Freeman's Blog


January 16th, 2020 by

If you receive a distribution from a qualified retirement plan such as a 401(k), you need to consider whether to pay taxes now or to roll over the account to another tax-deferred plan. A correctly implemented rollover avoids current taxes and allows the funds to continue accumulating tax-deferred.



If you decide to take a lump-sum distribution, income taxes are due on the total amount of the distribution (except for any after-tax contributions you’ve made) and are due in the year in which you cash out. Employers are required to withhold 20% automatically from the check and apply it toward federal income taxes, so you will receive only 80% of your total vested value in the plan. (Special rules apply to Roth accounts.)

The advantage of a lump-sum distribution is that you can spend or invest the balance as you wish. The problem with this approach is parting with all those tax dollars. Income taxes on the total distribution are taxed at your marginal income tax rate. If the distribution is large, it could easily move you into a higher tax bracket. Distributions taken prior to age 59½ are subject to a 10% federal income tax penalty. (Special rules may apply if you were born before 1936.)


If you don’t qualify for the above options or don’t want to pay current taxes on your lump-sum distribution, you can roll the money into a traditional IRA.

If you choose a rollover from a tax-deferred plan to a Roth IRA, you must pay income taxes on the total amount converted in that tax year. However, future withdrawals of earnings from a Roth IRA are free of federal income tax after age 59½ as long as the five-tax year holding requirement has been met. Even if you are not 59½, your distribution may be tax-free if you are disabled or a first-time home purchaser ($10,000 lifetime maximum), as long as you satisfy the five-year holding period.

If you elect to use an IRA rollover, you can avoid potential tax and penalty problems by electing a direct trustee-to-trustee transfer; in other words, the money never passes through your hands. IRA rollovers must be completed within 60 days of the distribution to avoid current taxes and penalties.

An IRA rollover allows your retirement nest egg to continue compounding tax-deferred. Remember that you must generally begin taking annual required minimum distributions (RMDs) from tax-deferred retirement plans after you turn 70½ (the first distribution must be taken no later than April 1 of the year after the year in which you reach age 70½). Failure to take an RMD subjects the funds that should have been withdrawn to a 50% federal income tax penalty.

Of course, there is also the possibility that you may be able to keep the funds in your former employer’s plan or move it to your new employer’s plan if allowed by the plans. (Make sure you understand the pros and cons of rolling funds from an employer plan to an IRA before you take any action.)

Before you decide which method to take for distributions from a qualified retirement plan, it would be prudent to consult with a professional tax advisor.

Let me guide you through your retirement planning decisions. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
April 18th, 2017 by

life insurance for a business owner

If you own your own business, I bet you think about your vulnerabilities. If something happens to you, what will happen to your business? Who will take over when you are gone? How will your family afford to live without your income?  Business continuation is difficult enough under normal circumstances. However, if there is an unexpected death of a key person or business owner, complications increase exponentially.

Company-owned life insurance is one way to help protect a business from financial problems caused by the unexpected death of a key employee, partner, or co-owner. If the covered individual dies, the proceeds from this type of insurance can help in several ways. Here are some examples.

Fund a Buy-Sell Agreement

A buy-sell agreement typically specifies in advance what will happen if an owner or a key person leaves the company, either through a personal decision or because of death or disability. The death benefit from a company-owned life insurance contract can be used to purchase the decedent’s interest in the company from his or her heirs.

Keep the Business Going

If survivors decide to continue the business, they might need a break. This period when operations cease will give them a chance to develop a future plan. The death benefit can be used to help replace lost revenue. It can also pay costs associated with keeping the doors open, including rent, utilities, lease payments, and payroll. And, it may help the surviving owners avoid borrowing money or selling assets.

Replace Lost Income for Business Owner

If a business owner has family members that depends on their business income, the proceeds from company-owned life insurance could help replace the lost income. It would also protect the family’s quality of life while they adjust and move on.

The appropriate coverage amount will depend on several factors. It could be a multiple of the business owner annual salary or the company’s operating budget. Don’t forget to include details like the cost of hiring and training a successor and any debts that the family may have to repay.

You should have a thorough examination of a business and personnel before deciding on the exact amount of coverage you need.

The cost and availability of life insurance for a business owner 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 the individual is insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have contract limitations, fees, and charges, which can include mortality and expense charges. In addition, if a contract is surrendered prematurely, there may be surrender charges and income tax implications.

The loss of an owner can be devastating to a small business. A company-owned life insurance contract may help reduce the financial consequences if such a loss were to occur.

I want to give you “peace of mind”.

I can help you determine the right life insurance for your business needs.  Let’s meet for a FREE retirement strategy consultation at my office. Call 1-833-313-7233.



April 18th, 2017 by

Life Insurance

Protect yourself against the financial consequences of premature death by using life insurance. However, choosing from the many types of life insurance that are available can be a difficult process. A few main categories are here to help you search for the right type of life insurance.

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

Term life insurance

Term life insurance is the most basic and usually the most affordable. You can purchase a contract for a specified period of time. If you die within the time period of your contract, the insurance company will pay your beneficiaries the face value of your contract. This insurance can benefit your spouse, children or business.

