Financial Advice – Annuity

Paying For Your Child’s Education

Annuity Strategic — Fri, 11 Aug 2017 20:13:55 +0000

With the rapidly increasing tuition costs each year, early planning for college is essential. Working with a financial planner to evaluate all options, develop a strategy and maximize tax benefits should help accomplish goals and objectives.

Client situation

David and Kathy are 42 and have three children. While they both love their jobs and they pay well, they have started to notice as the kids get older, their expenses are increasing too. David and Kathy want to comfortably afford their children’s education and activities and at the same time build their retirement savings. As work is stressful, they also want to continue taking regular holidays with the family.

How we have helped

Annuity Strategic worked with David and Kathy and completed a budget to see how they were spending their money. We then prepared some cash flow advice, firstly showing how they can build wealth without changing jobs, and secondly agreed a cash-flow plan going forward so they can be better prepared for any unexpected expenses, without substantially cutting back on their lifestyle.

Annuity Strategic planners can help clients financially prepare to send their children to a good college or university. Starting the college planning process as early as possible usually provides the best results. Planners can assist parents to establish a systematic savings plan and properly invest the funds according to the child’s age.

We reviewed their current superannuation funds and insurance to cut out any unnecessary costs. We made sure their superannuation was aligned with the retirement lifestyle they wanted for themselves and their family, and updated their insurance cover so that it continued to provide suitable risk management strategy for their family.

We also reviewed their current investment strategy outside of superannuation, and provided advice around a more efficient tax structure going forward.

The results

David and Kathy realised the following benefits from Annuity Strategic’s solution:

We gave our clients a high level of confidence that our conservative strategies would help them preserve their income in line with their spending and children’s education goals.
Comparing investment plans to state plans, we helped our clients select the best program based on their financial circumstances.
We provided advice around a more efficient tax structure going forward.

Estate Planning

Annuity Strategic — Fri, 11 Aug 2017 19:59:34 +0000

How We Have Helped

Michael and Sandra had a good budget that they were quite diligent with and this definitely assisted them in achieving their savings. After stamp duty costs, they estimated they would need to borrow an additional $490,000. We weighed up the pros and cons of having an investment property vs. a principle residence, and the effect this would have on their situation, plus the potential cost of LMI which would need to be discussed with the bank.

We weighed up the implications on First Home Buyers Grants, Taxation, Cash Flow, Long Term Capital Growth and the general implications of holding an investment property that would be difficult to sell quickly if they were to find themselves in financial difficulties. We also identified the need for personal insurance once their property was purchased, to protect them against the possibility of not being able to meet their monthly repayments due to an unexpected illness or injury.

Once we presented the couple with some scenarios on what each strategy may look like, they were able to make a decision on what was best suited to their lifestyle, and decided to continue to rent and purchase an investment property. We then referred them to our internal mortgage broker who assisted them in establishing their loans and found the right loan structure for them. Our advisors then provided them with advice on the recommended insurance requirements based on an analysis of their needs.

Finally, we assisted them in reducing the principal on their loan in as short a time as possible, in order to make their property positively geared to later draw on for their next property. 12 months later, Michael and Sandra have $200,000 debt remaining on their property and are starting to plan for their next investment.

The Moral of the Story: Proper Estate Planning Can Reap Rewards.

Financial Planning During Divorce

Annuity Strategic — Fri, 11 Aug 2017 19:26:06 +0000

The Clients

A couple is divorcing. The husband has been primarily dealing with the couple's investment portfolio. The wife has limited insight into the couple's finances. Now the couple is deliberating how to divide the marital assets, with input from their attorneys.

The husband informs the wife and her attorney that the portfolio has $2 million in real estate and $2 million in publicly traded stocks. The easiest split would be for one spouse to take the real estate and the other to take the stocks. Which investments should the wife take? Following are two possible scenarios.

Challenge

How to make wise financial choices about marital assets during divorce.

Scenario 1

Since the stock market is volatile and the wife is not experienced at picking stocks, the husband suggests that she take the real estate. After all, real estate is a solid investment; there will always be a limited supply of land. The wife and her attorney agree, and the couple reaches a settlement.

The wife is excited to own various pieces of real estate. It doesn't concern her that the real estate comes with debt, since the net equity is valued at $2 million. However, she soon learns that servicing the debt requires regular payments. The wife is struggling to cover her own expenses. Soon, she can't make the required payments. She learns quickly that real estate is an illiquid investment. It's a bad time to sell real estate. She doesn't have time to wait for a good price. She is able to sell some of the properties at a discount, and the lender forecloses on the remaining properties.

Two years after the settlement, the husband's stock positions have increased to a value of $2.3 million. Although the wife no longer has a liquidity crisis, she is only left with $1 million after her properties are liquidated. The husband is $1.3 million richer, because he was savvy at picking and managing the investment pieces in the couple's portfolio.

