factors—late payments and high credit utilization—Millennials have the lowest credit scores across all four generations. Consider a credit score as a financial report card, which means you should turn in everything on time and pay the balance in full every month.

 3. Renting forever.

It’s no secret that Millennials are not active homebuyers. Homeownership is important to consider because ultimately it costs more to rent a home than to buy one in many areas. Plus, Millennials do not build equity when they rent indefinitely. Of course, many Millennials still find themselves traveling and exploring without plans to settle down yet, but in the event that a reasonable deal on property comes up down the road, it would be wise to consider purchasing.

 4. Saving little to nothing for retirement.

Surprisingly, two in three Millennials intend to retire by age 65, but approximately 70% have not started saving for retirement, according to a 2013 survey by MainStreet.com and GfK Roper Public Affairs & Corporate Communication. Even more disconcerting is that half of all Millennials plan to draw income from Social Security, even though full payments from reserves are set to cease in 2033.

The journey to retirement begins with a single payment, then another. If you’re lucky to have an employer’s 401(k) matching plan, take full advantage of it and make above-average contributions. If not, build your own IRA, choosing a Roth or traditional IRA, and set aside a percentage of your monthly income toward it.

5. Skipping life insurance. 

Getting insurance in general may seem daunting, but it’s good to consider the various types, even ones you don’t think you need at first. Life insurance is one that might not have come up yet, but there are reasons to consider it.

One of the benefits of getting a life insurance policy early on is that it will likely cost you less now than later—life insurance is cheaper the younger and healthier you are. Plus, you have no idea if your health might change, which could make getting coverage much more expensive or even impossible later on. And remember that co-signers on any financial accounts you have may be liable for your debts should anything happen to you.

From the basic act of budgeting to considering life insurance, these actions can help ground your financial future. Saving for later in life is the foundation for having a debt-free life and securing retirement plans. As a Millennial you may still be finding your way in this economy, but you can help prevent any of these five financial mistakes from adding to your burdens.

By John Kuo
Originally published by www.lifehappens.org

Do You Need Life Insurance When You Retire? | Maryland Benefit Advisors

Once you hit 65 and retire, you don’t need life insurance, right? Not so fast!

The traditional thinking about life insurance is that you only need it when you have an income to protect, when you have a mortgage or when you have kids to support.

And while it’s true that having life insurance after 65 isn’t right for everyone, there are some good reasons you might want to consider it.

1. Supplement your retirement income. If you have an existing permanent life insurance policy, for example, you may be able to tap into accumulated cash value as a form of retirement income. You can incorporate the funds inside your permanent life insurance policy to complement other forms of retirement income such as Social Security, 401(k) plans and IRAs.

There also comes a point when people become concerned about outliving their retirement savings. Drawing on the cash value of a permanent life insurance policy enables people to use other resources to guarantee lifetime income, such as a longevity annuity or a guaranteed living benefit.

2. Transfer wealth. Life insurance can be an effective vehicle for transferring wealth to your heirs while avoiding inheritance taxes. While the federal exemption for estate taxes have been raised to $5.43 million for 2015, there are still state inheritance taxes to consider. There are several states where you wouldn’t want to be caught dead, from an estate-planning perspective.

Of course, such policies have to be set up correctly. Life insurance payouts are generally free of income tax, but they are still subject to inheritance taxes if they are owned by the insured. That is, if you own a policy on yourself, then it is considered part of your estate.

Here are three examples of how permanent life insurance can be used for wealth transfer:

  • Set up an irrevocable life insurance trust. You would then gift premiums to the trust—as long as the gifts are under the annual gift tax exemption, you wouldn’t have to worry about paying gift tax. The beneficiary of the policy would be the trust rather than your estate, so the policy wouldn’t be included in your estate for estate-tax purposes. The proceeds of the trust would then be distributed to your children or grandchildren, however you set it up. The downside of this approach is that, because the owner of the policy is an irrevocable trust, you have no access to that policy. You give up any access to it in exchange for the tax benefits.
  • Use a survivorship policy. If you might need access to the cash value of the policy, you can use a survivorship policy, one that covers multiple people and doesn’t pay out until the last person passes away. Initially, the policy would be owned by one of the insured, but when the first insured passes, the policy would then move into a trust. The trust becomes the beneficiary, avoiding estate tax because the survivorship policy pays the death benefit on the last death, not the first death.
  • Insure the children for the benefit of the grandchildren. This can be a very cost-effective way for people in their 60s or 70s to use life insurance for wealth transfer in a “skip generation” strategy. Generation 1 owns the policy, so they can have access to the cash if they want, but then when they die, the policy goes into a trust for the benefit of generation 3.

These are complex matters, so you will want to discuss these items with your financial and legal advisors to determine what post-retirement life insurance strategies make sense for you.

By Raymond Caucci
Originally published by www.lifehappens.org

Juvenile Life Insurance: The Whys and Hows | Maryland Benefit Advisors

As a parent, perhaps you’ve been able to check the critical financial boxes for your family. You’ve established emergency funds, secured life and disability insurance, and are on track with your retirement goals. You may wonder, is there anything else I could be doing to help my children?

