Martin A. Smith

Thank you for submitting your question about life insurance. The death benefit of a life insurance policy represents the "face amount" of the policy that will be paid out on a tax-free basis to whoever the owner or beneficiary of the policy is. Therefore, if you were to purchase a policy with a $1 million dollar face amount (i.e. "death benefit), your beneficiary will receive $1 million upon your death. However, the case value of the policy represents the portion of savings (or investments depending on the type of policy that you own) that is funded by a portion of your insurance premiums.

The cash value could compound based on an underlying index rate, or sub-account that is invested in mutual funds. Again, this would depend on the type of policy. The cash value grows on a tax deferred basis and can be withdrawn in the form of a "policy loan" on a tax free basis. You would have to discuss the actual particulars of taking a policy loan from your insurance carrier because if you withdraw too much, then you might inadvertently cause the policy to lapse. Therefore, be careful with taking policy loans and ALWAYS request a quarterly or annual summary statement so that you can review how well (or not) the policy is performing, etc.

It would be helpful if you spent some time speaking with an insurance professional about your life insurance needs. Be careful that by contacting an insurance agent, depending on the company/agent that you contact, he/she might try to convince you to purchase additional insurance, or some other type of financial product. Otherwise, I hope I have provided a suitable answer to your question.

Take care,

Martin

Thank you for submitting your question. First things first, I would suggest that once you receive the inheritance, deposit the funds in the money market of a brokerage account and just leave it there for a little while. There has been a lot of research conducted on the topic of "Sudden Wealth Syndrome." Yes, this may sound funny, but it is a real state of mind that many people who suddenly receive a significant amount of money become susceptible to. What Sudden Wealth Syndrome means is that when someone is not ready to receive a large sum of money, they usually spend it, give money away to family or friends, make impulsive purchases, etc....they tend to do everything except what you are doing -which I commend you for- which is to seek professional advice from a trusted financial advisor.

After you deposit the funds in a money market account and have spent some time interviewing financial advisors to make a final determination about who you would like to hire you, then you should sit down with your new financial advisor to develop a written financial plan. Some financial advisors will charge you for preparing a financial plan for you, while other financial advisors offer FREE Financial Planning. Having a financial plan prepared will help you to add future context to whatever your financial values, needs are goals are. The "Plan" will address taxes, budgeting, retirement, estate planning, investments, goal planning, etc. In my field, I am not alone in believing that starting with a written financial plan is one of the most important things that you can do in order to protect yourself financially! I HIGHLY recommend it!!!

Lord willing, the world will be there for you to travel after you come up for air from doing some good financial planning. Actually, your financial advisor is going to do most of the financial planning work. He or she will ask you a boat load of questions, or simply have you complete a paper questionnaire. However, since you are 24 years old, I can't imagine that you will have a lot of information to add to a financial planning questionnaire. Therefore, the Plan will probably focus more so on tax mitigation, goal planning, investing and structuring an income for yourself that you cannot outlive.

If you have any further questions, please don't hesitate to reach out to any of the financial professionals on Investopedia who I am sure will be more than happy to receive a phone call, or an email from you!

Take care,

Martin

The impact of lower interest rates is usually experienced in the housing market as people are incentivized to purchase a house or an investment property. Also, a reduction in interest rates might have a positive impact on capital spending as companies may consider lower interest rates as good timing to upgrade equipment, improve manufacturing, and hire additional employees. However, I would not say that there is a definite "cause & effect" relationship between lower interest rates and increased investment spending, I believe it depends on whether the investment spending is being done by a person or a corporation. In addition, from an investor's perspective, whether a reduction in interest rates will increase capital spending also depends on what side of the market the investor is on.

Some investors are "bullish" and others may be "bearish." Therefore, a reduction in interest rates might not make a bearish investor too happy since he/she is betting that something will cause the market to fall. Thanks for your question.

Hi, and thank you for taking the time to submit your question about Edward Jones's Guided Solutions program. The DOL's fiduciary law (aka "Fiduciary Rule") was set to take effect in a few months, although this could change now considering the new Administration. The Edward Jones representative was correct by stating that the new legislation places additional fiduciary responsibility on Broker/Dealers and financial advisors. One aspect of the Rule is the 'reasonableness' of the costs associated with investing through a brokerage firm and/or investment advisor.

I don't agree that the rule in itself should impose a set "fee" (e.g. 1.35%, 2%, etc.) that you will have to pay. Generally speaking, fees should be reasonable, not excessive. I also believe that fees must reflect the value that you are receiving from the firm where your portfolio is being managed. One advisor may charge 1% and another might charge 1.25% to manage the same amount. The investment representative is supposed to provide you with a prospectus and/or "ADV-2" document that relates to the Guided Solutions program. Basically, merely saying "laws have changed...fill out additional paperwork and accept our fee," falls short of the responsibility we have as financial professionals.

I am not knocking Edward Jones, however, since there are literally thousands of "Jones brokers" around the country, you could work with whoever you want, including hiring an independent Registered Investment Advisory firm, such as Wealthcare Financial Group, Inc. You are doing the right thing by reaching out to a number of financial advisors on Investopedia. You will receive a wealth of helpful information and advice on this site!

Lastly, whoever you hire should prepare a comprehensive financial plan for you that is supposed to inform the investment advice and/or other personal finance related recommendations given to you. At the end of the day, the solutions that we provide to people such as yourself is supposed to help you achieve your values, needs and goals.

I wish you the best!

Martin