Too Young For Life Insurance? Probably Not.

It’s a common myth that you needn’t invest in life insurance early in life. That’s actually not necessarily true. The reality is that getting a life insurance policy early may pay huge dividends when planning for the future. By comparison, few people acquire life insurance coverage between 18 and 45, but there are many reasons to get life insurance during this time.

The most important question is “Are supporting loved ones whose livelihood depends on your income?” If the answer is yes, then you should be looking at life insurance to guarantee their future.

Commonly, people wait because it is believed that life insurance is only needed later in life and want wait until expenses decrease. Life insurance has been long viewed as only for “old people.” When you are 30 or 35, you focus on the long life ahead of you. Financially speaking, it may make sense to acquire life insurance coverage now.

1.Your health is in great shape. Most shop for a life insurance policy in the 50’s and 60’s. At that age, your health may be different and it may be more difficult to qualify for affordable life insurance. A multitude of things can cause premiums to spike, so why not get the coverage you will need someday, while you are in your prime.

2.The cost will be a lot less. Life insurance premiums are based upon your current age and life expectancy. Since you are younger, the premiums will be less since they will be based on a longer life expectancy.

Some studies have cited that premiums for standard risk-term life insurance policies have dropped as much as 50% between 1994 and 2007. This can be credited to the fact that people have been living longer. Even cash value policy premiums have decreased an average of 4% per year since 2000.

If you are single, you may also want to look for a term policy that can be converted to permanent coverage at a later time. It’s a way to protect your insurability, even if your health changes.

As we all progress though different stages of life including marriage, having children and retirement, our needs for life insurance change and typically increase. If you are considering life insurance, your timing might just be perfect.

Wishing You Wealth in all its Greatest Forms,

Alex

Bank Stress Test Results - Does Your Bank Stack Up?

So the numbers are in. The Federal regulators have published the valuations of the nation’s 19 largest banks. With new information, comes new questions. Which banks are adequately capitalized and which need to raise new capital? And the billion dollar question: where might that new capital infusion come from?

The good news is that nine banks don’t need more capital. The fortunate are: American Express, BB&T, Bank of New York Mellon, Capital One Financial, Goldman Sachs, JPMorgan Chase, MetLife, State Street and US Bancorp. The government believes that these banks have enough capital available to weather the storm.

The bad news is that ten banks need to raise new capital or raise new reserves. These banks include: Bank of America, Citigroup, Fifth Third Bancorp, GMAC LLC, KeyCorp, Morgan Stanley, PNC Financial Services Group Inc., Regions Financial, SunTrust Bank and Wells Fargo. You will recall that a good number of these banks were on a business acquisition shopping spree less than 12 months ago.[Businessweek]

The government has given the banks that need new capital one month to come up with a plan and six cumulative months to raise it. June 8 is the plan deadline, with November 9 being the deadline to have the new capital. It’s possible that capital may be raised by converting government debt into private stock.

The Fed checked to see if the banks would have at least 6% of assets in Tier 1 capital and 4% in common equity by calendar 2010. Tier 1 capital includes common shares, majority of types of common stock and TARP funds.[Sfgate.com]

The drawing board for the banks that need to create a capital cushion may include:

1) Sell company assets
2) Raise new common equity from new or current shareholders
3) Applying earnings beating analyst expectations toward new capital
4) Converting preferred shares into common stock to eliminate preferred dividends

The government has instructed the banks to seek capital from the private sector first, before asking for federal money. The Treasury Secretary Timothy Geithner believes that the majority of banks needing additional capital will be able to find it in private sources.[Bloomberg.com]

Stress tests are nothing new and have occurred for years, but are typically kept private. In these difficult times, the government is taking measures to bolster the public faith in banking. Some analysts believe that the Fed is just posturing since we have still unresolved issues with the toxic assets on the balance sheets of these banks.

On the other hand, the stress test announcement was received well by Wall Street, who feared bank nationalization. The results were not as dire as some investors had expected. In addition, more economists believe that the economy will begin to improve by 2010, which should reduce bank stress.

Wishing You Wealth in all its Greatest Forms,

Alex

Refinancing Realities

Mortgage companies have flipped the switch and their commercials seem to be dominating the airwaves once again. With the rates sitting around 5%, there are reasons to cheer, but the reality is refinancing is now a whole different ball game.

Rates are at 40 year lows, but qualifying for that rate can be a real problem. Unlike during the refinance boom, when all you needed was a paycheck stub and a heartbeat, today's mortgage process is more difficult. Lending guidelines are stricter today since banks are still dealing with foreclosures tying up their capital.

At the current time, to qualify for the best rate, you will need a credit score of 720 and 20% equity or more. This applies to single family residences that are owner occupied (you live there). You can also "buy" down your rate by paying a discount point, which equals 1% of your loan. Paying a discount point usually lowers your rate by 0.25%.

You would be smart to contact your local credit union, bank and trust mortgage broker. The credit union and bank will typically work off of specific in house guidelines, while the mortgage broker may be able to locate you the best rate/fee combination for your situation. Mortgage brokers typically work with multiple lenders.

If you are successful in refinancing, you may capture the lowest rate of your lifetime.

Wishing You Wealth in all its Greatest Forms,

Alex

The End of Recession?

It appears that there has been some healing in the recent few months in some economic indicators: new and existing home sales, wholesale and factory orders, consumer spending and more positive reports from the Fed. And the stock market has proved to be resilient as of recent days with corporate earnings coming in better than expected. On the flip side, the unemployment rate is rising, March retail sales came in low and foreclosures are on the rise.

Ben Bernanke in Washington believes that economic declines are beginning to slow. And President Obama’s top advisor, Larry Summers, sees a “more balanced picture.” Away from Washington, Martin Feldstein of Harvard stated that “things are falling, but they are falling a little more slowly, but that doesn’t mean they will turn around anytime soon.” The forecast out of UCLA states that the recovery will be in 2010.

Recently, the Wall Street Journal polled economists and on average, they believe the recession will end in the third quarter of 2009. Whether the recovery is in 2009 or 2010, make sure that your assets are invested for long term success.

Wishing You Wealth in all its Greatest Forms,

Alex