Do I Need Life Insurance?

May 19, 2017

Smiling Father Playing With Baby Son At Home Lifting UpDo you remember what it’s like being a kid with no financial responsibilities? Neither do I. It seems like we have been adulting forever. If life insurance isn’t quintessential adulthood, I don’t know what is. As you are reading and researching life insurance, one of the biggest questions you ask yourself is “Do I even need life insurance?”

Ask yourself this question: Does someone rely on me financially? If the answer is yes, then you likely need life insurance. Let’s discuss a few different types of people and their need for life insurance.

Single? You probably don’t need it.

If you are single and have no children, you probably don’t need life insurance. However, if you’re an ultra-planner or want to have a family sooner rather than later, locking in those low rates while you’re young and healthy can be a wise move.

Here are a few situations in which buying life insurance would be recommended even if you’re single:

Co-signed loans

Maybe your grandparents are co-signers on your private student loans or your parents co-signed on your mortgage. If you die before the balance is paid, the creditors can go after your co-signers. Life insurance can pay for these debts.

Caring for relatives

If you are caring for siblings or aging relatives you should consider life insurance to ensure that your loved ones are still provided for even if you are no longer around.

Have dependent children? You definitely need it.

Those with children have the greatest need for life insurance. Children rely on you for food, clothing, shelter, medicine, and everything else. If you die, life insurance can continue to fund these things, and it can also pay for hopes and dreams such as college tuition or a wedding.

Let’s take a closer look at specific parental situations:

Dual income families

If your household has two incomes contributing to standard of living, the sudden loss of a parent can cause financial upheaval if there is no life insurance to replace the lost income. One parent is now responsible to provide what two incomes previously did. For example, the proceeds from a life insurance policy can pay off the mortgage ensuring the children do not have to be uprooted from their home or school district.

Single parents

Let’s face it, the loss of a single parent to a child would be devastating. When married couples purchase life insurance, they often plan with the possibility that one spouse will remain to care for the children. Single parents do not have this luxury and absolutely need life insurance.

Stay-at-home parents

When you think of life insurance, you may only think a breadwinner needs coverage and not a stay-at-home parent – this could not be further from the truth. Imagine everything a stay-at-home parent does: babysits, cleans, cooks, transports, grocery shops… the list goes on. According to Salary.com, a stay-at-home mom is worth approximately $112,962. If the stay-at-home parent were to die unexpectedly, life insurance can pay for someone to help with these tasks.

Married? You most likely need it.

You don’t need to have children to rely on your significant other’s income. You’re building a life together and doing so requires money. You are likely both contributing to rent or a mortgage, car payments, utilities, and credit card bills. What happens if one of you were to die prematurely? The death benefit from a term life insurance policy can help pay for those expenses and cover the cost of a funeral.

It’s not uncommon today for couples to be in a committed relationship but postpone marriage. While it’s a little easier to own life insurance on your significant other if you are married, non-married couples can still purchase life insurance on one another as long as they can prove insurable interest.

Insurable interest is when a person can expect to suffer financial loss upon the death of another specific person. Having both names on a mortgage loan, both named on a lease, or owning a business together are just a few examples of how you can prove insurable interest.

The two types of life insurance

There are two main types of life insurance: term life insurance and permanent life insurance.

Term insurance:

  • Basic, inexpensive life insurance
  • Temporary – lasts a certain length of time (typically 10, 20, or 30 years)
  • Ideal for most people

Permanent insurance:

  • Lasts a lifetime
  • Accumulates cash value
  • Much more costly than term insurance
  • Not necessary for most people

For most individuals, term life insurance is suitable coverage. It is designed to last only during the years in which you have the greatest need for it. Permanent life insurance can be beneficial for more complicated situations such as managing wealth for large estates.

The key benefits

Buying life insurance means you hand over some of your hard earned dollars to an insurance company – so what do you get in return?

  • Your life insurance policy will provide significant funds to your loved ones when they need it most, allowing them to grieve without the added financial stress.
  • The death benefit is typically considerably greater than the premiums you paid.
  • The proceeds are generally safe from creditors. Even if you die with debt, creditors cannot go after the life insurance proceeds paid.
  • Life insurance proceeds are typically not taxed by the federal government.
  • Peace of mind in knowing your loved ones will be financially protected if you are taken from them too soon.

Argent Insurance Services >> 

 

Source: MintLife

Raising a baby costs $52,000 – just in the first 12 months

April 14, 2017

Shot of a young woman taking a photo of her husband and child with a cellphoneConsidering car seats, cribs and all those animal crackers, parenthood comes with a lot of expenses.

