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Wealth Design Group

December 2017: 10 Happy thoughts About Money During the Holidays


10 Happy thoughts About Money During the Holidays

By Gary Pevey

Ten thoughts about money for December. Stay sharp out there!

1. The Basics of Annuities. Annuities are unique financial instruments. They can provide a way to accumulate funds for the future and/or systematically distribute those funds over a given period. Annuities are financial contracts issued by insurance companies. Annuity buyers deposit money into the contract in the form of premiums. The insurer invests these premium dollars, which are then credited with a certain rate of interest earnings or grow in relation to the performance of the investments in which they are deposited. Funds accumulate in an annuity on a tax-deferred basis, which enhances the product's ability to grow: funds compound at a greater rate because none of the earnings are taxed away.

2. Annuities are well suited for retirement planning. At a certain point in the contract's life, the insurance company-at the owner's direction-can convert all or a portion of the annuity's value into a series of periodic income payments. These payments are calculated actuarially to extend for a certain number of years or for the owner/annuitant's lifetime. By design, annuities can serve as

both asset accumulation vehicles and as asset distribution vehicles. For this reason, annuities are well suited for retirement planning. They can be purchased with after-tax dollars as a way to accumulate or distribute nonqualified funds or they can be purchased with pre-tax dollars and held in an IRA or qualified plan.

The former are nonqualified annuities; the latter are qualified annuities.

3. Are you nearing retirement and is Social Security part of your plan for essential income to cover living expenses?   A reality in retirement is that spouses do not die at the same time. When a spouse dies the income for the surviving spouse is reduced by the smaller of the two Social Security benefits. It is important to plan for this event, and the best way to plan for it is permanent life insurance.  Remember, the only life insurance that makes any sense is the policy that is in force when you need it the most. Many Americans don't realize that life insurance is just as important in retirement as it is when you are raising the children. The loss of Social Security income is just one example as to why it is important. Don't leave this earth without it!

4. Life Insurance is not just for the working spouse! One should consider insuring the non-working spouse especially if young children are involved. There is significant cost and time in raising children that will need to be replaced. Life Insurance helps mitigate that cost. The surviving spouse could also lose the retirement Social Security benefit of the non-working spouse.

5. Always - Always - Always

  • Always get a line of credit on your house when you don't need it and no natural disasters are pending. The financial institution probably will not extend a line of credit when you need it, or if a looming storm or fire is pending.
  • Always remember it is as important to manage your liabilities as it is to manage your assets.
  • Always know prepaying your mortgage in a lump sum each month does not lower your monthly mortgage payment. Prepaying your mortgage benefits the lender not the borrower.
  • Always keep in mind that the housing market and the individual buyer determine the value of your house. Your mortgage, or lack of it, has nothing to do with its value. Your house does not increase faster as a result of not having a mortgage on it.

6. Are you contemplating any type of medical procedure?

Insurance companies and medical providers are battling over reimbursement amounts. Many providers throughout the country are not renewing their contracts with major insurance carriers. Make sure your providers, including hospitals and surgical centers, are in your network. Don't assume they are because they were last year. In many cases, there is no notification of contract changes. If in doubt, contact your medical provider and they will advise you.

7. Are Your Estate Planning  documents in order? 2017 is coming to a close. This is a good time to review your estate documents. It is important we avoid threats with our money.  We suggest you work with a competent estate planning attorney to execute at least the following basic estate planning documents:

  • Last Will and Testament
  • Designation of Health Care Surrogate
  • Durable Power of Attorney
  • Living Will
  • HIPAA - individuals authorized to receive information on your medical care

8. Roth 401(K) vs. Traditional 401(K):  Which is right for you?

9. Medicare open enrollment ended December 7, 2017.  What does it mean? For those already enrolled in Medicare and who have a Medicare Advantage Plan or Part D (drug plan) it means you will not be able to make any changes to your existing plan until January 1, 2019. Open enrollment starts again on October 15, 2018.  For Medicare recipients using Medicare as their primary care provider and supplementing it with a Medigap or Medicare Supplement policy it means you can change insurance companies and plan designs anytime throughout the year, but you might have to medically qualify to make the change.

10. Innovative methods for growing assets also focus on managing liabilities. It is just as important to manage your liabilities as it is to find products that produce high rates of return. What kind of risk do you take when you decrease liabilities? What pressure does that relieve on the rate of return on your existing assets? Get with an advisor that understands the importance of managing liabilities, and can pinpoint areas where you can improve your efficiencies.



Gary Pevey CLU ChFC

Wealth Design Group

3445 American River Drive, Suite B Sacramento, CA 95864

(916) 480-0669


Investment advisory services offered through Wealth Design Group, a Registered Investment Adviser registered with the State of California. Securities offered through Mutual Securities, Inc., Member FINRA/SIPC. Wealth Design Group is not affiliated with Mutual Securities, Inc.