Planning for
All Stages
of Life.

Does an annuity make sense for your investment portfolio? At Valley Forge Financial Dynamics, we offer a full-range of annuity products to fit any client situation.

Fixed Indexed Annuities (FIA)

Fixed Index Annuities, also known as equity-indexed annuities base their annual interest rates on the performance of certain pre-determined indexes, such as the S&P 500. It’s a way to balance the risks and rewards, carrying lower risks than market investments and higher potential than traditional fixed annuities. The interest rate won’t sink below a preset amount. Any gains earned will be locked in and it will never lose its value. These annuities often have enhanced income riders attached which will pay a lifetime income based on values significantly higher than the invested amount.

Single Premium Immediate Annuities (SPIA)

With a Single Premium Immediate Annuity (SPIA) the annuity holder begins receiving payments within a year after purchasing it. The payments can be for a fixed period of time, or for the lifetime of the annuitant.

Multi-Year Guaranteed Annuities (MYGA)

This is the option with the least risk and the most predictability. Multi-Year Guaranteed Annuity (MYGA) sometimes referred to as fixed annuities, come with a guaranteed, set interest rate for a fixed number of years, that doesn’t vary beyond the terms of the contract. While other investments might soar or dive, the fixed annuity is steady. At the end of the predetermined number of years, the interest will reset, often at a lower rate.

Enhanced Income Fixed Index Annuities

Fixed Index Annuities that have a low-cost rider, typically under 1% that will provide enhanced lifetime income.  In many cases the enhanced value is twice to accumulated value of the annuity.  The income provided will not run out no matter value of the underlying annuity. The income rider can be single or joint and works with qualified and non-qualified accounts.

Accumulation Focused Annuities

These are fixed index annuities with a low cost rider that is designed to boost the indexes and fixed accounts for the annuity.  By doing this it increases the growth potential of the annuity at a rate that exceeds the cost of the rider.

Bonus Annuity

These are Fixed Index Annuities that have a 'Bonus' on the premium. In the case of a single premium annuity the bonus is on that first premium. With a flexible premium annuity the bonus is added all new premium placed within a set period of years, which are typically within the first 5 or 6 years. These annuities provide an initial boost to the growth of the annuity and can make up situations such as recent market losses.

Group Annuities

Annuities that can be utilized to fund group retirement plans, such as a 401(k). They are unregistered variable annuities that can be marketed without a securities license.

Annuities with LTC Hybrid Coverage

Annuities that perform as a normal annuity, either a fixed annuity or a Fixed Index Annuity. They may not have the same robust growth as other annuities, and they do not have any enhanced income features. They do have another component to them in that they provide traditional long term care protection.

Variable Annuities

These are annuities, that in addition to having a fixed interest option, will offer one or more mutual fund investment options for cash accumulation purposes. These types of annuities do not offer safety of principal and earnings, as they have full market participation. While they can promise greater returns than other types of annuities, they are exposed to full-market risk and can lose value, including loss of principal.

Are you prepared for the 'What-ifs' in life? If you became disabled and couldn't work, how would you pay your bills and protect your assets or loved ones? Just over 1-in-4 of today's 20 year-olds will become disabled before they retire.

High Limit Disability Insurance

It can be hard to face the fact that a disability can happen at anytime to anyone. Clients without high limit disability insurance could potentially face huge financial losses. Your clients need to protect themselves and their families from the ruinous fiscal consequences of a debilitating injury or illness. High wage earners whose income consists of significant 'Bonuses', can purchase limits up to $100,000/month.

Guaranteed Issue Multi-Life Disability Insurance

If a disability inhibits one from working the financial strain can be catastrophic. Because many highly compensated employees have difficulty obtaining adequate and reasonable amounts of disability insurance through their group long term disability insurance plans, USI has high limit supplemental group plans to consider.

Buy-Sell Disability Insurance

While most people plan for an unexpected death, many overlook the possibility of an injury or sickness permanently disabling one of the partners; even though a disability is much more likely! Buy-Sell Disability Insurance is invaluable in this type of situation.