With rising costs from child care to college, many first-time parents aren’t financially prepared from the start — no matter how much money they make — according to a recent report by NerdWallet.

The personal finance site analyzed the expenses of a baby’s first year in two sample households — one with a $40,000 annual income and one with a $200,000 income — to illustrate how families with different resources might cope with all of the expenses associated with a bundle of joy (including food, housing, transportation, diapers and health care).

In both cases, expectant parents, including those currently pregnant and those planning to have a child in the next three years, dramatically underestimated the costs right out of the gate: More than half of would-be parents believed the first year will cost $5,000 or less.

In fact, the first year of parenting is substantially more — just over $21,000 in a $40,000-income household and nearly $52,000 for families making $200,000 or more, according to NerdWallet.

Cost expectations

People planning to have a child in the next three years were asked: “Approximately how much do you think it costs to raise the average U.S. baby during their first year of life?”

The majority of soon-to-be parents mistakenly thought diapers and wipes would be the largest expense, although at $743 it was far below the cost of full-time child care, which averaged $8,059 for the first year.

Nationally, the cost of full-time care in child-care centers is 85 percent of the monthly U.S. median cost of rent, according to a separate report by think tank New America. To cover the cost for one child, a family earning the median household income of $53,000 would need to fork over 18 percent of its income.

But the expenses don’t stop there. The cost of raising a child to age 18 will set parents back a whopping $233,610 (not including college), according to the latest figures from the Department of Agriculture.

Parental savings

Parents were asked: “Prior to having your baby, approximately how much money did you have saved to care for your child for their first year of life?”

Most parents aren’t saving nearly enough, either because they don’t have the funds or they are misjudging the expenses, according to NerdWallet’s insurance editor, Amy Danise. “Babies aren’t a business decision, so there may not be a lot of research that goes into having one,” Danise said.

To get a better grip on what’s in store for those entering parenthood, other parents are often the best source of tips and advice, she said.

Regardless of their household income, more than half of parents said there are financial steps they regret not taking, NerdWallet found.

The biggest one? One-third wished they’d started or contributed more to a college savings plan.

Financial Planning >> 

 

Source: CNBC

Food Drive

April 11, 2017

FOOD DRIVE
April 1st – April 22nd

Help Argent “CAN” hunger by donating canned and non-perishable goods. Donation boxes are located at all of our Members Centers through April 22nd. The donations will go to support Mercy Mall.

Why the Age of Your Credit History Matters

March 30, 2017

This three-digit number plays a pivotal role in your financial life, including whether or not you’ll qualify for auto loans, mortgages, or credit cards, and if so, what interest rates you’ll pay. It can even affect your career, particularly if it’s in the finance field: A brokerage firm isn’t likely to hire a candidate they suspect isn’t good with money

Given how much weight your credit score carries, you should do everything within your power to maintain a high score. Yet, before you can maintain a good score, you have to understand the components that make up your credit score.

What Makes Up Your Credit Score

Credit scores aren’t determined by a single factor, but rather multiple factors. Once you open a credit account, your creditors report account activity to the credit bureaus on a regular basis. The bureaus compile data related to your accounts, and based on reported information, the bureaus formulate a credit score.

It probably comes as no surprise that your payment history and the amounts you owe have a tremendous impact on your personal score. Your payment history makes up 35% of your score, while the amount you owe makes up 30% of your score. If you pay your bills on time, avoid delinquencies, and keep your balances within a reasonable range, you’ll eventually build up to a solid score.

But even when you take these measures, good credit doesn’t happen overnight. Because there’s another factor that contributes to your overall score: When credit bureaus formulate credit scores, they also take into account the age of your credit history.

The age or length of your credit history — which makes up 15% of your credit score — doesn’t have as big an impact on your score as your payment history and amounts owed. Still, you shouldn’t downplay the importance of credit age.

How Credit Age Relates to Credit Risk

Most of us rely on credit for an auto loan, a house, and a credit card. Even so, being a creditor is risky business, and banks don’t arbitrarily approve credit applications. They consider several factors before approving financing, such as your income and your credit score. Even if you have adequate income and pay your bills on time, the bank might reject your application if you don’t meet the minimum credit score requirement for a loan. This can happen if you have a young credit history.

The age of credit history affects overall scores because a longer history provides a better assessment of risk level. Credit age takes two elements into consideration: the age of your oldest account, and the average age of all your accounts. The longer accounts remain open, the more your credit matures. And as your credit matures, credit scoring models slowly add points to your score.

