Traditionally, life insurance has been viewed as a safety net in the event the family breadwinner dies. To be sure, life insurance in the pre-retirement years can help cover the needs of your survivors, which may include replacing lost income and funding education costs or other financial goals. Yet for those near or in retirement, the need to replace income may become less pressing, while the desire to preserve and protect wealth for retirement needs and pass wealth efficiently to the next generation gains greater importance. There are a variety of innovative insurance solutions that can help meet your needs and also provide a way to help you achieve some of life’s extras, including taking steps to ensure a family legacy.

Keep your legacy intact with life insurance solutions

You may not realize it, but retirement plan income from an inheritance may trigger a tax bill for your heirs that can significantly eat into the amount you leave behind. If you should die, the distributions your beneficiaries take from certain retirement assets such as Traditional IRAs, 401(k)s, non-qualified annuities, and non-qualified deferred compensation is considered Income in Respect of Decedent (IRD) and subject to income tax.  The tax on IRD assets is in addition to estate taxation and thus can result in double taxation. Unlike estate taxes, these taxes are typically paid by the beneficiary and not by the estate. Additional taxable income from an inheritance can cause a host of potential income tax problems, from bumping the beneficiary into a higher tax bracket, to phasing out personal exemptions and itemized deductions and erasing certain tax credits.

One way to make up for the IRD tax bite is to take out a life insurance policy with a value equivalent to the anticipated tax bill. With beneficiary proceeds that are generally exempt from estate and income taxation, the life insurance policy can help replace the amount of your legacy that is lost due to income taxation on IRD assets.

Diversify with a variation on traditional life insurance

A traditional life insurance policy provides an income-tax free benefit, often with limited growth opportunity and flexibility. There are other life insurance options that offer the potential for growth and an income-tax free benefit. These options also build “cash value” and have the added benefit of flexibility to access cash for unforeseen events. These policies can contain fixed rate investments, or provide access to a range of variable rate investments.

For example, Variable Universal Life (VUL) is a type of policy that offers the opportunity to build cash values. A VUL policy can add diversification to your retirement portfolio. As a form of permanent life insurance, VUL provides financial protection against unexpected events. Because the cash value within the policy can be invested in separate accounts, a VUL introduces investment diversification. A VUL also offers some flexibility regarding taxes. You can use after-tax dollars to pay premiums in the VUL now for the potential to accumulate cash value tax-deferred and  receive tax-free supplemental income during retirement. Your financial advisor and tax professional can help you determine whether a VUL would benefit your circumstances.

Ask questions and explore protection options with a financial advisor

Take time to review your financial plan with a qualified financial advisor to help assess whether a life insurance product can help you achieve your financial goals in retirement. To determine what kind of policy would best suit your needs, and the amount of the policy, ask yourself:

• How much of your present living expenses will remain after death?
• Will survivor Social Security benefits offset these expenses?
• Will your tax rate change?
• Will the investment risk tolerance of your surviving spouse change?
• What is the life expectancy of the survivor?

An important consideration when purchasing life insurance is cost. Most policy premiums increase with the policyholder’s age, and variable products may have other flexible premium options that affect their cash value. Review your cash flow to ensure you will have sufficient funds to pay your premiums for the duration of the policy. Your life insurance needs will fluctuate over the course of your lifetime as your needs, goals and circumstances change and should be reviewed annually.

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This information is being provided only as a general source of information and is not intended to be used as a primary basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor. Please seek the advice of your advisor regarding your particular financial concerns.

Neither Ameriprise Financial nor its affiliates may provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues.

Variable life insurance is a complex investment vehicle that is subject to market risk, including the potential loss of principal invested. Before you invest, be sure to ask your financial advisor about the variable life insurance policy’s features, benefits, risks and fees, and whether the variable life insurance is appropriate for you, based on your financial situation and objectives.

Financial planning services and investments offered through Ameriprise Financial Services, Inc. Member FINRA & SIPC.

