Greg Nicholaides

By Leo LaGrotte – Life Settlement Advisors

Did you know you can sell all or a portion of a life insurance policy, even term insurance?

The opportunities to surrender or sell a life insurance policy represent a chance for many individuals to convert an expense into a liquid asset. But what does that mean for taxes? Here’s what you need to know about taxes on the surrender or sale of a life insurance policy.

What are the Tax Consequences of Surrendering a Life Insurance Policy?

The amount of your life insurance surrender payout that is taxed as income depends on the premiums you have paid into the policy.

The total of premiums you have paid into the policy is known as the cash basis. When you surrender the policy, the amount of the cash basis is considered a tax-free return of principal. Only the amount you receive over the cash basis will be taxed as regular income, at your top tax rate.

However, remember that for every $100,000 in coverage, only an average of $460 is received in surrender benefits. Depending on how long you’ve had the policy, you may not even break even on the cash basis in the surrender, especially when the surrender fees are between 10-30%.

Taxable Gains on Life Insurance Policies Sold in a Life Settlement

Much like with a life insurance surrender, the cash basis returned during your life settlement is tax-free. However, because life settlements return so much more value from the policy on average, the tax on the profits in the transaction is levied a little differently.

The proceeds received up to the tax basis (total premiums paid) are free of income tax. Proceeds received that are greater than the tax basis up to the amount of the cash surrender value are taxed at ordinary income rates. Luckily, there are many ways to minimize the impact of the capital gains tax, from reinvesting the funds in a retirement account, to making charitable contributions.

We find it is almost always the case that life settlements pay many times more than the cash surrender value of a policy. While this might give you pause in consideration to taxes, consulting with a financial advisor or tax professional can help you make the most of this opportunity without paying an unexpected big tax bill.

February 11, 2021

By Emile Halle

The new world of working from the comfort of home has made employment a touch more tolerable, leading many to stay in their current jobs indefinitely, or accept new offers for part-time or temporary work. And perhaps the biggest motivator to stay employed is that there isn’t much else to do amid a global lockdown that has isolated friends and families for the better part of a year.

“I have had a number of clients postpone retirement due to the pandemic. From their perspective, these are lower stress bonus years. The extra income and savings give them peace of mind, and the work keeps them busy,” said Catherine Gearig, partner at LifePlan Financial Advisory Group, in an email. “They tell me that working from home is significantly less stressful. And, if they did retire, they wouldn’t be able to do much — no travel, limited family get-togethers, etc.”

When the world begins to return to normal and the pandemic subsides, people will likely revisit the idea of retirement, Gearig said.

PRACTICE RUNS

It’s hardly unusual for someone recently retired to go back to work in some capacity. Being financially secure is an important step in retiring, but so too is having regular social connections and a meaningful way to spend one’s time.

Michigan resident Craig Childers, who works in automotive parts sales, came out of retirement for the second time during the pandemic.

“My first retirement was when I turned 65, in 2018,” said Childers, 67, who is Gearig’s client. “I retired, and the summer was great, the fall was great.” He spent much of his time doing what he loves: backpacking, cycling and kayaking. Then winter came. Friends escaped the cold by going to Florida, but that wasn’t for him. Childers was back at work in April 2019, having been retired for 10 months.

“That social aspect of work is really underrated,” he said. “At some point in retirement you’re sick of the to-do list … There’s a little bit of mental pressure to that.”

Some people who were on the fence about retiring have realized that much of what they wanted to be done with was their commute, not necessarily the work itself, said adviser Michael Meehan, vice president at TFC Financial.

One client, a medical doctor in her early 70s, has found an extended career in telemedicine, Meehan said. That has helped her maintain a good income and focus on “doing what she really loves — connecting with patients and helping people, without physically having to be there, risk COVID and deal with office structure,” he said.

