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783 Rio Del Mar Blvd, Suite 7, Aptos, CA, 95003
Employee Matters Bulletin
Protect Your Way of Life – Disability Insurance
Almost everyone needs Disability insurance. Think about it. Your capacity to earn a living is crucial. Your income makes it possible to buy food, make mortgage payments, provide for your children, take a vacation, and countless other things. Many faithfully pay premiums for car, life, homeowner’s insurance, and perhaps even a pet’s medical insurance, but they neglect this extremely important protection, Disability insurance.
There are few things as disruptive to a family’s happiness as having a parent, or maybe both, lose his/her income due to accident or illness. When income is drastically reduced, it creates stress and unmet needs and expectations. It often creates feelings of guilt in a parent. Life is hard without a reliable source of income.
A LIFE Foundation study states that 70% of working Americans could not be without income for more than one month without serious financial difficulty. Surprisingly, the same study states that one of every four Americans couldn’t last a week if they were seriously injured and unable to work. Clearly, the answer to the question, “Does almost everyone need Disability insurance?” is a resounding “Yes!” It is important for an individual, and especially important for a family, to have a financial plan. Disability insurance should be one of the foundation stones of everyone’s financial plan, because it protects such an important asset – your income.
Other statistics need to be considered. The Senate Finance Committee states that 70% of people between the ages of 35 and 65 will become disabled for three months or longer and that 90% of injuries will occur away from work.
After you make the decision to purchase Disability insurance, there are still important questions to be answered and decisions to be made. “How large a benefit do I need; how much will it cost to purchase a plan with that level of protection?” “Does my spouse need this kind of policy even if he/she doesn’t work or has a small income?” “How long is the waiting period before I start receiving checks?” “Does my employer offer a disability plan that I am not aware of?” “Will I need this kind of insurance after I reach age 65?” All these and many other questions need to be taken to a capable, experienced insurance agent who is a specialist in this type of insurance. This is an important decision with a great number of complicated considerations, such as, “Is the plan guaranteed to be renewable?”, “What is the maximum benefit period?”, and “Which occupation class does my job fall into?”
Once the decision is made and the policy is purchased and in effect, you can breathe a sigh of relief. You have done what is necessary to protect your happiness with Disability insurance. More importantly, you have protected your family by providing for them if your ability to work is interrupted.
Scurich Insurance Services
Pros And Cons Of A 401(k) Loan
Your 401(k) is money you save for your retirement. Some employers allow you to take a loan from your 401(k), though, and you may decide to take advantage of this feature to pay a current financial obligation. First, consider the pros and cons as you ensure you make the right financial decision for your future.
Access the money that belongs to you.
The money in your 401(k) is your money. It’s intended for retirement, but you could access it for an immediate need, such as a medical bill, house, car, college, business startup, debt repayment, or vacation.
Borrow up to $50,000.
The IRS limits your 401(k) loan to half of your vested 401(k) balance up to $50,000. That money can go a long way toward helping you with a current financial need.
No loan application necessary.
Instead of a complicated loan process, simply talk to your Human Resources director and complete a few forms.
No credit check required.
Traditional loans and credit card applications require a credit check. You can withdraw money from your 401(k) regardless of your credit score or history.
Repay the loan automatically.
Repay your 401(k) loan with automatic deductions from your paycheck. You typically have five years to repay the loan.
Have less money for retirement.
Right now, you have the ability to earn a living. That ability decreases when you retire, which is why you want a healthy 401(k). Borrow from the money now, and you lose out on compound interest. As a result, you have less money for your future.
Pay more taxes.
You originally contributed pre-tax money to your 401(k), and it will grow with tax-deferred interest until you withdraw it during retirement. However, if you borrow money now, you must repay the loan with post-tax dollars and will owe taxes on retirement withdrawals.
Repay the loan on time.
Your loan will include repayment conditions you’ll have to follow in order to avoid tax penalties. Also, be aware that if you leave your current employer before you repay the loan, the remaining balance will be due in October of the following year to avoid additional tax penalties.
401(k) money is protected from creditors.
Creditors and bankruptcy court cannot consider your 401(k) as an asset. That means it’s safe if you face financial trouble. Creditors can consider your 401(k) loan funds as an asset, though.
As you decide if a 401(k) loan is right for you, consider this list of pros and cons. Talk to your HR director, too, to ensure you understand the loan process, repayment requirements and other details of a 401(k) loan.
Scurich Insurance Services
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