Life Insurance on a Tight Budget

September 20, 2013




If you have been reading my postings on my fan page or my my blog, you may have drawn a conclusion that you need to purchase life insurance.

The reason we purchase life insurance is to protect one’s income.  Generally, we need to decide how much money the family is going to need upon our death.  The first thing to do is to make a list of all debts that you have now.  Then compute the dollar amount of your salary times the number of years you would like to provide for the family.  Add a percentage each year for inflation, as the cost of living increases every year.

For example, John and Mary have $50,000 in credit card debt and an outstanding mortgage of $250,000.  John earns $50,000 per year and they decide to include 5% for inflation per year.  Mary would like an income for at least three years after John’s death.

Most families would elect to cover, at least, the mortgage with life insurance so that the family would not lose the home.  The spouse could elect to use the life insurance proceeds to pay off the mortgage upon death of the other spouse. 

Ideally, both spouses should purchase an amount of life insurance on themselves to cover the mortgage, since both make contributions from their salaries to pay the mortgage.  A life insurance agent can assist in helping the couple to determine the amount of cover they can purchase, based on their budget.

The most economical insurance policy would be term insurance which provides a death benefit without cash value.  The most advantageous policy would cover them for ten, twenty, or thirty years at a level death benefit.  The spouses would name each other as beneficiaries on each other’s policy.  In this way, each would collect the proceeds of the policy, if the other dies.

Younger couples would be able to purchase this amount of coverage very inexpensively.  However, older couples would have to pay more money, especially if they have health problems.  Therefore, they may have to elect lower levels of coverage.  However, a lower amount of insurance is better than none at all.  Couples should purchase as much insurance as their budgets will allow.

In conclusion, couples should make plans for their financial security for the family in the event of the untimely death of one or both of the spouses.


The Business of Women

June 7, 2013


There will be  a seminar for women on June 15, 2013 from 9:00 am – to 3:00 pm at the Mainstay/Best Western  Inn, 15 Admiral Kalbfus Road in Newport, Rhode Island sponsored by Gail Cavanaugh’s Financial Solutions.  RSVP 401-380-7850.

The seminar will cover some of the business and financial issues that women struggle with in their businesses.  They will also learn how to protect and plan for their financial security through life insurance and annuities.

As more and more households in the U.S. are headed by women, their incomes are not adequately protected, leaving their families at risk for financial calamity.  We will discuss ways to ensure that the families are protected and that women take steps to plan for their financial futures.

For more information and to register for this event, please visit the website, The Business of Women.   Fee:  $65.00.

Please note that this event has been postponed. Feel free to visit the site and join as a member to get on the mailing list. Book to be published shortly!

Individual Retirement Plans The IRA’s

January 20, 2013


Most people who have planned for their retirement have either Roth or traditional IRA’s which they will use to transfer retirement plans from their employers upon terminating employment. While accumulating retirement income in these plans, it is wise to solicit the help of a CPA in determining how these plans will be taxed at year end and during the distribution phases of these accounts.

A Traditional IRA is a retirement plan in which an individual can accumulate money for retirement over and above the 401(k) or other retirement plan, which one may have at work. Unlike the 401(k), the traditional IRA allows for accumulating money for retirement with after-tax dollars.

The money can be invested in mutual funds, or stocks and the earnings can be reinvested and grow tax deferred, as long as the money remains in the account until age 59 ½. Once the person turns 59 ½, he/she must pay taxes on the money which is withdrawn from the account. By this time, the person in a high income tax bracket may be in a lower tax bracket and therefore will pay a lower tax rate than the year when the money went into the account.

The maximum amount which a person can contribute to an IRA is $6000 per year and the person can no longer contribute money after age 70 ½, which is the latest that the person can begin to withdraw money from the account.

With a Roth IRA, the owner of the contract can withdraw money before age 59 ½ without incurring the 10% penalty in certain situations.. It is suitable for accumulating money for college funding, and other large expenses which must be withdrawn before age 59 ½.

For example. a contract holder may withdraw money from a Roth IRA without incurring a ten percent penalty if he/she becomes permanently disabled, has to withdraw money to pay medical expenses for which he/she will not be reimbursed, he/she plans on withdrawing money to purchase a home as a first time home buyer, needs to pay higher educational costs for the family or self, has been collecting unemployment for more than twelve weeks and needs to pay medical insurance premiums, owes back taxes to the IRS, or has reached age 59 ½. If the contract owner dies before age 59 ½, the estate would not be required to pay taxes upon inheritance of the account.

There are many types of annuities to invest the IRA, if one is seeking safety. With the recent occurrences in the stock market over the last six years, Baby Boomers in particular may be a little hesitant about investing in the stock market or mutual funds. Additionally, an annuity may be the right vehicle for someone who needs safety, but more of a return than the banks are offering. To accurately assess your needs, a qualified insurance agent can offer assistance.

A Prosperous New Year to All

January 2, 2013


We have had a very rocky 2012 with all the natural disasters and violence  that occurred to innocent people.  Because of this, we are going to take more responsibility in keeping our families safe.  This means making better decisions and not leaving things to chance.

We are going to have to make difficult decisions involving our financial security, including the decision to purchase life insurance for each member of our families and ourselves in the event that something should happen to us.  This includes our children.  We have a tendency to believe that we will outlive our children, and in most cases that will be true.  However, we have seen what occurred in Newtown, Connecticut, where many innocent children and teachers were slain at the hand of a gunman.

One incident such as this could devastate us emotionally and financially.  When people fail to protect themselves from dangers such as these, it often cause calamites such as financial hardship.  One such person in my area drowned in an incident at sea recently.  Unfortunately, his family did not take out life insurance on him and there was no money for his funeral.  However, they were fortunate in that the community rallied together and raised money to cover his expenses.

This may or may not happen in every case.  Studies have shown that approximately forty-eight percent of the population dies without life insurance to cover final expenses.  LIMRA reports that, “Three in 10 American households (35 million) are
uninsured and half say they need more life insurance.”  People know they need the life insurance, but fail to purchase it.

There are many reasons why people do not purchase life insurance and mainly it is because of priorities.  People mistakenly believe that they cannot afford to purchase life insurance.  Insurance agents can find an affordable insurance plan for you and your family.  Low cost term insurance would be the best option for most families.

If you are overspending,, why not make a New years resolution to stop spending money unwisely and invest in life insurance for you and the family which would give peace and protection when they need it most, at the time of the loss of a loved one.  Not having insurance leaves an unnecessary burden on the rest of the family to provide final expenses.

If you know someone who needs life insurance protection to cover their family and you have an insurance agent, recommend them.  Sadly, some people never get approached about life insurance.