June 26, 2013
The market is acting odd. Ben Bernanke is hinting that he is going to scale back the loose monetary policy that has, theoretically, been supporting the US economic expansion. He is hinting at the change because he thinks the economy is reaching a level of stability that growth can continue with more normal policy out of the Fed. The improving economy would usually be a good news story for stocks; the most knowledgeable economist in the country thinks the economy is getting better – how is that not good news?
Well, sometimes when economic growth picks up, it results in higher levels of inflation, and that inflation can have a nasty impact on stock price. However, that doesn’t seem to be the case this time around. In fact, inflation expectations are falling, not rising; so inflation doesn’t explain what’s going on. What seems to be happening is a fundamental disagreement between investors and the Fed. The Fed thinks it’s safe to stand up and walk around the plane, while Wall Street thinks we need to keep the “fasten seat belt” sign lit, and to keep it fastened tightly! Wall Street’s concern is that if the Fed is wrong, and if they withdraw support too fast, the economy could slip back into recession.
We don’t envy the Fed’s position. If the Fed continues with their bond-buying, the chorus of Wall Street pundits will scream about inflation. If they take off the safety belt sign, the chorus screams about recession. It seems like a lose-lose situation, but in the end it doesn’t even really matter all that much. The markets are choppy, and always will be. The proof of the direction of the economy will be in the numbers: are companies earning more? Are people getting back to work?
Bernanke knows what he’s doing; if the numbers don’t demonstrate continued growth, he’s not taking the seat belt off. So, while there is a lot of turbulence right now, we don’t think we will go flying out of our seats anytime soon.
June 5, 2013
- Life events can prompt changes in your insurance needs. Some life events cause your needs to go up. Changing jobs, having children, buying a home, or updating your estate plan can require purchasing additional coverage. But there are also some life events that actually decrease your need for insurance. Maybe your children have grown up and moved out, or you’ve paid off the mortgage on your home. Events such as these can reduce your insurance. Either way, your life insurance needs are at stake.
- You haven’t revisited policies you purchased years ago. Life insurance proposals are written with the best of intentions and are based on the economic circumstances in which they are created. However, interest rates and market fluctuations can affect the overall health of some policies. Many clients who took out universal life policies in the 1980s incurred high interest rates when originally purchased. When interest rates declined, many people expected to find their policies almost paid off, only to find that they were in danger of lapsing. If you have a permanent life insurance policy, you should do an annual re-projection of the policy to make sure it is still going to do what it was designed to do.
- The type of insurance you need has changed. In your retirement years, you’ll likely put more thought into your estate plan. Creating an irrevocable life insurance trust can be an effective way to transfer assets to your loved ones in a more tax-efficient manner, and to provide tax-free proceeds to cover expensive settlement costs.
- You’re overwhelmed by the complexities of insurance policies. Insurance policies are complicated, and risk management specialists can provide clarity so that you can determine if your life insurance policy can deliver what your family needs. For example, you’re probably aware that life insurance can help provide an immediate source of income for your heirs upon your passing, but did you know that establishing an irrevocable life insurance trust can help maximize this lump sum?
- New policies and features may better suit your needs. The insurance world is constantly changing, and new products are constantly being developed. A few examples in the life insurance arena include policies that can provide long-term care benefits and assist business owners with transition planning, insuring a key partner or employee, and securing business loans.
The key to an effective life insurance policy review is to consider everything in your risk management file. Our team of insurance specialists at Wealth Enhancement Group will not only help you discern how your policies are working for you, they can also help determine how they fit into your overall financial situation.
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