Financial Fitness Strategies for Executives

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Doreen Fitzgerald
5 years ago
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1 Financial Fitness Strategies for Jennifer Jackson, Area Vice President Agenda What benefits are available to executives? What s the best way to manage these benefits? 1

2 Agenda What benefits are available to executives? Kathy Lewis, Arthur J. Gallagher Agenda What s the best way to manage these benefits? Doug English, CFP, CLU, MBA Founder ACT Advisors, LLC 2

3 LEADERSHIP BENEFITS Kathy Lewis, CLU, CLTC, LTCP Benefit Advisor, Health & Wellness Director, Executive Benefits Q:\2014\GBS\17\NicheName\20\DCN#.pptx 5 Medical Reimbursement Plan 24/7 Travel and Medical Emergency Support Rapid Reimbursement Coordination of and Coverage Toward Executive Physicals Pre Paid Prescription Visa Card TopDoc Services special access to renowned Physicians 6 3

Taxation * Premiums are tax deductible to the credit union Reimbursements are

tax advice as each person and credit union is unique.

4 Taxation * Premiums are tax deductible to the credit union Reimbursements are not taxable to executives and directors *This is not local, state or federal tax advice as each person and credit union is unique. It is recommended that you seek counsel of a professional tax advisor. Refer to section 105(h). 7 Pricing Premiums vary according to the demographics of those insured as well as the plan level chosen Premiums subject to change annually at renewal 8 4

Individual Disability Protection Enhanced Income Protection Own Occupation Coverage Portable Guaranteed Level Premiums 9 Taxation* If premiums are paid by the credit union Premiums are tax deductible

5 Individual Disability Protection Enhanced Income Protection Own Occupation Coverage Portable Guaranteed Level Premiums 9 Taxation* If premiums are paid by the credit union Premiums are tax deductible Benefits are taxable when received If premiums are paid by Premiums are not tax deductible Benefits are received tax free *This is not local, state or federal tax advice as each person and credit union is unique. It is recommended that you seek counsel of a professional tax advisor. Refer to section 105(h)

Pricing Premiums vary by age and benefits purchased

individuals are insured Premiums are payable for the life

claim 11 Long Term Care Insurance Asset Protection Level

6 Pricing Premiums vary by age and benefits purchased Premium discounts are available when three or more individuals are insured Premiums are payable for the life of the contract although waived when an individual is on claim 11 Long Term Care Insurance Asset Protection Level Premiums Peace of Mind 10 Year Pay Available

Taxation* Premiums are tax deductible when paid by the credit union No imputed income to for premiums paid on their behalf Benefits are received tax free as long

It is recommended that you seek counsel of a professional tax advisor. Refer to section 105(h).

7 Taxation* Premiums are tax deductible when paid by the credit union No imputed income to for premiums paid on their behalf Benefits are received tax free as long as they don t exceed $360 per day in 2017 *This is not local, state or federal tax advice as each person and credit union is unique. It is recommended that you seek counsel of a professional tax advisor. Refer to section 105(h). 13 Pricing Premiums vary by age and benefit purchased Premiums are designed to remain level Premium discounts are available when plans are sponsored by the Credit Union Premium discounts are often afforded to married individuals & couples

Medicare Supplements Assists in paying Medicare eligible deductibles, copayments and

one on one to help navigate and compare the options available to include Part D

may be available with some carriers Supplement pricing is based on age and zip code

8 Medicare Supplements Assists in paying Medicare eligible deductibles, copayments and out of pocket medical expenses not covered by Medicare Parts A & B Gallagher works with one on one to help navigate and compare the options available to include Part D (prescription benefits) 15 Medicare Supplements Personalized service Spousal discounts may be available with some carriers Supplement pricing is based on age and zip code Part D plan rates are based on zip code and prescriptions currently utilized

Cancer/Critical Illness Designed to allay financial hardships that so often accompany a serious illness like cancer, stroke & heart attack Lump sum benefit paid

deductible Benefits are taxable when received If premiums are paid by Premiums are not tax deductible Benefits are received tax free *This is not local, state or

