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3 Reasons Why Life Insurance is an Invaluable Gift for Kids

1/5/2021

What do you buy for the child who has everything? A life insurance policy makes a great gift, though it’s not something that people think about often. This policy can give your child or grandchild a financial head start in life whether they choose to go to college, buy a house or pursue a different dream. It can also protect their future family - your grandchildren or great-grandchildren.

Below are three reasons why life insurance in NJ is an invaluable gift to children.

1. Life insurance is cheaper when kids are young.

Life insurance premiums are based on a number of factors, and age is one of them. Premiums are typically lower for children because they are young and healthy. As children grow older or if their health condition changes, life insurance premiums will cost more. To lock in great rates for whole life insurance in NJ, it’s best to take out this policy when your child is young.

2. Provide financial stability for the future.

Most parents want to secure their child’s future, but this isn’t easy to do when you’re raising a family and paying bills. A life insurance policy has cash value that grows over time. When you pay the premium each month, part of your payment goes toward the premium and part goes toward building a cash value.

This cash value can then be used for things like a college tuition, a new home or a wedding. What a wonderful gift for the future! Plus, whole life insurance is far more flexible than a 529 plan that can only be used for educational-related expenses.

3. Invest in something practical and long-term.

While it’s not as fun as a game or toy, life insurance is a practical gift that your child or grandchild will come to value and appreciate. Toys and games are a dime a dozen and offer short-term fun, but they won’t be there for your child when they’re an adult and ready to start their life. You can even include a letter with your life insurance purchase to let your child know your hopes for them.

These are three great reasons why life insurance in NJ is an invaluable gift for kids. To learn more about taking out a whole life insurance policy for your child or grandchild, contact Leonard Financial Solutions today. We can help you choose a policy that meets your needs and budget.

How to Use Whole Life Insurance for Retirement

11/5/2020

You might not be thinking about your life insurance policy on a regular basis, but there are certainly additional benefits to this policy that you may not know about. Aside from paying your beneficiaries money upon your death, it can also be used for retirement planning in NJ. Now this is more worth thinking about, isn’t it?
Let’s explore how your permanent life insurance policy can be utilized as an additional source of income when you retire.

Build Cash Value

One of the main benefits of a permanent life insurance policy is its ability to build cash value. The cash value of a policy is the balance remaining after a portion of your payment has gone to the premium. Each month that you pay into your policy, some of the money goes toward the premium and some goes toward cash value.

Over time, the cash value account grows and can be used as a source of income when it comes time for retirement. And as long as the amount withdrawn isn’t more than the amount you’ve paid in premiums, you don’t have to pay taxes on it either.

Borrow from Yourself

Another option that you have is to use your cash value as a loan. It’s essentially a loan that you’re getting from yourself so you don’t have to deal with anyone else or their terms. You don’t technically have to pay this money back, but it’s a good idea to do so because it accrues interest and won’t take away from your death benefit. But this can be a nice cushion if you plan to purchase a second home in Florida or pay off your mortgage.

Save on Income Tax

There are some tax advantages to using your life insurance to fund your retirement. Let’s say that you have $50,000 coming out of your IRA account, along with $25,000 in Social Security. This full $75,000 would be taxable income. On the other hand, if you get the $50,000 from life insurance, you’re only taxed on the $25,000 from Social Security.

Not only do you reduce your taxable income this way, but also you lower the tax bracket you’re in. This means you pay less taxes on the $25,000 from Social Security. The only downside is that whole life insurance is expensive to invest in. This is one of the reasons why we recommend starting these policies early.

Start Planning for Retirement

So should you fund your entire retirement though a whole life insurance policy? Not necessarily. There are other vehicles you should invest in as well to build wealth. That said, we want you to know that permanent life insurance is one of the ways you can reach your retirement goals. To discuss your options for retirement planning in New Jersey, contact Leonard Financial Solutions today.

Can I Keep My Life Insurance When I Retire?

11/4/2020

For most of your adult life, you likely had a life insurance policy. Most people get their life insurance policy from their employer and don’t think much about it. These policies are generally offered as part of a benefits package for full-time employees. It’s also possible that you took out a life insurance policy once you had children so that they would be protected if you died unexpectedly.

However now that you’re about to retire, you might be wondering if you need to keep your life insurance in New Jersey. Once you retire, you won’t have benefits from your job anymore, so that means you have to take out a new policy or not have one at all. What’s the best option?