Loan Indemnification Disability Insurance

Often times, when a bank lends money to a business, they will require the borrowers to provide disability insurance covering the payments. This insures the bank that, should the borrower become sick or hurt, the payments will still be made. The preferred solution would be to prescribe disability insurance that would pay the monthly loan payments and/or pay off the remainder of the loan balance.

KEY POINTS REGARDING DISABILITY INSURANCE

Did you know?

• Disability insurance replaces 60%-80% of your income for a set period of time if you're unable to work.

• Illness, injury or other conditions that prevent you from being able to do your regular job could qualify as a disability.
• Disability insurance from employers does not offer much coverage because they're short-term plans and do not apply if you leave that employer.
• The benefit payment from an individual policy is tax-free, but benefits from an employer plan may be taxed.

Should you get Disability Insurance?

• According to 2017 data from the Social Security Administration, a 20 year old worker has a 1-in-4 chance of becoming disabled, for at least 1 year, by the time they reach retirement age.
• Because of how difficult it is to qualify for Social Security Disability, it is recommended that everyone should consider Disability Insurance.
• People with a higher standard of living would be greatly impacted if they lost income for just a few months.
• Married couples and families typically rely on two incomes to pay all of their bills each month, so losing one could cause issues.
• If you have significant debt, whether that's from a mortgage, an auto loan, or student loan debt from getting an advanced degree.

Are there different types?

Yes, there are different types of disability insurance:

• Short-Term Disability - Will pay up to 80% of your gross monthly income, but lasts just six months, this is normally though an employer.
• Long-Term Disability - Will pay 60% of your gross monthly income, and payments may last for two years or until you retire.
• Social Security Disability - This is a free form of disability insurance from the government and will only cover individuals with a severe disability. Notoriously difficult to qualify for and most are better off with Short Term Disability or Long Term Disability.
• Private Disability Insurance - Is often overlooked but it can fill the coverage gaps left open by health insurance plans and life insurance policies.

Financial planning is a step-by-step approach to achieving one's long-term goals, and acts as a roadmap to guide you through life's journey. Essentially, it helps you be in control of your income, expenses, and investments, allowing you to manage your money and achieve your goals.

FUNDAMENTAL CONSIDERATIONS

Setting Goals

• Budgeting
• Emergency fund
• Insurance
• Using credit
• Investing
• Tax planning
• Saving for college
• Retirement planning
• Estate planning

Income Sources

• Paycheck
• Rental income
• Government benefits
• Interest
• Investment income

Expenses

• Fixed expenses 
• Discretionary expenses

Risk Management with Insurance

Common types of insurance  that help protect you and your assets from different risks: 

• Health insurance
• Auto insurance
• Life insurance
• Property insurance
• Liability insurance
• Disability insurance
• Long-term care insurance

Growth, Income and Stability

• Growth: Increase in market value
• Income: Payments of interest or dividends
• Stability: Protection of original investment

Start Now

• Don’t put off planning and investing for retirement
• The sooner you start, the longer your investments have to grow
• Playing “catch-up” later can be difficult and expensive

One of the most common mistakes individuals and couples make regarding Social Security is when they choose to start receiving benefits. Maximizing this benefit will go a long way in determining if you will enjoy an adequate and happy retirement.

When Should You Start Receiving Retirement Benefits? 

• Before your full retirement age?  As early as age 62
• At your full retirement age? Age 66-67
• After your full retirement age?  As late as age 70

 Why is it an Important Decision? 

• When you claim benefits can significantly affect your overall retirement income
• If you’re married, timing can also affect spousal/survivor income

 What Should You Consider? 

• Your full retirement age and benefit calculation
• Amount of your future benefit and effect of early or delayed retirement
• How long you expect retirement to last based on life expectancy
• Whether you plan to continue working
• Other sources of retirement income
• Income taxes
• How your spouse might be affected

How Is Your Benefit Calculated?

As you approach retirement age, your highest 35 years of earnings are indexed, then averaged, and a formula is applied  to determine your benefit at full retirement age.