In some cases, clients “are going stir-crazy,” said Chris Mellone, an adviser at VLP Financial Advisors. Plans to retire are being put on hold until at least the summer, when people are hopeful that travel will be possible and vaccines will be more widely available, he said. Until then, clients are thinking about what they want “retirement” to look like. For example, does it mean phasing out work, or is it an abrupt cessation?

For those who want a lighter work schedule, the present is a good time to negotiate that, he said. Employers are much more willing to accommodate remote work and consulting arrangements, given the success they’ve seen during the pandemic. “This has almost been like a dry run for a lot of people,” Mellone said.

OPPOSITE EFFECT

Even with remote work capabilities and limited opportunities for travel and leisure, COVID-19 has led some clients to retire early, one adviser said.

“We have some clients who quite frankly, it’s made them think about their own mortality,” Meehan said. “Some younger people like that are starting to think about, ‘How do I get to my number and retire sooner than I had planned to?’”

Business owners are a prime example. In some industries, merger and acquisition activity has been on a tear, making it an opportune time to sell. And potential tax changes on the horizon are prompting deals to move quickly.

A client couple in their early 50s who own a media business is doing just that, Meehan said. “They’ve decided that now is a good time to sell their business. Multiples are high, and valuation was extremely strong,” he said. “They’re using it as an opportunity to almost reboot, and do what they love, focus on something different.”

FINANCIAL CONSIDERATIONS

There is a financial benefit to delaying retirement, particularly during the pandemic, for those who are fortunate enough to work remotely.

“If they can make working from home enjoyable, I think they would delay retirement a little longer if they have the choice,” Scott Hammel, a financial planner at Apeiron Planning, wrote in an email. “Without the ability for these would-be retirees to travel, there’s a ‘wait and see’ approach to working. Certainly, most are saving more than they would have otherwise with traveling and going out less, combined with working longer.”

Of course, many people who work with advisers are more financially secure than those without their services. And the COVID economy has been brutal, with workers of all ages suddenly out of jobs.

In January, the unemployment rate for people 55 and older fell to 5.3%, down from 6% in December and a high of 13.6% in April, according to data released Friday by the U.S. Bureau of Labor Statistics. But many of those who were near traditional retirement age and were laid off last year are struggling to find employment, especially if they worked in industries that were hardest hit by the effects of the pandemic. And for many of those workers, an early, unplanned retirement will necessitate lifestyle changes.

SETTING PRIORITIES

The newfound work flexibility some have found over the past year has led to an “introspective conversation many people have had with themselves … and placing a priority on the things they value most,” wrote Matthew Gaffey, managing partner of Corbett Road Wealth Management, in an email. Even in normal times, recently retired clients go back to work within two years, he said.

“Not always do people take this path because they’re forced to, but many because it gives them a sense of purpose, interaction with others, or they are charitably inclined,” he said.

For Childers, the automotive parts seller, the new retirement date is tentatively in April. Having the extra income has provided a little extra breathing room, in addition to the social benefits of working, he said. “I’m really glad we got a financial planner,” he said. “We’re in good shape. But a little extra money is nice.”

By Kelsey Waddill for Health Payer Intelligence

Although seniors still have concerns around affordability related to their Medigap policies, they appreciate lower out-of-pocket costs on hospital and physician services.

February 26, 2021 – Seniors who choose Medigap policies have high rates of satisfaction with their choice, particularly due to reduced out-of-pocket healthcare spending, according to a survey that America’s Health Insurance Plans (AHIP) commissioned.

“More than 14 million Americans rely on Medicare supplemental insurance, and more than a third of seniors with a traditional Medicare plan choose to enroll in a Medicare supplemental plan because they offer enhanced protection, consistent coverage, and access to high-quality care,” AHIP asserted in a blog post when the organization released its report.

Global Strategy Group conducted an online survey for AHIP from January 14 to January 20, 2021. The survey had 500 American, senior participants who were covered by traditional Medicare and a Medigap policy.

