The surrender value, also known as cash surrender value, of a life insurance policy is the amount of money an insurance policyholder will receive if they decide to cancel the policy before the end of its term or before they pass away. This option is typically only available in permanent or whole life insurance policies, and not in term insurance policies.
When you pay premiums on a whole life insurance policy, part of that money goes toward the actual insurance coverage, part of it goes towards administrative expenses, and part goes into a cash value account that grows over time. The longer you hold the policy and pay premiums, the greater the cash value tends to be.
If you decide to surrender the policy, the insurance company will pay out the cash value minus any surrender fees outlined in the policy and any outstanding policy loans. If you surrender the policy in the early years, these fees can be quite substantial. In some cases, if you surrender the policy very early, there may be little to no cash value after fees.
It's worth noting that any cash value that you withdraw is subject to taxation. The cash value grows on a tax-deferred basis, but if you surrender the policy, any gains above what you've paid in premiums will generally be taxable.
Remember, it's important to fully understand the implications and potential costs before surrendering a life insurance policy. Always consult with a financial advisor or insurance professional when making these decisions.
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When Summertime hits, it is often a rite of passage to hit the road – be it to the local beach or lake or to more ambitious locales. While much of the summer travel focus is righty on mapping out what friends and family to visit or what book to read, safety shouldn’t find itself at the bottom of our priority list. In fact, it should be quite the opposite as it is always wise to be prepared and pay attention to your surroundings. As someone famous once said, “an ounce of prevention is worth a pound of cure.”
While at the risk of sounding too parental, it is always smart to incorporate a few best practices while out and about on your summer adventures. Here are a few tips to keep you and your loved ones safe. . .
Interest rates are the cost borrowers pay for debt. This concept is well-understood, as nearly every loan carries some amount of interest. Less understood are the dynamics between interest rates, markets, and the Federal Reserve.
Business cycles have peaks and troughs. The Federal Reserve seeks to moderate these swings by controlling the money supply. This is accomplished by adjusting the discount rate, or the rate the Federal Reserve charges member banks for loans. Higher interest rates slow lending activity and limit currency circulation. Conversely, lower interest rates encourage new loans and promote economic growth. Borrowing costs eventually “trickle-down” to household mortgages, consumer car loans, and every other debt category imaginable.
Interest rates also impact stocks, bonds, and the broader economy. Individuals often have larger appetites for stocks and goods when interest rates are low. Businesses may keep pace by hiring more staff or raising prices. The opposite can be true in a high interest rate environment. Yields increase with interest rates, making bonds and savings accounts relatively more attractive. Individuals may also curb discretionary spending when interest rates rise. Diminished demand can ease inflation.
These are merely historical patterns. Rate adjustments foretell neither prosperity nor downturn. Many forces impact economic growth and market activity. It is therefore difficult to predict rate outcomes with any precision.
We are pleased to announce BaldwinClarke’s article series: Selecting a Business Retirement Plan. The series will review retirement plan options for business owners. This article introduces readers to employer retirement benefits through a historical lens. Later articles will discuss key principles, compare options, and explore strategies.
A tight labor market demands careful attention to employee benefits. Employer-sponsored retirement plans are central to these packages. Retirement plans include pensions, 401(k)s, stock bonus plans, and numerous others. Plan designs vary, but all serve similar purposes. Retirement plans attract and retain top talent. A suitable plan also fulfills an entity’s financial goals.
Retirement preparation has always been important. Prolonged life expectancies and surging health care costs now render it a necessity. Data reveals the full extent of both trends. Mortality tables indicate that today’s 65-year-olds have a 50% chance of living to age 90. What’s more, there is nearly a 20% probability they will live to age 100.[1] Life expectancy leaps are partly attributable to health care advancements. Medical interventions repel fatal diseases and life-sustaining treatments keep our ill alive longer. These innovations, however, come at a cost. Experts estimate that an average couple may incur roughly $315,000 in retirement health care expenses.[2] Longer and more expensive retirement periods require substantial savings.
Retirement costs are widely recognized. As such, many workers embrace and even expect employer-sponsored retirement plans. Research ranks retirement plans as a top-three priority for prospective workers.[3] Moreover, three-quarters of employees say they would switch jobs for better financial benefits.[4] Businesses are responding to these concerns. In 2020, approximately two-thirds of private sector workers had access to employer-provided plans[5] and most took full advantage. Widespread participation leads to a more satisfied, engaged, and productive workforce.