9 Cancer/Critical Illness Designed to allay financial hardships that so often accompany a serious illness like cancer, stroke & heart attack Lump sum benefit paid directly to the insured at time of diagnosis Group & individual plans are available 17 Taxation* If premiums are paid by the credit union Premiums are tax deductible Benefits are taxable when received If premiums are paid by Premiums are not tax deductible Benefits are received tax free *This is not local, state or federal tax advice as each person and credit union is unique. It is recommended that you seek counsel of a professional tax advisor. Refer to section 105(h)

ABOUT THE PRESENTER Over 20 years experience serving credit union senior executives and board volunteers. Specialist in financial planning and investment management for credit union executives.

10 ABOUT THE PRESENTER Over 20 years experience serving credit union senior executives and board volunteers. Specialist in financial planning and investment management for credit union executives. Deep knowledge of the specialized plans of the credit union movement. Doug English CFP, CLU, MBA Founder ACT Advisors, LLC Advisory services offered through ACT Advisors, LLC a Registered Investment Adviser. WHAT WE WILL COVER TODAY Why do executives need financial planning? Six key elements of a comprehensive plan 10

11 Sophisticated Financial Strategy EXECUTIVES NEED FINANCIAL PLANNING Complex financial lives Specialized strategies Roadmap for who, what, where, and when providing a tangible take-away of their benefits package 11

STEP 1: CASH FLOW ANALYSIS Inflow and outflow analysis. Identifies excess income or spending years and develops strategies to optimize use of income.

12 STEP 1: CASH FLOW ANALYSIS Inflow and outflow analysis. Identifies excess income or spending years and develops strategies to optimize use of income. Facilitates funding of goals throughout the executive s lifetime. STEP 1: CASH FLOW ANALYSIS David, CEO Complicated financial life with many income sources, investment vehicles, and spending needs. How will these fit together? Salary, 401(k), 457(b) CASD, Social Security This is a hypothetical example and is not representative of any specific investment. Your results may vary. 12

13 STEP 1: CASH FLOW ANALYSIS David wants to replace his current salary ($350,000) in retirement. What source of income should he spend first? This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 1: CASH FLOW ANALYSIS Analysis allows for optimization of split-dollar income during RMD years This is a hypothetical example and is not representative of any specific investment. Your results may vary. 13

STEP 2: INVESTMENT & PORTFOLIO ANALYSIS Mary, SVP of Sales 401(k) and 457(b) allocation?

14 STEP 2: INVESTMENT & PORTFOLIO ANALYSIS Creates a custom Thriving Index for each executive based on the return required to support the executives goals. Evaluates current portfolio in light of Thriving Index and optimizes asset allocation and asset location. STEP 2: INVESTMENT & PORTFOLIO ANALYSIS Mary, SVP of Sales 401(k) and 457(b) allocation? Moved 100% of the funds in her 401(k) to an all cash position 457(b) in all stocks This is a hypothetical example and is not representative of any specific investment. Your results may vary. 14

15 STEP 2: INVESTMENT & PORTFOLIO ANALYSIS Mary s Thriving Index is She will not reach her goals with the 401(k) in cash. Mary 4.25 This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 2: INVESTMENT & PORTFOLIO ANALYSIS 457(b) income starts at 60 (early retirement) 401(k) RMDs begin at 70.5 Mary 4.25 This is a hypothetical example and is not representative of any specific investment. Your results may vary. 15

16 STEP 2: INVESTMENT & PORTFOLIO ANALYSIS 457(b) income starts at 60 (early retirement) 401(k) RMDs begin at 70.5 Differences in timing of consumption should drive asset allocation (risk) Mary 4.25 This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 3: RETIREMENT INCOME ANALYSIS Evaluates all sources of income in retirement. Cash flow analysis and portfolio analysis drive retirement income analysis. Establishes savings and investments necessary to pursue retirement income goals. 16

STEP 3: RETIREMENT INCOME ANALYSIS Fred, SVP of Human Resources Retiring in 5 years

retirement income won t be enough This is a hypothetical example and is not

STEP 3: RETIREMENT INCOME ANALYSIS Coordination and optimization of retirement income