Medigap beneficiaries reported strong satisfaction with their benefits, their Medigap policies customer service, and other aspects of their coverage.

Beneficiaries were slightly more satisfied with their Medigap policies than with their traditional Medicare coverage, with 89 percent expressing extremely high or somewhat high satisfaction with their Medicare supplemental plan while 87 percent were very or somewhat satisfied with their traditional Medicare coverage.

 In 2019, the last time that AHIP conducted this survey, 87 percent of beneficiaries felt very or somewhat satisfied with traditional Medicare, and 86 percent felt the same way about their Medicare supplemental coverage.

Only around two percent of Medigap beneficiaries have characterized the value of their Medigap policy as “poor” in this biennial survey over the course of the past four years. Meanwhile, the percentage that would characterize the value as “excellent” or “good” has hovered around 77 to 79 percent.

More specifically, the seniors appreciate that their Medigap policy covers hospital expenses not covered by traditional Medicare (79 percent) and likewise that it covers physician expenses not covered by traditional Medicare (69 percent).

Beneficiaries were most dissatisfied with the affordability of their Medigap policy. Although almost three-quarters of beneficiaries were extremely, very, or somewhat satisfied and 11 percent had no opinion, 15 percent found their Medigap policy’s affordability was “poor.”

But 94 percent of seniors were “extremely/very satisfied” or “somewhat satisfied” with the services and benefits that their Medigap policies covered and 93 percent were “extremely/very satisfied” or “somewhat satisfied” with the enrollment and renewal processes.

Medigap policy beneficiaries seemed to be ambivalent about their payer’s member engagement. Seventeen percent said that they were neither satisfied nor dissatisfied with their policy’s responsiveness or the communications that they had received from their payer.

More than nine in ten Medigap beneficiaries “strongly” or “somewhat” agreed that Medigap enabled them to see their providers without concerns about out-of-pocket healthcare spending. Positive sentiment around this element of Medigap coverage has grown over the past four years but has not dipped below 92 percent satisfaction in the biennial surveys.

While 15 percent of seniors may not have been completely satisfied with the affordability, 44 percent strongly agreed and 40 percent somewhat agreed with the statement: “it provides good value for my money and peace of mind at an affordable cost” and 53 percent strongly agreed that it saved them thousands of dollars in out-of-pocket healthcare spending. Indeed, separate studies have indicated that seniors choose Medigap policies for budgeting reasons.

Seniors acknowledged that without their Medigap policies they would have financial concerns about covering their healthcare needs. Primarily, they would be worried about covering co-pays and co-insurance, losing their financial security, and covering deductibles. More than half of seniors worried about foregoing routine or preventive care without their Medigap policy.

If they were to lose their Medigap policy, most of the respondents (32 percent) said that they would rely solely on Traditional Medicare to cover their medical expenses, although 26 percent said they would turn to Medicare Advantage. Affordability would be the driving factor in that decision for 34 percent of seniors.

Before they settled on a Medigap policy, 36 percent of seniors somewhat or seriously considered a Medicare Advantage plan, where costs can be more predictable. However, the span of healthcare providers available through a Medigap policy was one of the main factors that drew them to Medigap policies, along with lower out-of-pocket healthcare spending and the affordability of routine care.

“Medicare supplemental coverage brings seniors a very high level of satisfaction because it allows seniors to get the care they need from the doctors they prefer at an out-of-pocket cost they can afford,” Winthrop Cash, executive director of product policy at AHIP, said the blog post that attended the report.  “Seniors value highly the peace of mind that their Medigap coverage provides them.”

Medigap policies have seen stable enrollment from 2015 through 2018, with Medigap Plan G experiencing a surge in recent years.

Jim Greene – Men’s Health

October 21, 2019

A recent study in the journal Neurology is shining the spotlight on your vegetable garden. Researchers were studying lycopene and stumbled upon some remarkable results. Lycopene is found in many different fruits and vegetables and is responsible for the red coloring of your tomatoes.

