Financial Planning Dentist

Life Insurance….

Let me guess, was your first thought, “are you serious?” If so, don’t worry mine was too. How could life insurance be like anything like a Roth?

When I was first presented with the idea that life insurance was more than purchasing protection about five years ago, being a CFP®, I immediately thought the same thing, this can’t be right. I mean outside of a few cases like when individuals have a high need for income protection being the primary breadwinner of the family, paying estate taxes, paying off debt and future obligations with a death benefit, or using it as a gifting strategy to avoid the estate tax exclusion (for the ultra-wealthy), I didn’t think there was more. I knew a lot of people needed it but I just thought most people would get term life insurance and call it good.

It wasn’t until I spoke with a CPA and one of the leading tax attorneys in the country on multiple zoom calls, thanks Covid, where everything I thought about life insurance was flipped upside down. I think many people were and maybe still are in the same position as I once was years ago. I am here now to tell you that permanent life insurance might be one of the best-kept secrets that the ultra-wealthy have been using for decades to get tax-free income, leverage, income protection, and asset protection.

Now there are a million ways to design life insurance but I want to share with you on a high level how some of the policies we design work and why it might be something that would complement the rest of your portfolio. As a financial planner, I want my clients to have a wide variety of different income streams, strategies, and ways to grow their wealth. Life insurance, I believe, was the piece I have been missing in our InSight-Full® Plan. My goal for every client is to help them reach their goals by maximizing how each dollar is used both now and in the future by simplifying each part of their financial lives. This means finding which accounts should be funded, when, how, and then how to withdraw from them when you need them.

So why is life insurance so great? For the right person and situation, some types of permanent life insurance policies can provide individuals a mix of growth, protection, tax-free income, and additional leverage should they choose to use it.

Let’s start with growth. Whether you’re using a universal life policy that’s tied to an index (think SP500) or ownership in an insurance company (think of a dividend payout) clients can accumulate wealth inside of a policy that’s providing them protection. As the money grows, the death benefit can also increase which means more of a payout to beneficiaries. In some types of insurance like whole life, cash accumulates (cash value) similar to that of a bank account. As that money accumulates, policy owners can withdraw that money and pay interest back to the insurance company. The beautiful part about this is the dividends paid by the insurance company for owning whole life insurance can be more than the interest being charged (leading to a positive arbitrage).
Second, since most individuals use life insurance for asset protection and income protection for a certain amount of time (term insurance), permanent life insurance gives you this protection for life. Unlike term insurance, where once you reach the end of your term your coverage ends and there is no value remaining, permanent life insurance continues giving you the flexibility to use the cash value accumulated for almost anything you want. So whether you take out a loan and use that money to make other investments or you annuitize your cash value into an income stream, having permanent life insurance can provide you more value in my opinion than term insurance in the long run due to its cash value.

Permanent life insurance can be used as a tax-free income generator as well. Every premium that is paid earns dividends and interest. As that money grows and compounds over time, you end up with a nest egg of cash value. This cash value can be annuitized into a tax-free income stream for life (all growth inside the policy is tax-free) with distribution rates as high as 6-7%. Outside of a Roth IRA and Municipal Bonds, tax-free income is hard to come by. Tax-free income that also pays out a death benefit to beneficiaries is a win-win for everyone.

Lastly, some insurance companies allow life insurance to be used as collateral for a loan making permanent life insurance one of the most flexible and lucrative vehicles out there.

So whether you’re looking for income and or asset protection, tax-free income in retirement, leverage, or coverage for estate taxes, permanent life insurance is a great place to look. Keep in mind, not all insurance policies are created equal and provide the same features so you need to make sure to do your due diligence, talk with a professional, to make the best decision for you and your family.