How Much You’ll Receive:

Claiming Benefits Earlier 

• Can start benefits as early as age 62
• Benefit reduction —you’ll receive 25% to 30% less at 62 than at full retirement age
• Benefits received for a longer period of time

 Claiming Benefits Later 

• You receive delayed retirement credits, up until age 70
• Benefit is increased 8% for each year you postpone receiving benefits past full retirement age

Monthly Benefit Comparison: 

• Benefit at age 70 is 77% more than benefit at age 62
• But cumulative benefits from age 62 to 70 equal $134,400

Example:

How Working Can Affect Your Benefits:

Before Full Retirement Age

• $1 withheld for every $2 that earnings exceed annual limit of $18,960 in 2021

Year You Reach Full Retirement Age

• $1 withheld for every $3 that earnings exceed annual limit of  $50,520 in 2021

At or After Full Retirement Age

• Earnings will not affect your benefit

Taxation and Your Social Security Retirement Benefits:

Will Your Benefit Be Taxable?*

Up to 50% of your benefit may be taxable if your combined income* is:

• $25,000 to $34,000 and you file as single
• $32,000 to $44,000 and you file as married filing jointly

 Up to 85% of benefit may be taxable if your combined income* is: 

• Over $34,000 and you file as single
• Over $44,000 and you file as married filing jointly

^{*combined income = adjusted  gross income + nontaxable income + ½ of Social Security benefit}

How Your Decision Affects Your Spouse and What is the Appropriate Combination of Claiming Ages:

• Retirement benefits are based on your earnings record —at full retirement age you’re entitled to receive 100% of your full retirement benefit
• Spousal benefits are based on your earnings record —as much as 50% of your full retirement benefit if your spouse claims at his or her full retirement age
• Reduction for filing for spousal benefits early - spouse can’t file until retired worker files

 Survivor Benefits:

• Surviving spouse generally receives the greater of the retirement benefit  the worker was receiving or his or her own benefit
• Survivor benefits may be payable as early as age 60 _{(may be subject to reduction)}

The Power of Delaying Your Benefits:

Monthly Benefit Example

• Monthly joint income is $2,374 more if both spouses claim benefits at age 70 instead of at age 62
• Monthly survivor benefit for Spouse 2 also increases

So many have a child or loved one with special needs. You want to make sure that they are protected and taken care of after you are gone.

Creating a plan for them can be extremely challenging. Proper Special Needs Planning will allow you to protect your loved one in a manner that fits for your family. An attorney who specializes in Estate Planning and Special Needs Trust can help create the documents you need to protect your loved one. An experienced Financial Professional can help you make sure that your goals and wishes are within reach financially.

When starting this type of planning you should be aware of certain considerations: 

• Do not disinherit your loved one. A common thought is that you give a greater share of one’s estate or life insurance proceeds to the “healthy” child and disinheriting the other child. This can cause a strain on the family dynamic and is not necessary. The solution is to create a Special Needs Trust, through an attorney.  You can create a trust that is used for purely discretionary purposes, as well as a trust that can be used for maintaining the quality of life you desire for your loved one.

• Choose the Trustee(s) carefully. Typically the trustee is given the sole and absolute discretion to act on behalf of the beneficiary (the special needs person).  This is a standard that is required for determining whether the beneficiary is eligible for benefits such as SSI or Medicaid. Whether it’s a family member or a professional, be sure to chose somebody with the capabilities to make these types of decisions.

• Make sure the trust is properly funded. Consider using life insurance to fund the Special Needs Trust. You do not need to have cash built up inside the policy, but you need to make sure that the life insurance will be in place for your lifetime. In the event that there are 2 parents involved, consider a Second To Die Policy, which will pay a death benefit to the Trust upon the passing of the second insured. It is important that the life insurance policy is owned by the Trust.  Having the trust in place before the insurance is acquired is the best way to achieve this goal.

• Do not plan on using IRA’s and other Retirement Plans to fund the Trust.  Typically these types of plans will have distribution requirements which could severely hinder the goals and desires of the plan.  Additionally, these types of accounts typically are market investments, which may lose value.

• Coordinate your plan with others.  Make sure you tell your relatives, and certain friends about your plans. Often times, with the best of intentions people will leave an inheritance for a person with special needs as a way to help.  If this is done outside of the Trust, it can curtail not only the intentions of the trust, but also have a negative effect on the special needs person getting benefits they may need.

Keep these factors in mind as you consider how to best plan for the special needs person in your life.

