10 Reasons You Need Risk Management
You are a high-income earner
You are concerned about federal or state estate tax
You are a business owner
You have complex beneficiaries or complex assets
You are concerned about not having a paycheck in retirement
You currently do not own long term care insurance
You have a higher net worth
You have older life insurance polices
You are concerned about healthcare costs in retirement
You are not sure if your existing Insurance meets your needs
1. You are a High-Income Earner
Group Disability Not Enough: 60% Coverage ≠ 60% of Your Income
Group Disability Features
Group Disability usually capped at $10k to $20k per month
Taxable if paid by employer or employee uses pre-tax dollars
Bonuses and incentive compensation not covered
Group Disability Example
$600,000 Annual Salary (covered)
$150,000 Annual Bonus (not covered)
Salary after tax (40%) = $360,000
Assume $20k per month cap
Annual Disability Payout = $240,000
60% Group Disability in this example is 32% (21% after-tax)
Need for Additional Tax Free Assets
Maxing out contributions to tax advantaged accounts:
401k, 403b, Traditional IRA, SEP IRA, etc.
Not able to contribute to a Roth
2. You are concerned about Federal or State Estate Tax
2025 Estate Tax Exclusion: $13.99m per person
Set to sunset after 2025; $5m indexed for inflation (approximately $7.5m)
State Estate Tax
12 states have state estate tax and 6 levy inheritance taxes
3. You are a Business Owner
Business Succession
Business Continuity / Business Liquidity
The greatest advantage most policies offer high-net-worth families is speed. Life insurance proceeds are often paid out within the month of someone’s passing. This can make a substantial amount of funds available for the family in a financially vulnerable time, while the estate details are still being worked out.
4. You have Complex Beneficiaries or Complex Assets
Business, Illiquid Assets, Large Retirement Accounts
Blended Families
Special Needs Planning
5. You are concerned about not having a Paycheck in Retirement
A need for income protection
Create your own pension
6. You currently do not own Long Term Care Insurance
Risk Shifting (avoid withdrawing funds in a down market)
Estate Planning Benefits
Medicare does not cover LTC expenses
19 States considering implementing LTC tax on those who do not own LTC insurance
Consider coverage now while you are healthy
A person turning 65 today has almost a 70% chance of needing long-term care because of a disability, chronic illness, or other challenges.
7. You have a Higher Net Worth
High Net Worth Individuals can be attractive targets for lawsuits
Existing policies may not provide sufficient coverage
Umbrella insurance is often necessary based on your level of risk, which can come from your job, lifestyle, property ownership, or activities you participate in.
8. Review your old Life Insurance Policies.
Ensure existing coverage is keeping up with your needs
Have your circumstances changed (life events)
Can you get a cheaper policy today
Does the carrier have a strong rating
Are your beneficiaries up to date
You may have a Life Settlement* need
*A life settlement involves selling a life insurance policy to a life settlement provider for an immediate payment. If you no longer need or can afford your policy, you can surrender it for cash value or let it lapse. Typically, the insured must have a limited life expectancy, generally under 15 years. Those under 75 and in good health or with minor conditions, like high blood pressure, are unlikely to qualify for a life settlement.
9. You are concerned about Healthcare Costs in Retirement
Medicare pre-planning should start by age 63
Begin by estimating health care expenses in retirement
Before executing any transactions that will increase your MAGI, determine the potential fee from IRMAA impacting Medicare Parts B and D premiums
Health insurance options for those retiring before 65: COBRA, spouse's plan, marketplace, specialty coverage.
10. You are not sure if your current Insurance meets your Needs
You need an analysis performed in the following areas:
Life, Health, Disability and Long Term Care
Property and Casualty
Bonus: Children inheriting large IRAs must withdraw all funds within ten years, increasing their taxes.
Example: Married Couple both age 65
IRA balance of $1,000,000
Annual IRA withdrawals of $43,000
Net after-tax withdrawals (24% tax rate): $30,000
For Illustrative Purposes Only
In this sample client, assume they utilize their $30,000 after tax withdrawals each year to fund a survivorship life insurance policy, in the example assume a death benefit of $1,870,000 (tax free to heirs). At age 87, assume the IRA balance is $740,000. The IRA balance could be left to charity, if charitably inclined.
The IRA value of $740,000 at age 87 assumes the annual withdrawals are the greater of $43,000 or the RMD amount and an interest rate of 4%.
Ville Wealth Management is a Registered Investment Adviser in the state of Ohio. Advisory services are only offered to clients or prospective clients where Ville Wealth Management and its representatives are properly registered or exempt from registration. “Likes” should not be considered a positive reflection of the investment advisory services offered by Ville Wealth Management. Brian Jaros is an investment adviser representative of Ville Wealth Management. The firm is a registered investment adviser and only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The information presented on this post is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Comments should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. A professional adviser should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. All investment strategies can result in profit or loss.
