An important reason to own life insurance is to replace your lost income and provide your survivors with a source of cash (up to the policy limits) to help them pay living expenses. One way to help insulate your life insurance coverage from the unpredictability of your employment situation is by purchasing an individual policy. Depending on the type of policy you select, you may be able to obtain coverage for a specific number of years or for life.

Temporary Protection with an Expiration Date
As the name suggests, term life insurance offers a death benefit if the insured dies within the covered time period, which could range from one to 30 years. The death benefit is typically not subject to federal income tax, unless the employer pays the premiums.

Term life generally has a lower premium than permanent life insurance, particularly at the beginning of the term. With some term policies, the premium adjusts each year, whereas with others the premium remains fixed for the full term. You may be able to continue coverage beyond the original term at a higher premium, or even convert to a permanent policy (subject to age restrictions and policy minimums) while the policy is in force.

Lifetime Protection with No Expiration Date
Permanent life insurance offers lifetime protection and a guaranteed death benefit as long as you keep the policy in force by paying the premiums. Although the premium is higher than for term insurance, it typically remains level for the rest of your life.

A portion of the permanent life insurance premium goes into a cash-value account, which accumulates on a tax-deferred basis at a minimum guaranteed rate for the life of the policy. You may be able to borrow against the cash value during your lifetime to help pay for retirement or other needs.

Withdrawals of the accumulated cash value, up to the amount of the premiums paid, are not subject to income tax. Loans (as long as they are repaid) are also free of income tax. Loans and withdrawals from a permanent life insurance policy will reduce the policy’s cash value and death benefit. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. And if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

Ask yourself whether you are willing to stake your family’s financial future on group coverage that could change unexpectedly. An individual policy could help prevent gaps in your coverage.

1) LIMRA, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Tony Ricci, CFP®
2831 Camino Del Rio South, Suite 101
San Diego, CA 2108

Phone: 619-297-9770, Ext. 13
Fax: 619-297-0549
www.YouHealthQuote.com and
www.TonyRicciCFP.com
ariccisd@gmail.com

It is my belief that the processing industry is about to undergo a disruption unlike anything is has ever experienced, and that these changes are eminent and unstoppable. Why? Two reasons:

First, and not surprisingly, merchants are fed up with the traditional credit card processing industry. Everywhere they look they are getting hit with more and more fees. It’s not uncommon for a merchant to be paying 4-5% in effective costs when all of their fees are added together against their total card sales. Not only that, but the merchant services industry is notorious for extremely poor customer service. Instead of supplying a product of value and giving merchants fair pricing, most providers rely on locking merchants into contracts with a goal to collect as much in fees for as long as possible. It’s a “churn and burn” industry and merchants have had enough of it.

Second, the new technologies and services that are entering the market promise to be different. These services are promoting features that include the complete elimination of nearly all of the most common fees imposed by traditional processors; such as cancellation fees, monthly fees, annual fees, PCI compliance fees, statement fees, batch header fees, AVS fees and nearly every other fee you can imagine. When it comes to processing costs, many of these services are offering flat rates that are easy to understand and don’t include any hidden downgrade surcharges. As you might have guessed, this is music to most merchants’ ears.
Below you will find my predictions for the top card processing trends for this coming year. Be sure to follow us on Facebook, Twitter, and Google+, or by email and RSS to stay informed as we track these changes.

Mainstream Merchant Adoption of Mobile Smartphone Processing
The popularity of iPhone and Android devices has given rise to companies like GoPayment and Square. These companies offer free card readers, free setup, no monthly or annual fees, no contract, and flat processing rates. Square reported that it has shipped nearly one million card readers since its launch in 2009 and GoPayment is likely not far behind. Not only do these services make great mobile options, but they are also great backup options in the event of a service disruption from a primary processor.

Mobile processing popularity has spurred traditional processors into offering similar smartphone apps and card readers in order to compete, but generally under traditional merchant account pricing models. Merchants will need to be careful so as to not fall prey to copycat services that lock them into expensive fees and long-term contracts.

The Rise of Digital Wallets
Not only can smartphones be used to accept payments, they can also make payments. Numerous companies are revving up to win the race of digitizing consumers’ wallets. These companies include behemoths like Google, Visa, PayPal, MasterCard and Verizon Wireless as well as startups like LevelUp and AisleBuyer.