Scenario 2

The couple's real estate assets are located throughout the United States. The wife agrees to take the stock positions because they are liquid and require less ongoing management. Her attorney agrees. Eager to end negotiations, the couple signs a settlement agreement.

Nobody questioned the husband's valuations of the real estate because he presented recent purchase prices. The wife was unaware that the husband had purchased all real estate properties from distressed sellers within a year, at great discounts. The actual fair market value of the real estate was closer to $3 million. But the wife and her attorney did not realize that the purchase prices did not reflect fair market value. At the same time, the stock market experiences a difficult two years. The wife's stock positions drop in value from $2 million to $1.8 million.

Two years after the settlement, the husband is sitting on real estate valued at $3 million, while the wife is holding on to stock valued at $1.8 million. The husband is $1.2 million richer than the wife.

Strategy and Solution

Now turn the clock back. Before any decisions are made, the wife's attorney refers her to Annuity Strategic. We analyze the investments in the portfolio, help the wife decide which investments appear more promising, and help her understand her risk tolerance. In addition, our planners recognize the significance of diversification. We advise the wife to spread her risk by taking half of the stock assets and real estate properties. Annuity Strategic then allocates the stock portfolio appropriately, while assigning the properties to some of its top real estate managers.

Planning For Your Family’s Financial Security

Annuity Strategic — Fri, 11 Aug 2017 19:22:47 +0000

Client Situation and Outcome

A recent widow may be hesitant or lack the expertise to handle finances. Planners can assist by providing knowledge and offering support. Initially, they help her ascertain how much income she can expect to receive from her late husband's pension and social security. Together, they review expenses to aid her in determining how much revenue is required to maintain a desired standard of living. Working with the client, planners develop an asset inventory and discuss possible risks within the portfolio.

Annuity Strategic planners join with the widow's attorney to assist her with reregistering assets in her name and filing life insurance claims. They also study tax returns, helping her to understand and address all issues.

Planners coordinate with the client to guide her in creating a comfortable income from assets. This assistance includes establishing an appropriate asset allocation based on age and financial situation. Annuity Strategic offers advice to help the client decide what monies to give to her children and collaborates with an attorney to tender new estate documents designed to pass the estate to her children with a low tax assessment.

When procedures and processes are complete, the client files the documentation in Annuity Strategic's electronic vault, comforted everything is in order for her children.

The Moral of the Story: Don't deal with the death of a spouse alone.

Preparing For Uncertainty

Annuity Strategic — Fri, 11 Aug 2017 19:04:27 +0000

Client Snapshot

A newly married couple joyfully welcomed their first child into their family. Recognizing the risks and responsibilities associated with children, they wanted to be positive they were protected and met with planners at Annuity Strategic to discuss various insurance options. The planners presented basic fundamentals of risk management and cautioned them that without proper insurance coverage, their savings, home and future income could be in danger.

Situation and Outcome

The meeting was very productive. The planners reviewed short and long-term disability provided by the couple’s employers to be certain coverage was sufficient, the definition of disability appropriate, and the carrier an A+ rated company. They stressed the importance of proper coverage to protect them if a long-term disability occurred, which may be financially devastating without ample coverage.

Next, the planners completed a needs analysis to determine life insurance requirements. They suggested the necessary amount and type of insurance and compared different investment grade companies by price and benefit. They reviewed and coordinated group life insurance benefits with their personal policies and recommended designated beneficiaries.

Working in concert with the couple’s property and casualty agent, the planners analyzed the auto and homeowner’s policies to discern extent of coverage, the existence of replacement cost riders and amount of deductibles to be sure they were not paying too much. As added protection for their assets, Annuity Strategic coordinated each policy’s liability with a new umbrella liability policy.

During one of the meetings, the woman mentioned concern for her parents’ future if something happened and they were hit with long-term medical expenses. Her mom and dad retired several years ago, and the thought of nursing home care, if ever needed, was daunting. The planners were happy to assist and subsequently met with her and her parents to help explore options. They analyzed the older couple’s financial status, explained long-term care insurance, feature by feature, and guided their client’s parents through the sometimes-confusing contractual language within the policy. The family learned about different policies and each one’s benefits, as well as types of care provided, such as nursing home, assisted living or home care. They also expressed interest in considering a new hybrid policy, which provides a combination of life insurance and long-term care benefits.

Results & Lessons Learned

Annuity Strategic planners provided objective advice because they are not tied to any particular insurance company. The end result was to obtain proper coverage, help minimize annual costs wherever possible and acquire insurance through high quality companies.

The Moral of the Story: Being properly insured results in peace of mind.