To illustrate, if you’ve had a credit history for the past six years with no negative activity appearing on your credit report, credit bureaus evaluate your entire borrowing pattern, and based on your history and record, deem you a responsible borrower. This is a fairly accurate assessment given the length of credit history. As a responsible borrower, you’re rewarded with additional credit score points.

But let’s say you’ve only had a credit file for six months or a year. Given your short credit history, credit bureaus can’t accurately rate creditworthiness. Despite paying your bills on time, you don’t have a long borrowing track record. There just isn’t enough evidence to gauge how well you manage credit — this happens with time. You have a short credit history, and unfortunately, your credit score pays the price. The good news, however, is that this is a temporary problem.

What Can You Do?

Credit scores range from 300 to 850. If you’re aiming for a perfect credit score, understand that it takes years of responsible credit habits to achieve. It doesn’t matter how well you manage your credit accounts in the first one or two years, you probably won’t have as high of a credit score as someone who’s had A+ credit for eight or nine years — but you can get there.

Remember, your payment history and the amount you owe make up 35% and 30% of your credit score, respectively. So while your credit score might be low due to a short credit history today, keeping your credit card balances low and making timely monthly payments will gradually increase your score.

 

Source: WiseBread

Your retirement is in trouble … what are you doing about it?

A young couple sharing a laptop at homeAmericans are losing sleep over their ability to retire, but few are doing anything about it.

Those were the findings from a recent retirement confidence survey conducted by the Employee Benefit Research Institute. The public policy research group polled 1,082 workers age 25 and older and 589 retirees in January.

The study showed that while nearly 40 percent of workers said they were not too confident or not at all confident that they would have enough money saved to get through retirement, few people are taking steps to fix that.

For instance, only 1 in 5 workers in the poll have calculated what their health-care costs will be once they’ve stopped working.

And just 40 percent said they or their spouse have tried to calculate the amount they’ll need to live comfortably in retirement. Only 11 percent of the workers said they have a written financial plan to get there.

“Since we know how much health-care costs can impact retirement, it’s alarming that only 2 in 10 workers have calculated their needs,” said Lisa Greenwald, assistant vice president at Greenwald & Associates, a research firm that collaborated on EBRI’s study.

Retirement realities

Workers tend to sharply underestimate how much they’ll need to manage the reality of retirement.

A study from Nationwide Mutual Insurance found that nearly two-thirds of women workers couldn’t estimate the cost of health care in retirement for themselves and their spouse.

Data from HealthView Services, a provider of health-care cost projection software, estimates that a 65-year-old couple retiring in 2016 would spend $10,680 on health insurance for that year.

Inflation will raise those costs each year, so that same couple can expect to pay $14,594 the year they turn 70 and more than $20,000 by age 75, according to HealthView.

Further compounding the issue, 63 percent of workers believe they’ll need less than $1 million for retirement, according to EBRI’s survey.

A 2012 study from Aon, a human resources and insurance company, recommended that workers be able to replace 85 percent of their salary in the first year of their retirement.

Workers would need to save 11 times their pay in order to have enough money to last through the remainder of their lives, according to Aon.

Rules of thumb

You’ll never know if you’re saving enough unless you determine how much you’ll need the day you stop working.

“Workers need to establish a goal and figure out how much they need to save for retirement,” said Greenwald. “Think through your lifestyle, your housing and what your expenses will be.”

If you’re stuck on your retirement planning, here’s where you can begin.

Understand your budget: “Your budget will tell you how much you need in retirement and how large your nest egg should be,” said Benjamin Brandt, founder of Capital City Wealth Management in Bismarck, North Dakota.

Look at your monthly expenses and get a sense of how your wants and needs stack up against your cash flow.

Don’t ignore health-care costs: Health expenses are a wild card. Don’t forget that Medicare Part B and Part D, which respectively cover doctor visits and prescription drugs, have premiums that are determined based on your income. Further, medical costs are subject to inflation.

Some websites, including HealthView Services and AARP, offer calculators to help you estimate that expense.

Envision saving monthly: Rather than getting your mind around the fact that you need $1.25 million to make it through retirement safely, find out what this means for you from a monthly standpoint. How much do you need to save in your 401(k) plan to reach your goal?

“Trying to boil it down to a monthly amount of how much you need to save is a small enough goal that you can focus on it,” Brandt said.

Attend the upcoming Credit Union Retirement Seminar >> 

 

Source: CNBC Personal Finance