2012 will see the beginning of a hard push to moving consumers and merchants to accepting payments from smartphones using Near Field Communication (NFC) technology. However, it will likely take several more years to gain widespread acceptance due to merchant resistance, device limitations, and slow consumer adoption. In particular, most services that currently allow merchants to accept digital wallet payments either require buying new hardware or signing up for additional accounts with other service providers. Therefore, the value proposition is not resonating well with many small merchants because of the extra costs and hassles associated with new technology.

More Options for Retailers
This year is going to bring retailers more options for accepting credit cards. Traditionally, small retail merchants such as coffee shops, boutique gift stores, and other single register-type stores have had very limited options in processing hardware. In most cases, the only option was a phone line credit card terminal.

Last year saw explosive growth in touch screen tablet sales as well as technologies that turn tablets into Point-of-Sale (POS) systems. Like digital wallets technology, tablet POS technology is still in its infancy and usually requires the merchant and customer to have compatible accounts through the same provider. Expect 2012 to bring many more advancements and options in tablet credit card processing.

Another option that has been making its way onto the scene is optical readers that scan bar codes and QR codes from consumers’ telephone screens. Generally these services allow consumers to pay merchants using PayPal or other attached accounts. The most successful implementation to date can be found at Starbucks restaurants using a technology created by mFoundry.

More Data, Rewards and Loyalty Value Propositions
Merchants are becoming more sophisticated and so are payment processing technologies. Many of the new processing services offer more than just the ability to accept credit card payments, and sometimes at lower costs than traditional providers. Several startups are now including data rich sales reports that can help merchants better understand purchase patterns as well as built in rewards and loyalty programs. Merchants will be able to leverage this information for the purposes of understanding the purchasing trends of their regular customers as well as to attract new ones.

Most of the companies that are pitching these types of offerings have yet to make a national splash, but several are seeing positive results in limited markets. It’s still unclear if small merchants see the value in large enough numbers, but 2012 will see much beta testing around this technology.

More Fees from Traditional Credit Card Processors
Unfortunately, not all of the predictions for 2012 are positive. Merchants utilizing the services of traditional processors should expect to see even more fees than in years prior. Many processors will take advantage of disruption caused by new startups, government regulation, and Visa/MC policy changes to raise rates and charge new fees.

For instance, Elavon has been taking a lot of flak from merchants for implementing a new annual fee of $59 for processing and collecting form 1099-K from merchants as now required by the IRS. Heartland Payment Systems has also started charging a similar fee but is not saying if it has to do with the new IRS requirement or not.

Merchants are encouraged to ask for a full written disclosure of fees from processors before they sign any contracts. Keep in mind that many merchant account agreements have language stating that the processor can change or add fees at their own discretion; however, many contracts give the merchant a grace period for cancelling service without a penalty if new fees are added, or existing fees raised. Watch out for new fees on your statements as this industry is notorious for adding them without announcing them. Processors that do not add new fees will likely raise processing rates instead.

Durbin May Get the Boot
The Durbin Amendment was supposed to help merchant by lowering Signature Debit Interchange fees. In reality, the document was drafted by people who apparently had little understanding of this industry and the result was much higher costs for small ticket transactions ($30 and under). Several retail organizations have brought suit against the Federal Reserve in order to repeal/modify the amendment and even the main author, Dick Durbin, has admitted the new law is flawed. With such disastrous results, merchants should expect to see the Durbin Amendment either repealed or greatly modified this year.

Bottom Line
At the very least, this year is going bring merchants many more options for accepting electronic payments and credit cards. Merchants will need to exercise caution when choosing new services in order to avoid unscrupulous copycats; however, choosing the right service will mean big savings and greater flexibility. Be sure to follow CardPaymentOptions.com on Facebook, Twitter, and Google+, or by email and RSS to stay up-to-date as these changes happen.