This can be the time for parents and even grandparents to consider juvenile life insurance. It’s an often-misunderstood type of life insurance that provides protection for your children or grandchildren.

For some, the topic of juvenile life insurance evokes confusion and perhaps even fear. After all, why would one want to insure a perfectly healthy child?

Thankfully, the loss of a child is extremely rare. So while a juvenile life insurance policy does indeed insure against this very slim risk, some types of coverage are also designed to protect your child’s financial future—in a way no other financial product can.

3 types of juvenile life insurance

1) Juvenile permanent life insurance. This type of coverage is permanent, as long as premiums are paid, and typically accumulates cash value over the years, just like with permanent life insurance for adults. Juvenile policies are generally issued at the lowest rates available, and with limited underwriting. They’re owned by a parent or grandparent until the child is 18, at which point the now-adult insured (even if he’s still just a child in his parents’ eyes) can assume ownership.

Upon ownership, the insured adult child enjoys some distinct benefits:

Guaranteed insurability. Your daughter or son locks in a low rate and continued coverage—and can generally purchase more life insurance up to allowable limits. This may be the most compelling reason parents buy juvenile life insurance. Insurability is easy to take for granted when you have it. While most children are healthy, a future health concern could one day make your son or daughter hard to insure. This affects their entire family, who must find other ways to protect against financial vulnerability.

Cash value. The policy’s cash value grows tax-deferred over time, making it a reliable savings vehicle with some unique characteristics. If the cash is needed, the policyowner can access it through low-interest policy loans or outright withdrawals. The policy can also be surrendered for the cash value, typically minus a surrender fee.

2) Juvenile term life insurance. In contrast to juvenile permanent life insurance, juvenile term offers parents significantly less expensive coverage. However, term life insurance does not have a cash value, and only lasts for a specific length of time, such as 10, 20 or 30 years. Policyowners pay a level premium during the length of the term, at which point the term expires and coverage becomes more expensive, often significantly so.

Juvenile term coverage is typically available as a rider (basically, a coverage option) on a parent’s term policy. This rider typically lasts until your child reaches adulthood. You can often purchase coverage for all your children for the same price, with a single rider. In the event of the unexpected death of an insured, the policy’s death benefit can be used to cover expenses.

3) Juvenile group life insurance. Finally, some employers offer juvenile life insurance options through their group life insurance coverage. While convenient, keep in mind employee benefit programs can change at any time, and that in general, group life insurance can be hard or impossible to take with you if you leave your employer.

Remember, while you may have a lot of other priorities on your plate, juvenile life insurance can help create a bedrock of financial stability for your children as they come of age in an uncertain world.

By Erica Oh Nataren
Originally published by www.lifehappens.org

 

6 Reasons People Don’t Buy Life Insurance (and Why They’re Wrong) | Maryland Benefit Advisors

Let’s face it. Most people put off buying life insurance for any number of reasons—if they even understand it Take a look at this list—do any of them sound like you?

1. It’s too expensive. In the ever-burgeoning budget of a young family, things like day care and car payments and possibly student loans eat up a good chunk of the money each month, and a lot of people think that life insurance is just outside those “necessities” when money’s tight. But two things: life insurance is often not nearly as expensive as you might think, especially when you can get a good policy for less than the cost of a daily cup of coffee at the local café, and well, if money’s tight now, what if something happens to you?

2. That’s that stuff for babies and old people, right? People of a certain age remember Ed McMahon telling them their grandparents couldn’t be turned down for any reason and figure that’s the target demographic for life insurance. Or, you might have been offered a small permanent insurance policy for your newborn, attractively presented with a cherubic infant on the envelope. The truth of the matter is that these are very specific insurance products—just as there are many insurance products for adults in their working years.

3. I’m strong and healthy! You eat right, you stay active, and everyone admires how grounded and centered you are. You passed your last physical with flying colors! That’s GREAT! But you’re neither immortal nor indestructible. It’s not even that something could happen to you – though it could – so much as when you’re at your strongest and healthiest, there’s no better time to get a policy to protect your loved ones. If you fall seriously ill or suffer significant injury later, it will make it tougher to get that kind of policy, if any at all.

4. I have life insurance through my job. Many people are offered life insurance as part of their employee benefit coverage –and often, it’s the first time they encounter life insurance and have no idea that a $50,000 policy, or one or two times their salary, isn’t as much as they think it is. It sounds like a lot of money, until you figure that it has to cover some or all the expenses for your loved ones in your absence. Plus, if you leave the job, it’s typically the type of insurance that doesn’t “move on” with you.

5. I don’t have kids. Sure, kids are a big reason why some people get life insurance. But that’s not the only litmus for needing protection. If there is anyone in your life who would suffer financially from your loss—your spouse or live-in partner, a sibling, even your parents—a life insurance policy goes a long way in making sure everyone’s still OK even if something happens to you.

6. Life insurance—it’s on my list … eventually. There’s no deadline on life insurance, no mandate from the government on purchasing it. Your parents may have never talked to you about its importance, and it’s certainly not the most invigorating topic for conversation. But don’t let your “eventually” turn into your loved ones’ “if only.”

By Helen Mosher
Originally published by www.lifehappens.org