A Life Settlement is a financial transaction that enables qualified life insurance policy owners to receive a cash advance on their life insurance coverage by selling it to a state licensed financial institution called a life settlement provider.

The sale of an in-force life insurance policy is similar to the sale of a home or car - all rights, title, and beneficial interest in the life insurance policy are transferred to the buyer who then becomes responsible for all future premium payments. The price paid for the life insurance policy represents the net present value of the policy which is discounted from the face amount and calculated by considering the future premium expenses, health prognosis of the insured, as well as other risk factors.

Why Consider a Life Settlement Option?

If a life insurance policy is no longer needed, no longer wanted, or no longer affordable it might be a great time to sell. Your life insurance policy might be worth more than its cash surrender value. Don’t lapse or surrender your life insurance policy until you understand if it’s worth more.

Possible reasons for selling a life insurance policy:

• Life insurance premiums are no longer affordable
• The need to replace lost income in case of death of the insured no longer exists
• The need for funds to pay estate taxes no longer applies
• There is a need for resources to pay for health expenses and long term care
• A term policy may be reaching the end of the coverage period
• Funds are wanted to improve a retirement lifestyle

Life Insurance Policy Considerations

• The life insurance policy must have a face value of $100,000 or more.
• The life insurance policy must be transferable.
• All types of life insurance policies MAY qualify if the sale is allowed by the life insurance carrier's original contract (contract language for group policies must be reviewed).
• Non-convertible term life insurance policies can be sold under limited circumstances, qualification will depend on the insured's life expectancy vs. the remaining premium schedule. If the premium schedule shows significant annual increases, the insured would likely need to be diagnosed with a terminal condition.

Health Status of the Insured

• The insured must have health conditions that limit life expectancy to under 20 years.
• If the insured is under age 65, life threatening health conditions or a terminal diagnosis would be required.
• If the insured is age 65-74, serious health impairments would be needed in order to qualify.
• If the insured is age 75-79, chronic health conditions would likely be needed in order to qualify.
• If the insured is age 80+, qualification is likely but would depend on the future premium costs of the policy.

Are Life Settlement Proceeds Taxable?

• Proceeds of the sale of your life insurance policy may be taxable under federal and/or state income tax law
• The sale may affect your right to receive Medicaid or other government benefits
• Proceeds could be subject to claims and creditors

Eligibility Requirements

The eligibility requirements for a viatical settlement or life settlement are based on two criteria:

• The Life Insurance Policy
• The Insured's Life Expectancy

A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of one or more beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.

The primary purposes for having a trust:

• Protect Property
• Greater Control of Assets
• Avoid Probate
• Mitigate Taxes
• Privacy Protection
• Incapacitation
• Flexibility
• Assure proper usage of Assets passed to Beneficiaries

A-B Trust

• Joint Trust created by Married couple
• Each Spouse places assets in the trust and names a final Beneficiary other than the Spouse
• The purpose is minimizing Estate taxes

Charitable Lead Trust

• Provide income to Charitable organization for specific time period
• At conclusion donated assets returned or redistributed to another

Charitable Remainder Trust

• Strategy to avoid Capital gains on sale of appreciated property
• Secures income tax credits for donation of property into trust
• Generates an income stream based on the fair market value of asset
• Ultimately benefits the Philanthropy of Donor’s choice

Credit Shelter Trust / Bypass Trust

• Pass assets into trust for benefit of surviving spouse
• Since assets do not pass directly they avoid inclusion on Spousal estate
• At survivor death estate pass asset to beneficiary partially Estate tax free
• Unfunded uses annual gifts from Grantor to pay premiums

Donor Advised Fund

• Separately identified fund held and administered by Public charity
• Client makes contribution for immediate tax deduction
• Client serves as Advisor to fund

Dynasty Trust

• Transfer wealth to Grandchildren free of generation skipping transfer tax

Grantor Retained Annuity Trust

• Donor sets up Trust as annuity, receiving annual payment for fixed period
• At end of annuity period remainder passes on to trust beneficiary as gift
• Trust beneficiary must be family member