17 STEP 3: RETIREMENT INCOME ANALYSIS Fred, SVP of Human Resources Retiring in 5 years extensive travel plans Contributes 6% of income to 401(k) and 457(b) Concerned retirement income won t be enough This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 3: RETIREMENT INCOME ANALYSIS Coordination and optimization of retirement income sources This is a hypothetical example and is not representative of any specific investment. Your results may vary. 17

executive taking full advantage of before-tax opportunities and efficiently handling after-tax

18 STEP 3: RETIREMENT INCOME ANALYSIS *Today s presentation is an overview our next webinar will cover in greater depth STEP 4: TAX PLANNING STRATEGY Seeks to identify tax leverage opportunities Is the executive taking full advantage of before-tax opportunities and efficiently handling after-tax investments? Develops a strategy which seeks to take advantage of lower tax years 18

19 STEP 4: TAX PLANNING STRATEGY Jim, a 50 year old Chief Audit Executive Contributes 5% to his 401(k) Regular contributions to an out-of-state 529 plan Plans to retire early This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 4: TAX PLANNING STRATEGY This is a hypothetical example and is not representative of any specific investment. Your results may vary. 19

20 STEP 4: TAX PLANNING STRATEGY Eligible to make catch-up contributions to his 401(k). He can take a deduction on state income taxes by rolling over his 529 to an in-state plan. Low tax years in early retirement can be optimized with a Roth conversion. This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 5: RISK ANALYSIS Evaluates optimal use of risk across investment portfolio, insurance program, and estate. Risk strategy developed which seeks to: Eliminate unnecessary risk. Evaluate insurance programs. Minimize cost. 20

21 STEP 5: RISK ANALYSIS Rob, recently retired $3M net worth State minimum coverage on auto No umbrella policy This is a hypothetical example and is not representative of any specific investment. Your results may vary. STEP 5: RISK ANALYSIS Rob, recently retired $3M net worth State minimum coverage on auto No umbrella policy An accident could result in large financial losses for Rob. This is a hypothetical example and is not representative of any specific investment. Your results may vary. 21

STEP 6: ESTATE PLANNING Analyzes current estate planning documents. Identifies strategies that seek to minimize estate tax liability and help simplify transfer.

22 STEP 6: ESTATE PLANNING Analyzes current estate planning documents. Identifies strategies that seek to minimize estate tax liability and help simplify transfer. Seeks to minimize transfer costs within the framework of the executive s legacy intentions. STEP 6: ESTATE PLANNING Karen, SVP of Marketing Will creates trust for minor daughter. Minor daughter named as direct beneficiary on 401(k) and $5M split-dollar plan. This is a hypothetical example and is not representative of any specific investment. Your results may vary. 22

STEP 6: ESTATE PLANNING Karen, SVP of Marketing Will creates trust for minor daughter. Minor daughter named as direct beneficiary on 401(k) and split-dollar plan.

23 STEP 6: ESTATE PLANNING Karen, SVP of Marketing Will creates trust for minor daughter. Minor daughter named as direct beneficiary on 401(k) and split-dollar plan. Trust will be bypassed and will not be funded if Karen should die without updating her beneficiaries. This is a hypothetical example and is not representative of any specific investment. Your results may vary. WHAT WE COVERED TODAY Complex financial lives need coordination and strategy. A financial plan can help the executive remained focused on the work of the credit union. 23

24 Thank you! Jennifer Jackson, BFB Gallagher Kathy Lewis, Gallagher Benefit Services Doug English, ACT Advisors

Critical Illness. Standard Life and Accident Insurance Company INSURANCE SLA-CIBR10/11

Critical Illness. Standard Life and Accident Insurance Company INSURANCE SLA-CIBR10/11 Critical Illness INSURANCE Standard Life and Accident Insurance Company SLA-CIBR10/11 Critical Illnesses happen more often In the United States: About Every 34 Seconds Someone Suffers a Heart Attack. 1