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Kevin Taylor

Meditation, Mindfulness and Money: 4 ways to channel mindfulness into your money

If you’re looking for some broader answers to the ‘universal question’ I’m not your guy and this is not that article. But I will say that after years of thinking the transcendental was not for me, I’ve changed. If it was real, here and now, I would investigate it for legitimacy. If it was ethereal and spiritual it was for guru’s, theologians, monks and priests. But that has changed for me. I now see mindfulness as a tool that has a very real way of actualizing my intentions, and meditation is the gateway to getting in touch with that.  The deliberate focusing of your mind is no more than coaching it to react in a particular way. Drawing from techniques that are metaphysical (more controllable) and shaping the physical (less controllable). So, to cut through the chaos of daily life, and getting your mind thinking about money, or more broadly wealth is no more difficult than coaching it to think more deeply about your family, career, or your other passions.  Visualize your financial goals Players and coaches have for decades now taught visualization as a method for success. Mindfulness allows the player to be mentally prepared for a situation, before they are called on to act in that moment. To see their options and take advantage of opportunity by running through a situation and potential variables. This speeds up decision making ability and allows people to react faster and with a better sense of how a decision reflects the hope of a game plan. They do this to focus the mind on their desired outcome, before the situation arises. Visualization can similarly help you premeditate the outcome you’re seeking for you and your family’s financial future. It is rarely a lack of opportunity that hinders success, but a failure of recognizing that opportunity in the moment it exposes itself. Having coached your mind to see and react to risk and opportunity is something that you mind can be coached into understanding before the opportunity presents itself. Get real about your finances By taking time to reflect and gain comfortability with your financial situation you can become more intimate and realistic with your expectations. By carving out time to reflect on your situation, the calmness of the moment can help you define more achievable outcomes. This is not to say you shouldn’t expect an extravagant life, but to help you control the resources at your disposal and become capable of mastering the decision making process in front of you.  Through meditation you can calm down otherwise erratic parts of life and focus your mind with greater intention. You can isolate the parts about your financial life that bring you joy and contentment and ready your mind to make decisions that have often been the result of emotion or reaction. Deliberately bringing your mind into focus brings clarity to the more important aspects of your life. Mindfulness about your past Meditation can be used to deliberately shape the way you react to a situation. Using mindfulness it can also be used to relive and relearn from events in your past. Taking time to re-feel how a situation in your past affected your present is a way of coaching your mind to learn from those events. By using the emotions which drive so much of our decision making and combining that with the more deliberative parts of the brain, you can combine the events of your past into the reactions you hope are part of your present.  Imagine if you isolate a single event from your past that shaped your current relationship with money. Reflecting through meditation the events that have caused your current understanding of your financial situation and the history you associate with the subject. You can then reimagine the events and outcome from your past. Learn from that very visceral event, and reshape how you would have rather reacted. The goal is not to relive financial missteps that you cannot get back, but to coach your emotional reptilian brain to cede the lead to your primate and more deliberative brain. By reflecting on the emotional drivers in a meditative process you can recognize the leading indicators events and avoid them in your current situation. Discover your money beliefs though mindfulness By channeling meditation time towards your money habits you can have a more complete and intimate relationship with money. Meditation helps you uncover the person you want to be in life, to shape and imagine how that person thinks and reacts to help define what that person’s intentions about money are. We all hold certain money beliefs, usually as a reaction to our emotions with money and lifestyle. One you begin spending even small amounts of time focusing your mind on money and your relationship with it, you’ll find the beliefs you have about money change. Channeling a deliberate intention into your beliefs will develop more positive money reactions, and those reactions will evolve in habits. This process enshrines the positive money outcomes you desire, into tactical decisions you can control. For many this transformation can happen in the way they save which is one of the leading indicators to financial success. They can transform the way they think and transform the way cash flows through their household flow from “income – spend = save” to “income – save = spend.” This shift in the belief that saving is more pressing then spending is not the natural state for most people, until they gain that more intimate and purposeful mindset around the value of saving. Conclusion Becoming more purposeful with your actions and ultimately your money begins with mindfulness. This mindfulness can be the result of focused meditation on the subject. Reshaping to the way you feel about and react to investment situations, market performance, and risk. Finding time to be deliberative about money allows you to cultivate your reaction to your money and better develop the fiscal life you want.  

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Kevin Taylor

What to know about investments in self-storage and storage facilities

Investing in storage facilities, also known as self-storage, can be a profitable investment opportunity for those looking to enter the real estate market. However, like any investment, it comes with its share of benefits and drawbacks. Benefits of storage and self-storage investments: Steady income stream: Storage facilities can provide a steady income stream through rental income from tenants who use the space to store their belongings. High occupancy rates: Storage facilities typically have high occupancy rates, as tenants often sign long-term leases. Low maintenance costs: Storage facilities require minimal maintenance compared to other types of real estate, making them a cost-effective investment. Flexibility: Storage facilities can be used for a variety of purposes, including personal and business storage, providing flexibility to investors. Drawbacks of self-storage and storage investments: Competition: The self-storage industry is highly competitive, with many new facilities opening each year. Location: The location of the storage facility can significantly impact its value and potential for rental income. Economic downturns: During economic downturns, demand for storage space may decrease, which can impact occupancy rates and rental income. Security: The security of the storage facility is important to tenants and may require additional investment to ensure safety and protect against theft. The most lucrative benefit of investing in storage facilities is the potential for a steady income stream and high occupancy rates. The cap rate, or the ratio of net operating income to property value, should be evaluated to ensure a good return on investment. Generally, a higher cap rate indicates a better return on investment, but this can vary depending on the location and condition of the property. There is a moderate level of risk involved in investing in storage facilities. Competition, location, economic downturns, and security are all factors that can impact the value and potential for rental income. People typically invest in a variety of storage facilities, including indoor and outdoor facilities, climate-controlled facilities, and boat and RV storage. The specific type of storage facility depends on the investor’s goals and market conditions. In conclusion, investing in storage facilities can provide a steady income stream and flexibility to investors. However, careful evaluation of the property and market conditions is necessary to minimize risk and maximize returns.

