Dean Akey

As we all age, I sometimes find that the owner of a large life insurance policy no longer wants or needs life insurance. And sometimes the policy premiums have risen to the point where the owner can't comfortably pay them.

In either case, an agent for a company that buys life insurance policies will offer to buy the policy and give the owner a "life settlement." You have probably seen commercials on TV like JG Wentworth who advertise this service.

Recently, Business Week studied one such situation where the insured was a 72-year-old retired man. He has had a heart bypass and a stint procedure and is expected to live eight years. He has a $1 million policy. The premium began 20 years ago at $14,000 a year, but now premiums are $37,000 a year. Here's what he could do.

* Cash in the policy with the insurance company for $100,000.

* Sell the policy to a life settlement firm for about $275,000.

* Reduce the death benefit to $375,000 which will allow him to keep the policy in force for 12 years without paying additional premiums.

* Stop paying premiums but not reduce the death benefit. That will run the cash value down to near zero in about five years.

At that point, if he is in about the same state of health, a life settlement company would be willing to pay about $475,000 for the policy because his life expectancy is now only three years. (If he dies during the five years he isn't paying premiums, his beneficiaries still get $1 million.)

Not many people have a $1 million life insurance policy, but the percentages would be about the same for policies of lesser amounts.

When you or a member of your family considers selling a life insurance policy, please consult with your financial planner, CPA or attorney prior to making any decisions.

If you would like to learn more regarding preparing for your retirement please give me a call at 630-232-9811 or drop me a note at deanakey@allstate.com.

With so many ways to spend your income, it can be difficult to set priorities. Here are a few tips to help get you started with your financial plan.

Pay off high-cost consumer debt first. Paying off an 18 percent credit card is like getting a tax-free 18 percent rate of interest on your money. Pay off the card with the highest rate first.

After that, save enough cash to live on for three to six months in case of emergency or job loss. And save at least something for retirement.

With a cash cushion in place, invest in your retirement 401(k). Invest at least as much as the company will match.

Put retirement savings before saving for your kids' college expenses. You can borrow for college costs, but you can't borrow for retirement.

Don't prepay your mortgage unless you are saving 15 percent of your income for retirement.

Insurance: Make sure homeowner and auto insurance are up-to-date. A full-time worker should have life insurance equal to six to 10 times their income. Consider long-term care insurance which will help pay for time spent in nursing or assisted living care.

Make a will to ensure that your wishes are carried out. Have a durable power of attorney and a health-care power of attorney.

If you would like to learn more regarding preparing for your retirement or a free review of your insurance policies please call me at 630-232-9811 or drop me a note at deanakey@allstate.com

Only about 5 percent of retirees wait until full retirement age to claim Social Security benefits.

Retiring early can cost dearly, according to the Social Security Administration (SSA), especially if you live a long time.

The SSA calculates that retirees who live to age 90 would lose $39,000 in benefits if they retire at age 62.

Some financial analysts say retiring early would cost far more because of the cost-of-living increases that boost Social Security checks. They figure the loss would be $83,000 for those who take benefits at 62 and live to age 90 and nearly $149,000 for those who live to age 95. The reason: Cost-of-living adjustments would apply to larger sums if a person retires at age 66.

Age 77 is the SSA's estimated break even point. If you think you will die before age 77, retire early. If you think you will live past age 77, delay retirement as long as possible.

People are, in fact, living longer. There is a 41 percent chance that a 62-year-old woman will live to age 90. A 62-year-old man has a 29 percent chance.

For a married couple, there's a 58 percent chance that one of them will live to age 90, and a 29 percent chance that one will reach 95. If you don't think you'll live very long, taking benefits early could hurt your spouse. A married beneficiary can continue receiving his or her own benefits or the deceased's benefit, whichever is more. So spouses who take benefits early also reduce the amount the surviving spouse could receive.

People who want to retire early and can afford to live on their retirement savings until age 66 may also save on income tax.

Married couples with $32,000 in combined income face income tax on half of their Social Security benefits.

If you would like to learn more regarding preparing for your retirement please call me at 630-232-9811 or drop me a note at deanakey@allstate.com

If you want to retire early, but don't want to pay the 10 percent early withdrawal penalty on your IRA, here's how to do it.

You can apply for 72(t) distributions to avoid the penalty. Under that plan, you agree to make equal periodic withdrawals for five years or until you reach age 59 1/2, whichever comes later.

If your retirement savings are in a 401(k), you would have to roll them over into an IRA in order to take advantage of the 72(t) options.

There are three methods for calculating the monthly distribution amounts that are approved by the Internal Revenue Service. Your tax professional will help you determine which plan to choose. Annual payments are set up for a 29.6 year life expectancy for 55-year-olds.

Here is an example of the withdrawal for a 55-year-old who has $250,000 in an IRA and wants to set up a 72(t). Under the Minimum Distribution Method, the monthly check would be about $703, which would be the least you could take. Under the Amortization and Annuitization Methods, it would be about $500 to $600 a month more than that.

Distribution amounts also vary according to the interest rate used in the calculations, which was 4.3 percent in this example.

If you would like to learn more about preparing for your retirement please call me at 630-232-9811 or drop me a note at deanakey@allstate.com

From time to time I am asked which banks are safe places to stash your cash. I share with my clients that their deposits are insured via the FDIC for up to $250,000 but also offer the suggestion to investigate community banks and credit unions.

While the biggest banks are suffering from a subprime mortgage fallout, community banks and credit unions haven't had big losses. They never made risky loans.

Credit unions are different from other financial institutions because they are not-for-profit cooperatives. They are owned by the members and often operated by volunteer boards.

One financial analyst interviewed on Fox Business says the shareholders and board members in credit unions know their own money is at risk when they make a loan, so they are more conservative.

The capital in credit unions is at an all-time high, according to the Credit Unions National Association, Inc., in Madison, Wis. It's a safety cushion that protects them against loss and that allows them to continue in spite of recessions or turbulent financial markets.

They are known for share accounts, which may pay a little more interest than bank savings accounts, and for their auto loans, which may cost a little less. Most also offer mortgages.

The lifeline of credit union funds is particularly important now because big banks have tightened their lending standards and may only make loans to people with the highest credit scores.

Some credit unions can refinance subprime mortgages, and offer banking products no longer available from other lenders, including a five-year adjustable-rate mortgage. One reason: They don't pay dividends to shareholders. The money is reinvested in loans to meet the needs of their members.

The American Bankers Association encourages consumers trying to consolidate debt or refinance mortgages to contact community banks. While they are typically conservative, according to The Wall Street Journal, they have plenty of money to lend.

I have had a longstanding relationship with my credit union and a local bank and recommend these institutions to all of my clients.

If you would like to learn more about how to prepare for your retirement please give me a call at 630-232-9811 or drop me a note at deanakey@allstate.com