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There is a pervasive myth that insurance products produce mediocre returns. In truth, though life insurance has been purchased for many years to provide security and guarantees, there are some newer product lines that can be very attractive for investment purposes—particularly in volatile markets. 

In order to remain competitive and relevant, the insurance industry has had to become much more creative with the investment options underlying their products. Years ago, they unveiled variable life insurance and variable annuities, where policyholders can invest monies that were over and above the cost of the insurance itself into mutual funds. Policyholders can choose from a myriad of mutual funds to invest in, much like what they’d find in various 401(k) plans, and now, some even offer target date funds as well. When the market goes up, the investment account or cash value accounts go up with it, and when the market declines, so do the underlying values to match a broader spectrum of risk tolerances.

With the market so volatile, fixed returns at all-time lows, and not much movement in sight, insurance companies were forced to find ways to pivot. Indexed products, such as indexed annuities and indexed universal life insurance came about. These products carry unique features to secure your principal with downside protection while offering some level of returns if the market does well. The defining phrase that emerged from this pivot was “Zero is my hero.”

When we experience a market crash, like we did in 2008 or again this past February, the unleveraged indexed products don’t lose value. When the market goes down, you retain your value, but when the market rises again, you share in a piece of the upside to a cap. The annuity products also have riders that provide a guaranteed payout in retirement that you cannot outlive. Features like these make such products attractive to protect against market decline while locking in a minimum payout for life.

So, it may be time to reassess your old views on life insurance and annuities. For those looking for stable investment options that protect against drops in the market, but also allow for some growth potential, indexed annuities or indexed universal life insurance policies are worth considering. And if you like slow and steady returns, good old-fashioned Whole Life is still worth a look.

If you’re interested in learning more about these products and how they might fit your portfolio, we are here to help.

Getting Your Financial House in Order

/// Posted by Evan Macedo

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Since many of us are stuck at home with our fiscal future full of bumps and potholes, I’ve found it to be a good opportunity to assess my relationship with personal finances. Full disclosure, I am a bit of an “Excel geek,” so expense tracking and spreadsheets are definitely in my wheelhouse. Nevertheless, this process need not be a burden, even for those of you who hate looking at numbers or facing the realities of your own spending habits. Getting your financial house in order may just be one of the most productive and important things you do this year. As someone who has just gone through the process, here are my favorite strategies that have worked well for me.

Analyze Last Year’s Income vs. Expenses

I, like so many others, spent the better part of a month not spending much money because we were told to only go out if we had to.  When I saw how much my credit card bill went down, I decided to analyze what I had been spending money on. For me, the easiest way to start this process was to export digital copies of online credit card “year-end summary” statements, and input those numbers, broken out by category, into an Excel spreadsheet. Since your credit cards conveniently categorize everything for you, pulling this together should be a cinch. Next, I added in any expenses that came out directly from my bank accounts, and when all else fails, I estimated the rest. The objective of this exercise is to scrutinize where all my spending went, how much I saved at the end of the year, and whether those numbers fell in line with my wealth building goals. I learned that I didn’t save nearly as much as I had planned to. It became painfully apparent that my Amazon purchases and fine dining habits would be the areas where I need to show more willpower in the coming year!

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Podcast Q&A: Getting Your Financial House in Order

/// Posted by Evan Macedo

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Evan Macedo, Vice President Finance & Operations at Sapers & Wallack, answers questions about our June blog, Getting Your Financial House in Order.

/// Posted by Ellen Bohn Gitlitz & Bill Smeltzer

No one would have predicted that we’d all be spending our spring, summer, and possibly beyond working remotely and restructuring how we engage with our coworkers, clients, and lives in general. Unfortunately, this extended period of disruption and uncertainty has also made us all more vulnerable to those who would capitalize on the moment.  As we’ve all turned to online solutions to remain connected, hackers, fraudsters, and thieves across the globe have unleashed their arsenals toward exploiting any weakness. Now more than ever, stringent cybersecurity protocols, backed by a comprehensive insurance policy, are necessary.

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Ellen Bohn Gitlitz, Executive Vice President Property & Casualty, Sapers & Wallack /The Hilb Group of New England answers questions about our May blog, Why Cybersecurity Insurance is More Important than Ever.

 

Tax Efficiency: It’s Not What You Earn; It’s What You Keep

/// Posted by Jeffrey Tomaneng

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As a general rule, the more money you make, whether in work generated income or capital gains, the more you will pay in taxes. But rules are meant to be broken, and there are ways to mitigate tax losses with the right planning and advice.

The after-tax return vs. the pretax return. Everyone wants their investments to perform well. But for many investors it’s their after-tax return that may make all the difference. After all, even if your portfolio is earning double-digit returns, it may not matter if you’re also losing a percent of those earnings to taxes.1

Holding onto assets. One method that may increase tax efficiency is to simply minimize buying and selling in order to manage your capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions. In the words of Warren Buffett, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”2

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Jeff Tomaneng, Director of Financial Planning at Sapers & Wallack, answers questions about our April blog, Tax Efficiency: It’s Not What You Earn; It’s What You Keep.

 

Many people believe in giving back, but under the new tax laws, it may not be as tax advantageous as it used to be. With the steady appreciation in the stock market – the longest bull run in history – some folks have achieved a level of wealth they never imagined. Our Charitable Strategies work is focused on smarter, tax-efficient ways to help people give back a bit of that wealth to various philanthropic causes. But we are often surprised to find even large, well-established, donors who are still not familiar with the benefits of donating appreciated stock and how to use Donor Advised Funds (DAFs).

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How Will the SECURE Act Change the Way You Plan for Retirement?

/// Posted by Rob Simons

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On December 20th, 2019, new legislation was signed into law as part of a larger government spending package that promises to have wide ranging and lasting effect on saving for retirement. Called the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the legislation includes many long-sought common-sense reforms that could make retirement saving both easier and more attainable for many Americans.

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Rob Simons, Senior Retirement Consultant at Sapers & Wallack, answers questions about our February blog, How Will the SECURE Act Change the Way You Plan for Retirement?