Intentionally Defective Guarantor Trust / IDGT

• Asset protection device structured to protect personal residence
• For tax purposes IDGT is disregarded as entity when Grantor makes transfer to IDGT irrevocable grantor trust
• Client sells residence to IDGT for fair market value in exchange for an installment note, enters into lease with IDGT to live in residence paying (FMV) non-deductible rent to IDGT (not considered income)
• IDGT pays the Client annual installment payments via installment note (not considered income)
• If property has mortgage IDGT makes mortgage payments which are deductible to Client / Grantor as if house is owned individually

In-Trust For (ITF)

• An account tool for parents and grandparents to set aside funds for minors, to make investment decisions and to potentially split income for tax purposes

Irrevocable Living Trust

• Estate planning tool transferring assets for purpose of tax savings
• Upon death proceeds bypass probate

Irrevocable Life Insurance Trust

• Purpose is to pass Life insurance proceeds Estate tax free to beneficiaries
• Funder transfers income generating assets to trust to pay premiums

Revocable Living Trust

• Deed property to heirs, but Grantor retains control during lifetime
• Upon death proceeds bypass probate
• Upon death Beneficiaries entitled to tax advantages of Irrevocable Trust

Spousal Lifetime Access Trust (SLAT)

• Estate planning tool for a wealthy married couple wishing to reduce estate taxes and to protect assets from creditors
• A SLAT is an irrevocable trust that one spouse establishes for the benefit of the other spouse, and if properly structured, the assets in a SLAT are not taxable in either spouse’s estate and are not available to either spouse’s creditors
• Simultaneously the beneficiary-spouse may receive distributions of income and / or principal from the SLAT and thus will benefit from the gifted assets

Depending upon your personal and overall family situation, we can discuss your options for Pre-Need Planning or considering a Final Expense policy to cover your end-of-life arrangements.

Final Expense insurance and Pre-Need Planning are different ways to pay for funeral and burial costs. The terms are often used interchangeably and may seem like the same thing, but there are subtle differences. Both methods provide funding for end-of-life expenses, and the process of choosing either one encourages people to make plans for their passing. Advance planning allows you to document your final wishes and make arrangements according to your personal preferences, alleviating your loved ones of significant stress and uncertainty while they're mourning.

Final Expense Coverage

Final expense insurance is a type of life insurance policy used to pay the funeral and burial costs of the insured person after they die. This plan allows you to choose a beneficiary – usually a trusted family member – to manage the proceeds after your death, using the funds to cover funeral or cremation costs as necessary. Funeral insurance plans guarantee a fixed amount of insurance proceeds, and the policy is usually based on expected final expense costs.

Pre-Need Planning

This type of insurance policy is specifically designed to cover the cost of pre-planned funeral, cremation, and burial services. Pre-need insurance allows you to plan your funeral or cremation service (per your individual preferences) and pay for the costs in advance. It might seem overwhelming, but making funeral plans sooner rather than later helps you get your affairs in order. Paying for the funeral in advance is also a thoughtful gift for your family in the wake of your death, and helps to protect them from any financial stress in their time of grief.

It's never too early to begin your plan

Based on your personal situation and family dynamics, we can help guide you through the advantages or disadvantages of considering Financial Expense coverage or implementing a Pre-Need Plan. Either way, you will have the peace-of-mind knowing that your affairs and wishes will be in order at the time of your passing.

A tax strategy is a plan for reducing taxes, regardless of your business or investment situation. It is a strategy developed to ethically ensure you pay the least amount of tax allowable by law.

Retained Earnings (C Corporations)

• Are defined as cumulative net income since corporate inception, minus dividends that have been declared since inception. These earnings are reported in Stockholder’s equity section of the balance sheet. The retained surplus that isn’t distributed to partners and shareholders is subject to taxation if the organization’s retained earnings reach a $250,000 threshold. Any amount beyond this becomes subject to a supplemental corporation tax at 39.6 percent unless the organization is able to justify a significant reinvestment of profits. The IRS makes exceptions on supplemental tax liability when businesses demonstrate how they plan to use these retained earnings.

Family Limited Partnerships

• Are a legitimate business structure used by families to pool their resources for business and investing purposes. Each family member involved in the partnership becomes a shareholder and has specific powers and authority based on the partner role the charter or operating agreement as either a General or Limited Partner.
• Advantages of a FLP are Asset Protection, Avoiding Probate since FLP assets are not subject to probate although each person’s share in the FLP is subject to probate, and Business Succession Planning for passing on Business interests in the event of a Member’s death.