Life Insurance is for Your Beneficiaries

While there is no simple answer for everyone, we’ll do our best to explain the purpose of life insurance and why you may not need it anymore.

When you take out a life insurance policy in NJ, you’re not insuring your life. You are protecting family members from the loss of income if you were to pass away. That’s why life insurance is highly recommended for working adults, as their families probably couldn’t keep up with their bills if they were to die unexpectedly.

There are different types of life insurance depending on your needs and budget. Term life insurance offers coverage for a specific period of time, usually 10-30 years. Permanent life insurance is a lifetime policy that helps build cash value.

Do Your Children or Spouse Depend on Your Income?

If your spouse or partner will have a steady source of income if you die, then you probably don’t need life insurance. Many couples live off Social Security and their retirement savings so there’s no income to replace. But this isn’t the case for everyone. If your spouse will lose a substantial amount of your pension income, life insurance can help fill the gap.

Another instance where you may want to keep your life insurance policy is if you have a spouse or adult children who are dependent on you. Even if they aren’t, some people like having something to leave their children or grandchildren.

How Much Life Insurance Do I Need?

If you plan to keep your life insurance after retirement, you’ll probably need to review it because there will be some changes.

Think about your situation and the people who would experience a loss if you were to die today. What amount of money would allow them to keep living and paying the bills? This will help you determine how much life insurance you need. You’ll also likely find that a term insurance policy will fit your needs. We do recommend permanent insurance if you have a high net worth or a thriving business, as you could be subject to taxes.

While this doesn’t give you a simple yes or no answer, we hope it provides you with some insight as to who needs life insurance in NJ when they retire and who doesn’t. To learn more about your options for retirement, schedule a consultation with Leonard Financial Solutions.

529 Plans vs Whole Life Insurance: What is Better for my Child's Education?

8/7/2020

A college education is something that most parents want to provide for their children. In America, having a solid education is key to landing a better job. But saving for this education can be daunting. Fortunately, college savings tools like 529 plans and permanent life insurance make it easier to save for educational expenses.

Below you’ll find more information about 529 plans and whole life insurance in NJ and which one is a better college savings plan.

529 Plans vs Whole Life: What’s the Difference?

529 plans in New Jersey are similar to a Roth 401K or RothIRA but are intended to help pay for college expenses rather than retirement. Through a 529 plan, you can invest in a variety of mutual funds and earnings will grow tax-deferred. As long as your child uses the money for educational expenses, the withdrawals are tax-free.

While a 529 plan is the gold standard for saving for college, it’s not your only option. Permanent life insurance is also an excellent way to save money. When you pay into your policy each month, some of the money goes towards the premium and some goes into the cash value. The money in your cash value grows tax-deferred, similar to a 529 plan.

Why Permanent Life Insurance is Better than a 529 Plan

Each family is unique, so you’ll have to make the best decision for your circumstances. That said, Leonard Financial Solutions typically recommends whole life insurance as a college savings plan. Here are the reasons why.

No qualified expenses. Your child can only use the funds tax-free in your 529 plan if they are used for college. Whole life insurance, on the other hand, has no limitations. Your child can use the money to buy a home or pay for their wedding.

No contribution cap. 529 plans have restrictive contribution limits. Whole life insurance does not. If a grandparent wants to make a generous contribution, they can.

Not included in your financial picture. When applying to college, a 529 plan is considered in your overall financial picture. This can affect your ability to get financial aid. Life insurance does not.

Includes a death benefit. 529 plans are a fine college savings tool, but they include nothing more. Permanent life insurance comes with a death benefit. We generally recommend insuring the parent, not the child.

Not correlated to the market. If the stock market declines, your life insurance policy remains untouched. This makes whole life insurance a recession-proof savings tool, unlike 529 plans.

529 plans are not bad. They have many advantages, and we understand the appeal to them. However, they are not the only way to save for your child’s post-secondary education. Permanent life insurance is worth a look. If you would like a life insurance quote comparison in NJ, contact Leonard Financial Solutions.

How Does the Cash Value of Life Insurance Work?

7/20/2020

Some types of life insurance in NJ have an investment feature called a cash value. This part of your policy earns interest and may be available for you to borrow against one day. While there are different life insurance policies, the most common one you’ll come across is whole life insurance. Term life insurance, on the other hand, does not have a cash value.