You can buy a contract for any period between 1 and 30 years. Annual renewable term insurance usually can renew every year without proof of insurability. However, the premium may increase with each renewal. This options is useful if you can only afford a low-cost option.

Permanent life insurance

The other major category is permanent life insurance. You pay a premium for as long as you live, and upon your death, a pay out goes to your beneficiaries. This permanent contract typically comes with a “cash value” growth element. There are three main types of permanent life insurance: whole, universal, and variable.

Whole life insurance.

This type of permanent life insurance has a premium that stays the same throughout the life of the contract. Although the premiums may seem higher than the risk of death in the early years, they can increase in cash value.  You may be able to borrow funds from the cash value or surrender your contract for its face value.

Access to cash values through borrowing or partial surrenders can:

  • reduce the contract’s cash value and death benefit
  • increase the chance that the contract will lapse
  • may result in a tax liability if the contract terminates before the death of the insured
  • require additional out-of-pocket payments

Universal life insurance.

Universal life coverage goes one step further. You have the same type of coverage and cash value as you would with whole life, but with greater flexibility. Once cash value has grown, you may be able to vary the frequency and amount of your premiums. In fact, you could structure the contract so that the cash value covers your premium costs completely. Of course, it’s important to remember that altering your premiums may decrease the value of the death benefit.

Variable life insurance.

With variable life insurance, you receive the same death protection as with other types of permanent contracts. However, you have control over decisions for your cash value. You have the option of putting your money into stocks, bonds, or money market funds. The value of your contract has the ability to grow more quickly, but there is also more risk. If your financial instrument does not perform well, your cash value and the death benefit may decrease. However, some policies provide a guarantee that your death benefit will not fall below a certain level. You cannot change the premiums for this type of insurance. Moreover, you cannot change them in relation to the size of your cash-value.

Variable universal life

Variable universal life is another type of variable life insurance. It combines the features of variable and universal life insurance, with the ability to adjust your premiums or death benefit.

As with most financial decisions, there are expenses associated with life insurance. Generally, life insurance policies have contract limitations. Moreover, there are fees, charges, extra costs for optional benefits. Most policies have surrender charges during the early years of the contract if the contract owner surrenders the contract. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing company. FDIC does not guarantee life insurance nor does any other government agency. It is not guaranteed or endorsed by any bank or savings association.

You’ll have to pay tax if you have withdrawals of any increases. Also, you may be subject to surrender charges and a 10% federal income tax penalty if  you are younger than age 59½. Withdrawals reduce contract benefits and values. For variable life insurance and variable universal life, there is no guarantee on the financial instrument’s growth. Moreover, they can fluctuate with changes in index conditions. Thus, the principal may be worth more or less than the original dollar amount when the contract ends.

Variable life and variable universal life are sold by prospectus. Please consider the financial instrument’s objectives, risks, charges, and expenses before making your decisions. The prospectus, which contains information about the variable life or variable universal life insurance contract and the underlying financial instrument’s options, can be obtained from your financial professional. Be sure to read the prospectus carefully before making any final decisions.

Your retirement success is important to me.

I can help you determine the right life insurance for your needs and life situation.  Let’s meet for a FREE retirement strategy consultation at my office. Call 1-833-313-7233.



August 5th, 2014 by

Why Women Need Life Insurance

Women comprise almost half the U.S. labor force, and their contributions to family finances are more important than ever.1

A record 40% of households with children under age 18 include mothers who are either the sole or primary breadwinner. In 1960, only about 11% of women carried this level of financial responsibility.2 And, about 37% of “breadwinner moms” are married women who earn a higher income than their husbands. The other 63% are single mothers.3  Of course, many working women might not earn more than their spouses but still make a contribution to the family’s finances.

Stay-at-home moms also contribute to family stability, even if they don’t bring home a paycheck. Based on wages that would be paid for common household tasks, the annual “value of mom” in 2013 was $59,862.4  And, here is the irony. Despite the growing importance of their financial contributions, women are less likely than men to have life insurance (see chart). Those women who do have insurance often have lower coverage amounts — an average of $169,000 for married mothers versus $215,000 for married dads.5

But, it isn’t as costly as you might imagine. The most cost-efficient way to obtain coverage is typically term life insurance. One study found that consumers tend to overestimate the cost of life insurance by almost three times the actual cost.6
Time have changed since the 1960’s. Women are actively in the work force and are actively participating in contributing to the family finances. So, whether you’re the breadwinner, a co-provider, or a stay-at-home parent, be sure that you have enough coverage to protect your family in the event you are no longer there to provide for them.

1) U.S. Bureau of Labor Statistics, 2013
2–3) Pew Research Center, 2013
4) Journal of Financial Planning, June 2013
5), January 9, 2013
6) LIFE Foundation, 2012

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM For better money management and to plan more effectively for your retirement, contact me for a free consultation.
Toll Free: 1-833-313-7233 | MD, VA & DC.