The stock market has prompted many Americans to seek safer quarters for at least some of their life savings. But, instead of stuffing a mattress with dollar bills, some find security in money market accounts, certificates of deposit or fixed annuities. Each of these saving alternatives has unique features, benefits and drawbacks.

Money market account

People typically house surplus cash in a money market account when they want to earn a slightly higher rate of interest than a checking or savings account. A money market account may restrict cash withdrawals each month, but in general, it usually offers enough liquidity to ensure access to your money when needed. Some money market accounts issue checks to facilitate withdrawals.

Before you open an account, check bankrate.com for the best money market rates. It’s not enough to simply compare the Annual Percentage Yield (APY); you need to consider the frequency of compounding interest. For example, interest that is compounded daily will grow more quickly than interest that is compounded monthly, quarterly or annually, so your yield will be higher as a result.

The FDIC has temporarily increased insurance on FDIC-insurable funds, including money market accounts, from $100,000 to $250,000 per depositor, per insured bank until December 31, 2013. After that date, the amount will revert back to $100,000.

Certificate of deposit

A certificate of deposit (CD) is a savings vehicle that ties up your money for a set period of time, ranging from three months to six years. In exchange for “lending” your money for the fixed period, you earn a fixed or variable amount of interest. When you purchase a CD with a fixed rate, you have the advantage of knowing exactly how much money you will earn when the CD matures.

In general, the more you invest in a CD and the longer the timeframe, the higher the earned interest rate. Bankrate.com publishes rates to help you sort through your options. Before you buy, check out the frequency of compounding and whether the interest earned is rolled into the CD or paid to you by check during the holding period.

You can buy CDs directly from a bank or credit union, or you can buy them from a brokerage. Note that a CD purchased from a brokerage may be considered “callable,” meaning the issuing bank can drop the CD if interest rates fall.

Help increase your interest earnings and keep at least some of your savings accessible with “laddering,” a strategy that involves purchasing multiple CDs with staggered maturity dates. As each CD expires, roll the money into a new CD of the longest duration. Eventually, you will own continually maturing CDs that also earn the best rates.

Like money market accounts, CDs are covered by FDIC insurance. If you withdraw from a CD before the maturity date, you may be subject to a penalty.

Fixed annuity

A fixed annuity is another savings option that offers principal protection. A fixed annuity provides a set amount of interest income at regular intervals. It is usually purchased in a lump sum, which is forfeited by the buyer in exchange for guaranteed income over a predetermined interval. For example, you can purchase an annuity that provides payments for the rest of your life or until a certain dollar amount is reached.

A fixed annuity is a tax-deferred investment, meaning you pay no taxes on the income until your money is withdrawn. However, earnings from an annuity are subject to ordinary income tax, which tends to be higher than the capital gains tax applied to other forms of investment income.

Annuities are sold on commission and can be costly because of the variety of fees attached to them. If you expire before the annuity does, the money is gone unless you purchased a special death benefit rider. If you decide to cancel your annuity after purchase, you may be hit with a stiff surrender fee. Because of the complexity of annuities, make sure you understand all the fees and restrictions of the product before you sign on the dotted line.

As an insurance contract, an annuity is not guaranteed by the FDIC. You can check the strength of the issuing insurance company with a rating agency such as Moody’s or Standard & Poor’s.

Save trouble by seeking expert advice

If you need a safe place to put your money outside of the stock market, talk to a qualified financial advisor for professional advice. A financial advisor can help you evaluate your savings options and make decisions that support your overall financial plan.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Fixed annuities are long-term insurance products.  Before you purchase, be sure to ask your financial professional about the annuity’s features, benefits, and fees, and whether the annuity is appropriate for you, based on your financial situation and objectives.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

© 2009 Ameriprise Financial, Inc. All rights reserved.

In today’s environment, selling a house is a lot more difficult than in the recent past. The housing crisis that has seen the sales of existing homes decline the past two years creates a dilemma for many homeowners who want or need to change addresses.