If you’re interested in taking out a whole life insurance policy, you’ll be pleasantly surprised by how much money you can earn over the years. It’s an excellent asset that builds tax-free wealth - and there’s not much you need to do but pay your premiums!

It’s also worth noting that whole life insurance offers “limited pay.” This allows you to pay your premiums for a limited number of years. Once you’re paid up, your cash value and death benefit will continue to grow, and the benefits will last a lifetime.

How Does the Cash Value in a Life Insurance Policy Work?

Permanent life insurance policies generally offer two features:

Death benefit. The death benefit is the amount that’s paid out to the beneficiary when you pass away. Usually, the death benefit is the amount of life insurance coverage you purchased when you set up the policy.

Cash value. The cash value is an added feature of your policy that builds value. A small amount of your monthly premium goes into this (the rest goes towards the death benefit and other fees). This portion of your policy is tax free and earns interest over time.

Am I Able to Access My Cash Value?

It is possible to access your cash value when you need it, but it does depend on your policy. Also, keep in mind that when you borrow against your policy, it can reduce your death benefit. Generally speaking, there are three ways to access your cash value:

Make a withdrawal. A common way to access your cash value is by making a withdrawal. You can usually do this tax-free and without penalty, though you don’t want to exceed the amount you’ve paid in. Otherwise, this extra money will be taxed as income.

Taking out a loan. Another way to borrow money from your policy is by taking out a loan. You can usually borrow up to the cash value on your policy, including accrued interest and paid premiums.

Surrendering your policy. If you cancel your life insurance policy, you’ll have equity that you’re entitled to. But, be careful about “surrender fees” and income taxes. Also, it’s a good idea to replace the policy, as you won’t have coverage.

What are the Benefits of Cash Value Life Insurance?

If you are considering cash value life insurance as an asset, you’re probably wondering what the benefits are. Whole life policies are not cheap, after all, so you want to be sure that you’re investing your money into the right places. A financial advisor in New Jersey can help determine the best options for you, but here are some benefits to expect:

Cash value grows tax-free as long as the money stays in your account

Fixed premiums for life

Permanent coverage - your policy will never be cancelled as long as you pay your premiums

Ability to borrow against your cash value

Death benefit that pays out to your beneficiaries if you die

If you are interested in whole life insurance, contact Leonard Financial Solutions today for a free life insurance quote in NJ. We have solutions for everyone based on your needs, financial goals and budget.

College Planning: A 529 Plan Alternative

4/27/2018

You may know a 529 plan as a tax-advantaged savings vehicle to help fund a college education (Not familiar? See below). You should consider whole life insurance as an alternative with similar contribution, accumulation and distribution tax features of a 529 plan, but with additional benefits. This option will allow you to:

Disability Income Insurance - Protecting Your Most Valuable Asset: The Ability to Earn an Income

4/23/2018

Have you protected your income?
Disability happens. You can’t predict whether or when it will strike. However, you can prepare in case it does, with a customized disability income insurance plan. This protection can replace a portion of your income to help maintain your current lifestyle if you suffer a disability covered by the policy. Your income is your most valuable asset and has the potential to be substantial over your working lifetime. But to earn it, you must be able to work.

Pros And Cons Of Term Life Insurance

1/19/2018

Leaving this life behind can get expensive. Not for you, but for the loved ones you will be leaving behind. That is why life insurance is a great way for us to protect the ones we love, even if we are no longer with them. Our final expenses are not limited to funeral costs. There will be taxes and other associated costs, ceremony fees, clergy donations, and even leftover loans and mortgages.

Most Common Uses For Whole Life Insurance

1/18/2018

Whole life insurance is a guaranteed life insurance policy. It remains in force during your whole lifetime and upon your death, payout is guaranteed to your beneficiaries. This is, of course, subject if your required premiums are paid.

Get Your Money Back With Return Of Premium Life Insurance

12/21/2017

Protecting our loved ones from financial hardships when we can’t be there for them anymore is the main reason why we get a life insurance policy. But what if you only need to protect them from long term expenses such as the mortgage, a home equity loan or your children’s education? A return-of-premium-life insurance assures that you will get your money back if you outlive your policy term. This type of insurance guarantees that you’d be able to give your loved ones the financial protection they need.