What are the pros and cons of paying premiums for mortgage protection? A potential “helping hand” for a homeowner’s heirs. No one wants to saddle their heirs with the hard choice of paying off an unsettled mortgage or selling or losing a home. A mortgage term life insurance policy can provide relief in such a dilemma. Simply put, this is a term life policy designed for homeowners. If you die owing a huge sum to a mortgage lender, the proceeds from the policy will pay off the note. Why, and why not? The pros and cons of mortgage term life are simply stated. On the plus side, you are paying (relatively) little for a lot of potential mortgage protection, which could be useful if your heirs are in no financial shape to make mortgage payments. On the negative side, term insurance is term insurance. If you live past the term of your mortgage term life policy, no benefit will be forthcoming for all those premiums. You don’t find many fans of mortgage term life insurance in the mortgage industry. Their argument is that a regular life insurance policy might do the job just as well, and give your heirs more flexibility besides. Still, quite a few homeowners want mortgage term life insurance and appreciate its designated purpose. Basic types. The cheapest type of mortgage term life is the level premium/level benefit policy. You can commonly purchase them with 20-, 25- or 30-year terms. As the name implies, the premiums are guaranteed to stay level for the entire policy term, and the benefit amount does not decline with time. You can still find the original kind of mortgage term life policy, in which your premiums stay level but your coverage shrinks as your mortgage balance diminishes. While some banks and insurers still offer these “old school” policies, they are getting scarce. An interesting alternative. Some homeowners decide to get a return-of-premium term life policy instead of a mortgage term life policy. With an ROP term policy, the insurance company will give you all of your premiums back if you outlive the term (provided, of course, that you’ve kept your policy in force). Someone with 20 years left on a home loan could get a 20-year ROP term policy for an amount comparable to their mortgage balance and get all the money paid into the policy back without a tax consequence if they are alive two decades later. 1 That money could be used for any need or objective. So how is this different than private mortgage insurance? Well, PMI isn’t about protecting you at all – it’s about protecting the lender in case you default on your home loan. It diversifies that risk to a third party. Should you look into these options? You might be in a situation in which you really don’t want to risk burdening your heirs with an existing mortgage – especially if they are trying to pay off one themselves. Or, maybe you want a more flexible insurance option that could be used to pay off a mortgage or meet other needs. Talk to your financial or insurance advisor today to explore this a little further.

If you have kids, you’re either dreading the cost of college or already dealing with the pressure. Today, the average cost of an education at a public university is $22,286 per year. Private schools cost even more, averaging $44,750 annually. For most people, providing their children with a solid education is a high priority, so it’s no wonder so many parents feel driven to make desperate decisions. Unfortunately, desperation can drive us to make poor decisions with our money. Before you drain your retirement account to pay that tuition bill, stop and consider the ultimate cost to you. You may feel that you can afford to lose a few thousand from your retirement account, but that’s not all you’ll lose. You would also lose the compounding interest that money would have accumulated over the rest of your life, and you may also incur significant fees for withdrawing the money. You could end up struggling once you retire, or being forced to work longer than you had planned. Raiding your 401(k) fund to pay for college can be one of the worst financial mistakes you’ll ever make. Luckily, it’s also a mistake you can easily avoid. You have many other options available to you, such as grants, scholarships, loans, work study programs, and so on. Families who don’t believe they’ll qualify for financial assistance are often surprised – especially if they have more than one family member in college at the same time. Talk to a financial aid counselor at the school of your choice, and you may find that you have more options than you previously imagined. If you start planning early enough, you can prevent an educational funding crisis from ever hitting your family. A 529 savings plan allows you to set aside money for college with taxes deferred. Talk to your financial advisor about the benefits and risks of a 529 savings plan, and protect your retirement fund while giving your children their best start in life.