What can you do if you have already purchased another home, need to relocate to a different city and are no longer able to occupy your existing home? If selling hasn’t worked out, consider the option of renting your home instead. It can help you cope with the financial challenge of keeping up with the costs of multiple dwellings. But, you also need to be prepared to take on the role of landlord.

Dealing with a harsh reality

The bursting of the so-called “housing bubble,” when average home prices shot up dramatically and then collapsed, has put many homeowners in a difficult position. In much of the country, home values have taken a significant hit and there are fewer buyers on the market due to the struggling economy.

According to the National Association of Realtors, sales of existing homes fell by approximately 13 percent from 2006 to 2007 and again from 2007 to 2008. The average sales price of an existing home nationally declined from $221,900 in 2006 to a low of $166,600 in April 2009.

Renting is a financial alternative

If you choose to rent your home, study the market in your area to determine a fair asking price. If your home is in good shape and in a favorable location, it may be easier to find renters in today’s market. Your primary goal is to try and generate enough in monthly rent to cover your expenses, such as the mortgage payment, insurance and property tax that you must continue to pay as the owner of the property. You must consider, however, that you are constrained by what the current rental market will bear, so it may not necessarily match your ongoing costs.

There are other factors to consider as well when you rent your home:

•     Maintenance – for tasks like mowing a lawn or shoveling sidewalks, you may want to strike an agreement with the renter. If the home needs repairs (fixing a leaky roof, hiring a plumber to deal with a clogged drain, etc.) that cost is the responsibility of you, the property owner.

•     Tax considerations – income from rent is taxed as ordinary income, typically a higher rate for individuals than the capital gains tax rate. There are some ways depreciation methods can be used to reduce the current tax burden, but that also creates more complications when you sell the house.

•     Wear and tear on the property – will a renter care for your property as much as you do? The motivation to do so often isn’t there, so renters can take a toll on a home that you hope will once again be attractive to buyers when the housing market recovers. On the other hand, a vacant house can be more difficult to sell than one that is occupied, even if the owner does not live there, so renting the home can also have advantages.

However, the biggest factor in determining whether to choose the rental option is whether you can sell your home in a timely manner and for the price you want given the realities of today’s market.

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 Neither Ameriprise Financial nor its affiliates or representatives may provide tax or legal advice.  Consult your tax or legal advisors concerning your situation.

 Financial planning services and investments offered through Ameriprise Financial Services, Inc. Member FINRA & SIPC.

 ©2009 Ameriprise Financial, Inc. All rights reserved.

File # 90709

(10/09)

Every homeowner needs to carry homeowners insurance. After all, your home not only provides a roof over your head, in most cases it’s the largest asset on your personal balance sheet. Come what may — whether it’s a tornado, fire, theft or other catastrophe — homeowners insurance offers peace of mind and the confidence in knowing that you are covered.

Generally, homeowners insurance is optional only if you own your home outright. If you have a federally-backed or insured mortgage, your lender will require you to maintain a minimum amount of replacement insurance to protect their investment in the event your home is damaged or destroyed. But even if your mortgage is paid and you own your home, it’s important to keep your homeowners insurance just in case something happens. Without a policy in place or a sufficient level of coverage, you might not be able to repair or rebuild your home, or replace property if something unpleasant does transpire.

So, what is covered by homeowners insurance? A basic homeowner’s policy covers damage that occurs as a result of a host of “named perils” spelled out by your insurer, which may include wind, hail, fire, theft and other events. Losses of personal property or possessions are also included under homeowners insurance. Typically, a standard policy pays replacement value of structures on your property, such as your home and garage, and provides an additional 75 percent of your home’s appraised value to account for loss of personal property. However, your policy may contain limitations on the replacement value of items that fall under the following categories:

• Jewelry and furs
• Silverware and goldware
• Business property
• Home computers
• Firearms

If you own personal property in excess of 75 percent of the value of your home, or in excess of standard limits in any of the above categories, you should consider purchasing a rider or endorsement to guarantee comprehensive coverage. The trick is to find the right balance so you are not under- or over-insured.