The study was conducted on over 1000 men over a 12 year period and discovered that the subjects who had higher levels of lycopene in their blood were much less likely to have a stroke in their future. The researchers also looked into other potential causes such as beta-carotene, vitamins A and E. These levels did not seem to have an impact on the reduction in the risk of a stroke.

Besides the increased levels of lycopene tomatoes are filled with things that your body craves. Inside a tomato you will find fibre, vitamin C, select B vitamins, potassium, and a number of antioxidants. A single tomato has almost no fat content, is quite low in sodium, and only possesses about thirty calories.

Lycopene can be found in a number of places in nature including tomatoes, watermelon, grapefruit, and guavas. One of the interesting facts that came out of this research is that the best way to get lycopene is not through supplements but tomatoes in their processed form. Tomato juice, ketchup, sauces and tomato paste are all sources of lycopene. Processed tomatoes are recommended due to the higher level of absorption that is possible.

By Deidre McPhillips – CNN

February 18, 2021

Life expectancy in the US dropped a full year in the first half of 2020, according to a report published by the US Centers for Disease Control and Prevention’s National Center for Health Statistics. Experts say that Covid-19 was a significant factor contributing to the decline. The life expectancy for the entire US population fell to 77.8 years, similar to what it was in 2006, CDC data shows.

Changes to life expectancy also widened racial and ethnic inequities. Compared to 2019, life expectancy for non-Hispanic Black people in the US fell about three times what it did for non-Hispanic White people, by 2.7 years. It fell by twice as much for Hispanic people, by 1.9 years. Covid-19 is sending Black, Latino and Native American people to the hospital at about 4 times the rate of others.

Life-expectancy disparities between Black people and White people had been shrinking in recent years, but these latest figures reverse some of that progress. Over the past 40 years, life expectancy has increased slowly but rarely declined. Between 2014 and 2017 — a peak period of the opioid epidemic — life expectancy declined a third of a year, which itself was significant.

Life-expectancy estimates before 1980 have been measured less consistently, but experts told CNN that estimates for drops in life expectancy after World War II range from less than a year to three years. The pandemic has taken a massive toll on the US population. About 490,000 people have lost their lives to the disease, and the CDC estimates excess deaths in 2020 to be even higher. 

“A year of life expectancy lost doesn’t really give you a true sense of how serious this has been. Millions of life years were actually lost,” Eileen Crimmins, a professor at the University of Southern California who has researched changes in mortality, told CNN. “Covid is on track to cause more deaths than cancer or heart disease, and that’s important.”

Most deaths due to Covid-19 have been among older adults, which would have a small effect on overall life expectancy.  But Theresa Andrasfay, a researcher at the University of Southern California who has published work on the potential impact of Covid-19 on life expectancy, notes that while deaths among younger adults may be less common, the numbers are still substantial. “Those deaths have a significant effect on life expectancy because they contribute to more foregone years of life,” she told CNN.

Disparities in years lost among Black and Hispanic people are in line with the disproportionate effect Covid-19 has had on communities of color. Hispanic and non-Hispanic Black people are both about twice as likely to die of Covid-19 than non-Hispanic White people, according to the latest data from the CDC. 

“At the beginning of the pandemic, we may have thought this was a virus that affected everyone equally,” Andrasfay said. “We were aware of these longstanding health disparities, but this really drives home how the Black and Latino communities were disproportionately affected.”

The new life-expectancy estimates from the CDC mark the first time the agency has published these figures using provisional data that comes from death certificates that were received and processed for the first half of 2020. Because it is based on deaths recorded between January and June, the report notes that the estimates “do not reflect the entirety of the effects of the COVID-19 pandemic in 2020, or other changes in causes of death.” Certain geographic areas were affected more than others earlier in the pandemic, and timely reporting of deaths varies by jurisdiction.