Business Related – Simple IRA’s 401K’s

• 401(k) - Employer sponsored retirement plan. Contributions are often taken directly from payroll.  Employee contributions are made with pre-tax dollars and are tax deductible.  Provisions can and often do allow for Employer Matching contributions up to a specified percentage of income.

•  403(b)- A retirement account designed for certain employees of public schools and other tax-exempt organizations such as hospitals, churches and certain other medical facilities. Participants may include teachers, school administrators, professors, government employees, nurses, doctors, and librarian sallows participants to save money for retirement through payroll deductions while enjoying certain tax benefits. There's also an option for the employer to match part of the employee's contribution.

• Deferred Compensation Plans - Retirement plans that allow an employee to defer part of their compensation until a future date.  The employee does not pay income tax on the deferral until it is received.  They can be qualified plans such as a 401K or 403b or nonqualified.   A non qualified plan is typically used for highly compensated employees and can be set up so it does not need to include all employees,

• Defined Benefit Plans - These are like traditional Pension Plans.  They are employer sponsored plans that will pay a benefit based on factors such as salary and years with the company.  They have a set amount that they will provide at retirement and contributions are made to reach that specified amount.

Key Person Insurance protects the business against the loss of an owner or key employee. 

• The business obtains life insurance and is the owner of the policy on the key employee.
• At retirement the business may use the policy fund a non-qualified retirement plan
• Insurance proceeds are income tax free to the company
• Premium payments are not deductible

Traditional IRA’s: Uses before tax dollars, so there is a deduction available for contributions. The account grows tax free until distribution.

Roth IRA’s: Funded with after tax dollars, there is no current year deduction. The growth and distribution are tax-free.

401(k): Employer sponsored retirement plan. Contributions are often taken directly from payroll. Employee contributions are made with pre-tax dollars and are tax deductible. Provisions can and often do allow for Employer Matching contributions up to a specified percentage of income.

Deferred Compensation Plans: Retirement plans that allow an employee to defer part of their compensation until a future date.  The employee does not pay income tax on the deferral until it is received. They can be qualified plans such as a 401K or 403b or nonqualified. A non-qualified plan is  typically used for highly compensated employees and can be set up so it does not need to include all employees.

Defined Benefit Plans: These are like traditional Pension Plans. They are employer sponsored plans that will pay a benefit based on factors such as salary and years with the company. They have a set amount that they will provide at retirement and contributions are made to reach that specified amount.

Through our many carriers you can review the need and cost of group term life, short and long term disability coverage as well as dental and vision benefits.

Group Term Life: includes simplified enrollment, guaranteed issue up to $50,000. for groups of two to nine lives, and accelerated death benefits for hospice care. You will also have access to coverage for groups up to 500 lives with expanded benefits for dependents, and much more flexible benefit schedules.

Group Short Term Disability: responds to the fact that everyone who needs a paycheck needs to protect it. This is easy, flexible  and affordable income protection for short term illnesses and injuries. Typical maximum weekly benefit is $2,309 up to 70% of your income with partial and residual benefits available. Claim coverage will last a maximum 52 weeks in most cases.

Group Long Term Disability: one in three Americans will have a disability that will prevent them from working for 90 days or longer. One in seven can expect to be disabled five years or more. Financial hardship caused by the loss of income resulting from a disability is one of the primary causes of personal bankruptcy. A few points more to remember, there are NO earnings tests, maximum monthly benefits up to $24,000. elimination period from 30 days to 60 months, own occupation definition of disability in some cases with rate guarantees up to 3 years.

Group Dental Coverage: This benefit requires 10 or more employees to offer the greatest amount of benefits related to services such as preventive care (cleanings), basic care (pulled tooth) and major care (root canal). Dental coverage can be written on an individual basis with a reduced level of coverage and care.

Group Vision Care: Plans include coverage for a comprehensive eye exams, monitoring of medical conditions involving advanced vision issues and LASIK care. For the purchase of eye ware use the VSP network available throughout the United States. Eye exam frequency is every 12 Months and eye ware can be purchased every 24 months.