Ask yourself the following questions when purchasing homeowners insurance:

• Does your policy readjust the replacement value of your home annually to reflect changes in value due to inflation or other factors?
• Do you need a separate policy because your property is in an area predisposed to a special hazard such as flooding or earthquake?
• Does your policy include liability coverage for accidental injuries that might occur on your property?
• Do you need a rider or endorsement for valuable items for which replacement costs would not be covered under a standard policy?
• Do you own a special breed of animal that might require a special rider to ensure liability coverage for attacks on your property?

 Keep in mind that not every natural disaster is covered by homeowners insurance. Flood and earthquake losses are not covered by homeowners insurance and require separate policies. Go to FloodSmart.gov to assess the risk of flooding where you live and determine if you should purchase flood insurance. The National Flood Insurance Program was created by Congress to help homeowners insure their properties against conditions that could result in flooding and water damage. To qualify for this insurance rider, you must live in an area that has agreed to meet certain standards for reducing the risk of flooding. If you live in California, you can assume you need some form of earthquake coverage. Learn more about earthquake insurance from the California Earthquake Authority at earthquakeauthority.com.

To find a reputable insurance company, check with independent rating services such as A.M. Best Company and Standard & Poor’s. Friends and family are often a valuable resource for insurance company recommendations, especially if they have had experience filing claims. Laws regarding homeowners insurance vary by state, so be sure to consult with a knowledgeable agent who can help you review your insurance needs and state requirements.    

Making sure you have adequate homeowners coverage is just one step in protecting your financial future. Enlist the help of a financial advisor to review your insurance policies and other emergency contingency plans.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

 ©2009 Ameriprise Financial, Inc. All rights reserved.

Managing risk is a focus for many of us today. We think about our investment portfolio as protecting us against significant losses in a volatile market. We take steps to protect our family financially in the event of an untimely death by using life insurance. But there is another form of protection that can have far-reaching implications if you fail to take it seriously – offsetting the potential loss of income if you are faced with a long-term disabling injury or illness.

Statistics from the Social Security Administration show that three out of 10 workers entering the workforce today will become disabled at some point. According to a study by the Health Insurance Association of America, one in seven workers can expect a disability to last for at least five years prior to retirement.

 This is a risk that many overlook. If you haven’t already, you should consider a disability income protection policy to help you replace wages (and other forms of income) that could be lost in the event of an illness, or injury takes you away from the job for an extended period of time.

 When it comes to disability coverage, there are three types of situations for people:

1. Those who have sufficient coverage in place.
2. Those who have coverage, but probably not enough to replace all of their income needs in the event of a disability.
3. Those who have not taken steps to protect their income and cash flow needs if a disability should occur.

Too much risk –- too little coverage

Unfortunately, too many people fall into the second and third categories, and are either underinsured or uninsured. It is important to assess the situation in a realistic fashion to make sure you are adequately protected from unforeseen events.

You may have some disability coverage through your workplace. If premiums for the policy are paid by your employer or taken out of your paycheck before taxes, this means any disability benefits received will be considered taxable income. Typically, workplace benefits provide enough coverage to replace 60 percent of their regular income. If the benefits you receive are subject to taxation, the net amount you keep after tax could, in effect, represent half or less of your current income. It is important for you to determine whether such a policy provides enough protection for you in the event of a disabling injury or illness.

If you purchased a policy on your own, paid for with after-tax dollars, the benefits would be tax-free if you receive them. But even in that situation, you need to determine if the level of coverage is adequate for your needs. Consider the impact on your expenses if you are unable to work for an extended period of time.

Along with expected expenses that need to be paid each month, such as a mortgage, food or household utilities, you may incur other unexpected costs associated with your condition, such as increased medical expenses or the cost of modifications to your home, depending on the type of disability you face. In addition, you may need to hire people to perform tasks you would normally do yourself.