In the retirement planning field, one of the most common questions we hear about Social Security is, “How am I supposed to live on that?”. The answer, of course, is really quite simple: You aren’t supposed to live on your Social Security benefits. Social Security was never intended to be a retirement plan. It was originally conceived as a back-up, supplemental income for retirees, the disabled, and widows whose bread-winning husbands passed away. President Franklin Roosevelt described Social Security as a type of government-sponsored, supplemental insurance program: “The [Social Security] Act does not offer anyone, either individually or collectively, an easy life — nor was it ever intended so to do. None of the sums of money paid out to individuals in assistance or in insurance will spell anything approaching abundance. But they will furnish that minimum necessity to keep a foothold; and that is the kind of protection Americans want.” In order to ensure a more comfortable retirement, you should begin planning years in advance. Social Security will be an important part of your budget, but it shouldn’t be your only source of income. To protect yourself against inflation and rising costs of living, consider some of the following actions to boost retirement income: Maximize your income: Ask for raises when they are deserved. Go back to school or take other measures to further your job skills. Take on a second job during years of lower earnings Work as long as possible. Social Security uses a formula to calculate your Social Security benefits, based on your highest-earning 35 years of work. Work at least 35 years so that there are no zeros averaged into your calculation. Plan ahead. Every year that you work, set aside money in a retirement plan. Wait to retire. Don’t claim Social Security until you reach “full retirement age” – the age at which you can claim full benefits. Consider a partial retirement. Take on consulting work in your old field, continue working part-time, or start a home-based business to boost your retirement earnings.

Much of your retirement planning might focus on reaching a certain balance in your retirement account. You may also pursue certain goals like paying off all of your debt or choosing the perfect retirement location. While it’s a great idea to plan your retirement around reaching certain milestones, it’s important to keep certain birthdays in mind. You’re eligible for important benefits on these dates. Age 59 ½. At any time prior to age 59 ½, taking distributions from your retirement plan may result in a 10 percent tax penalty. Once you reach this age, you don’t have to worry about the tax penalty anymore. Of course, regular income taxes will still apply to these distributions, so try not to withdraw money from your retirement account until you actually retire. Age 62. This is the earliest age at which you can claim your Social Security benefits. But since you have yet to reach “full retirement age”, your monthly check will be permanently reduced by about 30 percent. Waiting to reach full retirement age (defined by Social Security as between 65 and 67, depending upon your birth date) will net you a larger monthly check. But if you do need to retire early for some reason, you can begin claiming a smaller Social Security benefit at age 62. Age 65. You’re eligible for Medicare on your 65th birthday. You’re automatically eligible for Medicare Part A if you’re already receiving Social Security, and you can purchase Medicare Part B for a monthly premium. If you need to apply for Medicare, get the process started several months prior to your 65th birthday, since processing time commonly takes a few months. Age 70 ½. If you haven’t already begun taking withdrawals from your retirement account, you will probably be required to do so by age 70 ½. Your life expectancy will determine your minimum distributions.