Keeping Pace with Social Security

How the COLA Is Determined
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the spending habits of workers who are generally younger than Social Security recipients. A recent study suggests that, while Social Security benefits increased 31% from 2000 to 2011, typical expenses for people aged 65 and older increased by 73%.2

One suggestion to address this disparity is to base the COLA on the CPI for Elderly Consumers (CPI-E); an “experimental” price index that the government has tracked since 1983.3 Although the CPI-E has increased somewhat faster than the CPI-W, the difference is relatively small. A monthly benefit of $1,000 in 2001 would have increased to about $1,268 in 2011 based on the CPI-W and $1,280 based on the CPI-E.4

Considering Social Security’s fiscal problems, a more likely change (proposed by two congressional commissions) is to lower benefit adjustments by tying the COLA to the slower-moving Chained CPI for All Urban Consumers (C-CPI-U), which attempts to track changes in spending patterns as consumers respond to price changes.5 If the $1,000 monthly benefit in 2001 had been based on the C-CPI-U, it would have increased to only $1,238 in 2011.6

Regardless of the index used, current and near-retirees are unlikely to see major changes to their basic benefits. It’s clear that Social Security should not be given too much weight in funding a comfortable retirement.

1) Social Security Administration, 2011
2–3) The Senior Citizens League, 2011
4, 6) Haver Analytics, 2011
5) Center for Retirement Research, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald.
Tony Ricci, CFP®
2831 Camino Del Rio South, Suite 101San Diego, CA 92108
Phone: 619-297-9770, Ext. 13
ariccisd@gmail.com
www.YouHealthQuote.com and www.TonyRicciCFP.com

It’s a good idea to review your life insurance situation on a regular basis. Here are some reasons why your coverage may need to evolve to keep pace with your life.

Life Changes
If your income and/or net worth have increased significantly since you purchased your policy, ask yourself whether your current coverage would enable your survivors to maintain their current standard of living. Major life events such as birth, marriage, death, and divorce may also affect the amount of coverage you need.

Inflation
Because of inflation, a policy purchased years ago may no longer offer the same level of protection. For example, a 3% inflation rate can cut the purchasing power of a death benefit in half in about 24 years, based on the Rule of 72 (72 ÷ 3 = 24 years).

Estate Conservation
One popular reason for owning life insurance is to provide liquid funds to help heirs pay estate taxes and any other debts. Considering that the estate tax has changed several times over the past decade, it’s a good idea to review your coverage in light of current estate tax laws and your net worth.

As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

1) USA Today, December 3, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Tony Ricci, CFP®
2831 Camino Del Rio South, Suite 101
San Diego, CA 92108
Phone: 619-297-9770, Ext. 13
Fax: 619-297-0549
www.YouHealthQuote.com
www.TonyRicciCFP.com
ariccisd@gmail.com

The federal estate tax was repealed in 2010, and then reinstated by the 2010 Tax Relief Act with new provisions for 2011 and 2012. These provisions include a higher exemption amount and a lower tax rate that could ease or eliminate the tax burden on many estates.

Although the reinstated estate tax may not affect you now, it is scheduled to become more aggressive in 2013 and beyond, potentially affecting many families who might not be considered wealthy.

What’s New?
For estates left behind in 2011 and 2012, assets exceeding a $5 million exemption will be taxed at 35%, the lowest top tax rate in 70 years. A new portability provision allows surviving spouses to use the unused portion of a deceased spouse’s exemption, provided he or she makes the appropriate declaration on the estate tax return. Thus, married couples may be able to pool their exemptions to shield up to $10 million from federal estate taxes. The law also brings back the ability to “step up” the basis of assets to the fair market value on the deceased owner’s date of death.

Options for 2010
Estates of 2010 decedents can choose the 0% federal estate tax that was in effect that year, when the modified carryover basis rules were also in effect. (Under these rules, heirs must use the lesser of the decedent’s basis or the fair market value on the date of the owner’s death when calculating capital gains.) Alternatively, decedent estates can choose the reinstated estate tax and the new provisions. Their choice may affect capital gains taxes on some estate assets.

What’s Next?
Without further legislation, the federal estate tax will revert to a $1 million exemption and a top tax rate of 55% in 2013. The portability provision is also scheduled to expire after 2012. These changes could subject many more estates to the tax than under current law.

No one can anticipate what will happen in the future, but it’s important to be aware of the temporary estate tax provisions and the potential for change in 2013. Before you take any specific action, be sure to consult with an experienced estate, legal, and/or tax professional.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Tony Ricci, CFP®
2831 Camino Del Rio South, Suite 101
San Diego, CA 92108
Phone: 619-297-9770, Ext. 13
Fax: 619-297-0549
www.tonyriccicfp.com
ariccisd@gmail.com