Most people who buy coverage will use their base salary as a guideline to determine replacement income. However, if a large portion of your annual income is derived from bonuses, commissions overtime pay or employer contributions to your retirement plan, you may find your current policy comes up short. Consider whether, in reality, your lifestyle would require a higher benefit payout should you become disabled.

Protection you should not live without

The Social Security Administration estimates that 70 percent of individuals in the private workforce have no long-term disability insurance. If you are in this group, it puts you in a precarious situation. While many perceive that the greatest risk of disability can come from an accident on the job, in reality, the causes are far more widespread. Among the most prominent reasons that people miss work for an extended period are back injuries, car accidents or serious, unexpected illnesses. If you ever are confronted with a health concern (such as cancer or other diseases or ailments) it is very likely you will be forced to miss work for a few months, if not longer.

If you do have coverage, take a close look at how much it would truly provide for you and your family if you were forced to rely on it. Planning ahead while you are healthy is the best strategy to prevent a serious financial setback if you should become disabled.

Please visit your financial advisor to discuss your insurance plan. Protection is a critical element of a comprehensive financial planning approach.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

 Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

 ©2009 Ameriprise Financial, Inc. All rights reserved.

Times are tough, which means more individuals will find themselves requesting financial help from a family member. Before you consider writing a check for a family bailout, take steps to help protect yourself and your relationships. The more you can do to clarify your agreement and establish guidelines for repayment, the better off you will both be.

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Know the risks of intra-family lending

Family loans can put relationships at risk by creating an imbalance of power. The lender can feel unfairly treated if the borrower fails to repay or appears to lead an extravagant lifestyle. The borrower may resent the demands of a repayment schedule and the extra financial scrutiny that is tacked onto a family loan. Both parties need to be aware that borrowed money can quickly become the elephant in the room, creating rifts in families.

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Put it in writing

If you decide to go through with a family loan, as the lender, it’s up to you to determine the terms of the arrangement. Both sides benefit when a signed written contract is established. As the lender, you should create a schedule of monthly payments and the level of interest, if any, that is applied to the principal. That way, the borrower understands your expectations for repayment and you have something to point to if the terms are not met.

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Consider a third-party middleman

You don’t have to go it alone. There are companies out there that administer family loans for a fee. With this kind of arrangement, you determine whatever interest rate you’d like to charge, but the borrower will also be required to pay the administrative loan fees, which can add up rather quickly. You may consider this a small price to pay for the reassurance that your private loan is repaid through monthly payments that are conveniently and automatically deducted from a checking account. Third-party loan administration beats having to drop hints about a late payment at the next family gathering. If the amount being loaned is significant and you want an airtight agreement, consult a lawyer to draw up paperwork — but prepare yourself for an uphill emotional and legal battle if your beloved borrower defaults.

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Avoid tax problems

If you keep your loan under $10,000, the IRS won’t meddle in your family loan. But once the dollar amount exceeds this threshold, your family loan is a public matter that is subject to income tax. As the lender, you will be required to report earned interest as taxable income. If the borrower defaults on the loan, he or she may be responsible for income taxes on the balance. Talk to a tax specialist and determine your tax obligation to help avoid trouble.

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Only lend what you can afford to lose

Even if your family loan has been drawn up with legal paperwork, it can be difficult to follow through on agreed-upon default procedures when family is at stake. Therefore, lend only what you can reasonably afford to lose. Still, you should do what you can to require repayment by outlining your expectations if payments stop or other trouble arises.—
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Get advice from a neutral financial expert

A financial advisor can help you determine whether you can afford to extend a loan to a family member with no guarantee of repayment. A financial advisor is also a great resource to help borrowers gain better control of their spending and avoid the problems that put them in their dire situation in the first place.

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This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

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Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

© 2009 Ameriprise Financial, Inc. All rights reserved.

File # 82763

3/09