One of the most common questions we hear about Social Security is, “How am I supposed to live on that?”. The answer, of course, is really quite simple: You aren’t supposed to live on your Social Security benefits. Social Security was never intended to be a retirement plan. It was originally conceived as a back-up, supplemental income for retirees, the disabled, and widows whose bread-winning husbands passed away. President Franklin Roosevelt described Social Security as a type of government-sponsored, supplemental insurance program: “The [Social Security] Act does not offer anyone, either individually or collectively, an easy life — nor was it ever intended so to do. None of the sums of money paid out to individuals in assistance or in insurance will spell anything approaching abundance. But they will furnish that minimum necessity to keep a foothold; and that is the kind of protection Americans want.” In order to ensure a more comfortable retirement, you should begin planning years in advance. Social Security will be an important part of your budget, but it shouldn’t be your only source of income. To protect yourself against inflation and rising costs of living, consider some of the following actions to boost retirement income: Maximize your income: Ask for raises when they are deserved. Go back to school or take other measures to further your job skills. Take on a second job during years of lower earnings. Work as long as possible. Social Security uses a formula to calculate your Social Security benefits, based on your highest-earning 35 years of work. Work at least 35 years so that there are no zeros averaged into your calculation. Plan ahead. Every year that you work, set aside money in a retirement plan. Wait to retire. Don’t claim Social Security until you reach “full retirement age” – the age at which you can claim full benefits. Consider a partial retirement. Take on consulting work in your old field, continue working part-time, or start a home-based business to boost your retirement earnings. After years of hard work, you might begin to feel impatient about your retirement. If you’re itching to travel, visit friends and family, enjoy your favorite hobbies, or simply escape the daily grind of your work life, ask yourself these five questions to assess your retirement readiness. Are you expecting growth in your retirement fund? Since market conditions can be unpredictable and volatile, it’s generally not a good idea to depend upon dramatic growth in your assets that may or may not actually manifest. Instead, retire when even a modest return from your account would be sufficient to fund your lifestyle. How much debt are you carrying? Excess debt can cause considerable stress and financial strain during retirement. Working just a few more years to pay off your debt might be a worthwhile goal, so you can retire worry-free and with more room in your monthly budget. How will you pay for medical expenses? Hopefully, you’ll enjoy good health for a long time. But none of us can predict the future, and high out-of-pocket medical expenses are common for many retirees. In fact, the average couple retiring today can expect to spend about $220,000 on medical care throughout retirement. Make sure you have a plan to cover unexpected medical bills, expensive prescriptions, and long-term nursing care. What about other expenses? There may come a time that you wish for a little extra money to cover any surprises that come your way. Think carefully about the legacy you wish to leave to your family; right now you may be at your earnings peak and able to set aside money for their future. Are you relying on Social Security? Social Security was always meant to be a supplement to retirement income, since most seniors could not live comfortably on their benefits checks alone. You can retire early at age 62, but your check will be permanently reduced. By waiting until your full retirement age to retire – age 65 to 67, depending upon your birth date – you can ensure a larger monthly check.

Your retirement dreams probably center around travel, leisure activities, and spending time with family and friends. You probably don’t spend a lot of time thinking about nursing homes or assisted living facilities. And yet, both of those living options become a reality for 7 out of 10 seniors at some point during retirement. Considering the odds that you’ll need long-term nursing care at some point, it’s best to plan ahead for the financial consequences. While expenses may vary greatly depending upon your state of residence, national averages for long-term nursing care paint a pretty clear picture of the expense: Assisted living facilities average $3,300 per month Nursing homes average between $6,083 and $6,753 per month, depending upon room type The average cost for in-home skilled nursing care is $3,432 per month As you can see, long-term nursing care can be expensive. Even if you only need to stay in a facility for a few months or so, the bills could put a big dent in your retirement savings. Medicare coverage of long-term nursing care is more limited than you may think. The public health program will only pay for 100 days of care in a nursing facility; after the 100th day, you are responsible for the entire bill. Medicaid, a health care program for low income individuals, will pay significantly more toward long-term care bills. However, it can be very difficult to qualify for Medicaid if you have income and assets. Rather than risking a huge bill you can’t cover, or placing a significant financial strain on your spouse, it’s best to plan for the possibility of nursing care long in advance of retirement. Make sure you include plenty of wiggle room in your retirement budget, or consider long-term care insurance to protect you from the rising costs of nursing care.