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Kevin Taylor

Do your chores or there will be NO MONEY in your retirement account!!!! ~ DAD

First off, review this list of answers and accept how incredible this idea is, to both fund college, make your kids earn it, and do it all in a tax-advantaged way: Yes, income earned in the home can be put into a child’s Roth (within the rules) Yes, the income and savings can be used for college, or really any major life purchase Yes, it is a relatively easy strategy if you follow the below tips If you are raising your kids like I am mine, the early years are an important time to ingrain a set of good money habits that hopefully they keep for the rest of their lives. I require my kids to put 10% of any money they earn into the following categories, college, giving, and taxes (back to the family). Meaning they only ever get to spend about 70% of their income. This has been met with several comments ranging from “awesome” to “cruel”. But for my kids, it’s all they know. They don’t negotiate or object to taxes because it has always been how they get paid. I hand them a dollar and take a dime back instantly. It’s visceral, and habitual at this point.  I feel money is a difficult idea if children are never given the opportunity to handle it, hold it, and lose it. When it comes to teaching financial lessons, setting a good parental example is important, but actually giving the child some experience making wise financial decisions is essential. This includes both giving the child decision-making authority with their own money and giving the child the means to earn money outside of or instead of an allowance. This is where the Roth comes into play, and your opportunity to hire your child… This is an open platform to pay your children in a way that makes sense for your family. And the best part is that this payment can be counted as earned income and thus qualifying for Roth eligibility. But there are some rules you need to follow and this article will walk parents through the right way to keep the Roth eligibility intact.  You will want to make it clear, under which IRS designation you want to use. The two options are as a self-employed independent contractor or a household employee of yourselves.  This all might sound silly, hiring your child as a contractor, but the benefits make it worth it. I promise. And like taxing your children, it might only sound silly because it’s new, but your kids won’t know this isn’t normal and will just roll with it. The Independent Contractor Route… If you decide that your child is an independent contractor, then all of the child’s earnings must be reported as Self-Employed on Schedule C.  So it should be noted that if their net earnings from this kind of self-employment are more than $400, the child would need to pay self-employment tax (Medicare and Social Security) on Schedule SE. That’s an important threshold to be aware of.  Quite possibly the best part of choosing the independent contractor route is that your child could work for many different families. So if they are routinely engaging in neighborhood childcare, lawn maintenance, or other jobs in your community, this might be the most open path.  Let’s be clear though, this route still requires that the child follow the child labor laws. But these laws are reasonable restrictions for most circumstances.  The first law of note is the age restrictions on certain occupations. If your child is under 14, then the list of potential occupations is limited to: delivering newspapers to customers; babysitting on a casual basis; work as an actor or performer in movies, TV, radio, or theater; work as a homeworker gathering evergreens and making evergreen wreaths; and work for a business owned entirely by your parents as long as it is not in mining, manufacturing, or any of the 17 hazardous occupations. This is the sweet spot for any family that has 1or more family businesses.  At age 14 and above the universe of employment can expand to include: intellectual or creative work such as computer programming, teaching, tutoring, singing, acting, or playing an instrument; retail occupations; errands or delivery work by foot, bicycle, and public transportation; clean-up and yard work which does not include using power-driven mowers, cutters, trimmers, edgers, or similar equipment; work in connection with cars and trucks such as dispensing gasoline or oil and washing or hand polishing; some kitchen and food service work including reheating food, washing dishes, cleaning equipment, and limited cooking; cleaning vegetables and fruits, wrapping sealing, and labeling, weighing pricing, and stocking of items when performed in areas separate from a freezer or meat cooler; loading or unloading objects for use at a worksite including rakes, hand-held clippers, and shovels; 14- and 15-year-olds who meet certain requirements can perform limited tasks in sawmills and woodshops; and 15-year-olds who meet certain requirements can perform lifeguard duties at traditional swimming pools and water amusement parks. At age 16 or 17, almost any job that is not expressly prohibited (like alcohol serves or licensed operations) becomes available to children.  For more details on the standing labor laws and how they pertain to children consult YouthRules.Gov. The Household Employee Route… This is likely the more common route, and requires less diligence in what the job is, and the laws that protect it. There are two general guidelines you still note before you take this route:  Your list of jobs allowed under child labor laws expands significantly as you are allowed to “work for a business owned entirely by your parents as long as it is not in mining, manufacturing, or any of the 17 hazardous occupations” at any age. The wages are exempt from FICA taxes if they are working for a business owned solely by their parent(s). When determining if this employment is suitable this is the question you need to ask yourself: Does the employer (you) have control

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