THAMES FINANCIAL & INSURANCE SERVICES
Retirement and Estate Preservation Services
C. Thomas Thames Folsom Office: 916-779-4999

​If you have considered the possibility that you may need long-term care at some point in the future, you may have decided that purchasing some form long-term care insurance makes sense. But like many people, you may be concerned about paying premiums for coverage you may never need. 

A possible alternative is something called asset-based long-term care policies.  These are usually life insurance policies that also provide long-term care benefits. They are usually funded with a single premium, but some companies offer other payment options. 

For many people the major advantage of asset-based long-term care policies is that they are not a "use it or lose it" product. With some asset-based policies, you will have benefits for long-term care, a death benefit for your heirs, and a full return of premium (less any withdrawals) if you surrender the contract.  

Asset-based policies are not a perfect replacement for traditional long-term care insurance, but they are an option that many people should consider.  

About the Author:  C. Thomas (Tom) Thames is a Certified Financial Planner(TM) professional who specializes in retirement planning and estate preservation strategies.  
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The debate about fees vs. commissions almost always centers around potential conflicts of interest.  And the usual argument is that since fee-only advisers don't collect commissions, they will not be tempted to put their own interest ahead of the client's. But I don’t think that argument holds water. I have been following the fee vs. commission debate for years, and I have used both, and I am convinced that no method of compensation eliminates conflicts of interest. It doesn’t matter if I am compensated by fees or by commissions, if I make a recommendation that will eventually put money or some other benefit in my pocket, I have a conflict of interest. Fee-only advisors have a conflict of interest whenever they make a recommendation that could affect the amount of fees they are charging their client.  And if my dentist tells me I should have one of my teeth pulled, and he is the one who will be paid to do it, he has a conflict of interest. 

Many advisors are “fee-based” (not fee-only) which means that they accept both fees and commissions. It also means that they could have the same conflicts of interest as a commissions-only advisor. But that doesn't stop some fee-based advisors from criticizing commissions-only advisors. It's a little sad that any advisor feels the need to promote his or her own credibility by criticizing other honest advisors who may be providing the same products and services at a lower cost to the consumer.  

Some fee-only advisors like to talk about all the extra services that clients get when they pay a fee.  And that might be a good deal for clients who need and use those extra services. But it is important to understand that many advisors who earn commissions can and do provide all the financial planning services that the average consumer needs. Consumers may need a retirement income plan, an insurance and risk management plan, a basic estate plan (a job for an attorney), and possibly a plan to reduce or control their taxes. And some may need help planning for education expenses. All those basic services can be provided by fee-only advisors, fee-based advisors who earn both fees and commissions, and by advisors who are paid entirely by commissions.  

We can’t eliminate conflicts of interest, but we can and should disclose them. If we disclose all conflicts of interest, and the consumer understands them, the key question regarding adviser compensation should be which method is most cost-efficient for the client.   

About the Author: C. Thomas (Tom) Thames is a Certified Financial Planner™ professional with offices in Elk Grove and Folsom, California. Tom holds an MBA degree from Santa Clara University and has over 45 years of experience in the financial services industry.

Welcome to the CT Thames Financial Blog. In this article we look at the differences between fixed indexed annuities and variable annuities. 

Fixed indexed annuities are insurance products that provide principal protection and opportunity for growth. They were designed to provide more growth potential than a traditional fixed annuity but less growth potential than a variable annuity. Fixed indexed annuities do not lose principal or credited interest when the investment markets decline. 

Variable annuities are also offered by insurance companies, but they are legally considered investment products because their assets include stocks, bonds, and other investment securities. They have more growth potential than fixed indexed annuities, but they also have all the usual investment risks and can be very volatile. 

Variable annuities also have fees that fixed indexed annuities do not have, and those fees can be quite high. Most fixed indexed annuities have no fees unless some optional benefit or rider has been added to the contract. 

Most indexed and variable annuities have surrender charges that apply if the policy is surrendered before it has been in force a prescribed number of years, or if partial withdrawals exceed the penalty-free amount that can be withdrawn each year. Surrender charges are determined by the issuing company and usually apply for the first 5 to 10 years after the annuity is issued. During those years, many indexed and variable annuities allow annual penalty-free withdrawals of 5% to 10% of the accumulated value, beginning after the contract has been in force one year. 

Gains on both types of annuities are tax-deferred until withdrawn, and then they are taxed as ordinary income. And like traditional IRAs, withdrawals from an annuity before age 59 1/2 may be subject to state and federal tax penalties. Both types of annuities can be used to fund traditional and Roth IRAs, and in that case the rules regarding IRAs will apply.  

This article is not a recommendation or complete explanation of any product. Prospectuses (for variable annuities), product brochures, and a variety of disclosure documents are provided by the companies that offer indexed and variable annuities. Be sure to read and understand them before buying any kind of annuity. For additional information please refer to the National Association of Insurance Commissioners Buyer's Guide for Deferred Annuities CLICK HERE and to the variable annuities guide at Investor.gov CLICK HERE

About the author: C. Thomas (Tom) Thames is a Certified Financial Planner(TM) professional with over 45 years of experience as an insurance agent, stockbroker, and investment adviser representative.