An estate planning option more families ought to know about. You may think of life insurance in very simple terms: you buy a policy so that your loved ones will have some financial assistance when you die. But if you have assets of $1 million or more, you should view life insurance as a tool – kind of a Swiss army knife, in fact. Life insurance has many potential uses in estate planning, and a life insurance trust can certainly help a family. What does a life insurance trust do? It enables you and your family to do three things in particular. One, it provides you, your spouse and your heirs with life insurance coverage after it is implemented. Two, it allows a trustee to distribute death benefits from a life insurance policy as that trustee sees fit. Three, it gives you the chance to reduce your estate taxes. When you create a life insurance trust, you are creating an entity (the trust) to buy life insurance policies for you and your loved ones. You don’t own the policies, the trust does. So the insurance proceeds go into the trust when someone passes away. Because the trust owns the insurance policies instead of a person, the insurance proceeds aren’t subject to probate, income taxes or estate taxes. The trustee can distribute those proceeds to one or more parties as stipulated in the language of the trust. Also, if your estate ends up really large, the trust can buy additional life insurance to provide additional cash to pay additional estate taxes. Sometimes these trusts establish investment policies for life insurance proceeds, and even timelines for who receives what when (families may want to delay an heir from legally receiving an inheritance until age 18 or 21, for example). Why not just have someone else own my insurance policy? That scenario can lead to major financial and familial headaches. If that person dies before you die, the cash value of the policy will be included in their taxable estate. So the heirs (and relatives) of that person will have higher estate taxes to pay as a result. Also, if you do this, you surrender control of your policy; the loved one you trust could end up naming another beneficiary or even cashing your policy out. A decision for life. Almost all life insurance trusts are irrevocable trusts. That is, they are legally “set in stone” once created, unlike a revocable trust which can be amended or revoked after creation. You can make these trusts revocable, but if you do, you lose the tax benefit: the insurance proceeds will be included in your taxable estate when you die, which could increase the estate tax bill for your heirs. However, some irrevocable life insurance trusts purchase survivorship life insurance in a profit sharing plan to permit the ability to change beneficiaries. If you’d like to know more about life insurance trusts or the potentially significant changes in estate taxes over the next few years, talk to a qualified legal professional/attorney today. These are the views of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation. 16834 | 2520310 This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. www.petermontoya.com , www.montoyaregistry.com , www.marketinglibrary.net

Is it time to review your policy? Life insurance is hard. It’s hard to know if you have the right kind. It’s hard to know if you have enough. And it’s hard to know if you need any at all. The insurance companies have made it even harder by coming up with bewildering names: whole life, term life, universal life. Some life insurance policies have a cash value while others don’t. Some invest that cash value in the stock market while others pay a fixed rate of interest. Some insurance policies combine all of these ideas. This may be one reason why a recent study by the National Association of Insurance Commissioners found that about 40% of people don’t review their life insurance annually. 1 In my experience, that number seems to be even higher. But no matter what the exact number, a large portion of Americans may simply be paying for insurance that’s not right for them. That is why it’s important for you to sit down annually with an insurance professional to review how your policy works and how it will help you to protect your family. When you’re young, a certain type of policy is needed. As you raise a family and take on more responsibilities, your needs change again. At some point – when the nest is empty or other life changes occur – there may come a time where you don’t need life insurance at all or you may desperately need it to protect your estate. Reviewing your life insurance policies is one way to make sure you have the coverage that is right for you and your family now, today – not when you bought it. When is the last time you thought about your life insurance? Is it time to take another look?

Why might the wealthy be directing more money into this middle-class bedrock? For generations, Americans have thought of life insurance as a midlife purchase of the middle class. Today, that perception is less accurate. Wealthier Americans seem to be buying more life insurance. Affluent individuals are recognizing what it may help to accomplish for their families and their companies. They see the twofold tax break offered by whole life and universal life policies – the death benefit goes untaxed, and the policy has a chance to accumulate cash value through a tax-deferred savings or investment account. As tax rates may rise before the end of the decade, cash value life insurance may seem increasingly attractive to those in the top tax brackets. Here is some recent history to mull over: In 2007, a striking 55% of tax-free investment gains inside universal life and whole life policies belonged to the wealthiest 10% of U.S. families. In fact, 22% of these assets belonged to the richest 1% of American families. (That data comes from the Federal Reserve.) In that same year, the life insurance industry research group LIMRA conducted a survey for the Wall Street Journal. It found that policies for $2 million and more comprised almost 40% of the face value of whole life and universal life policies sold that year. In 1997, large policies made up just 10% of the life insurance market; in 1987, they made up 1% of it. Prudential Financial Inc. says 31% of its life insurance policy sales in 2009 were made to households with investable assets of more than $250,000. In 1999, that demographic accounted for just 19% of its life insurance polices in force. 1 When you consider that households with adjusted gross incomes above $250,000 face a 0.9% income tax increase and a new 3.8% investment income tax in 2013, you have yet another factor that may contribute to the trend. 2 An option to consider. Whether you see life insurance as an alternative investment or merely a resource to pay estate taxes or facilitate a buy-sell agreement, it may have merit as a complement to your retirement strategy – especially given the volatility of the stock market and the possibility of higher income taxes in the next few years.