In general usage, a financial plan can be a budget, a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate.

While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). The work engaged in by this professional is commonly known as personal financial planning. In carrying out the planning function, he is guided by the financial planning process to create a financial plan; a detailed strategy tailored to a client's specific situation, for meeting a client's specific goals.

Objectives
People enlist the help of a financial planner because of the complexity of knowing how to perform the following: * Providing direction and meaning to financial decisions;

* Allowing the person to understand how each financial decision affects the other areas of finance; and

* Allowing the person to adapt more easily to life changes in order to feel more secure.

Defining personal financial decisions
Personal financial planning is broadly defined as a process of determining an individual's financial goals, purposes in life and life's priorities, and after considering his resources, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual's goals are used as guideposts to map a course of action on 'what needs to be done' to reach those goals.

Alongside the data gathering exercise, the purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.

Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual's current lifestyle so that the 'pain' in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.

Financial Splanning Scope
Financial planning should cover all areas of the client’s financial needs and should result in the achievement of each of the client's goals. The scope of planning would usually include the following:

Risk Management and Insurance Planning
Managing cash flow risks through sound risk management and insurance techniques

Investment and Planning Issues Planning
creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending

Retirement Planning
Planning to ensure financial independence at retirement including 401Ks, IRAs etc.

Tax Planning
Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes

Estate Planning
Planning for the creation, accumulation, conservation and distribution of assets

Cash Flow and Liability Management
Maintaining and enhancing personal cash flows through debt and lifestyle management

Relationship Management
Moving beyond pure product selling to understand and service the core needs of the client

Education Planning for kids and the family members

The Financial Planning Process:
The personal financial planning process is generally accepted as a six-step process as follows:

Step 1: Setting goals with the client This step (that is usually performed in conjunction with Step 2) is meant to identify where the client wants to go in terms of his finances and life.

Step 2: Gathering relevant information on the client This would include the qualitative and quantitative aspects of the client's financial and relevant non-financial situation.

Step 3: Analyzing the information The information gathered is analysed so that the client's situation is properly understood. This includes determining whether there are sufficient resources to reach the client's goals and what those resources are.

Step 4: Constructing a financial plan Based on the understanding of what the client wants in the future and his current financial status, a roadmap to the client goals is drawn to facilitate the achievements of those goals.

Step 5: Implementing the strategies in the plan Guided by the financial plan, the strategies outlined in the plan are implemented using the resources allocated for the purpose.

Step 6: Monitoring implementation and reviewing the plan The implementation process is closely monitored to ensure it stays in alignment to the client's goals. Periodic reviews are undertaken to check for misalignment and changes in the client's situation. If there is any significant change to the client's situation, the strategies and goals in the financial plan are revised accordingly.

What is a financial planner's job function?
A financial planner specializes in the planning aspects of finance, in particular personal finance, as contrasted with a stock broker who is generally concerned with the investments, or with a life insurance intermediary who advises on risk products.

Financial planning is usually a multi-step process, and involves considering the client's situation from all relevant angles to produce integrated solutions. The six-step financial planning process has been adopted by the International Organization for Standardization (ISO). Financial planners are also known by the title financial adviser in some countries, although these two terms are technically not synonymous, and their roles have some functional differences.

Although there are many types of 'financial planners,' the term is used largely to describe those who consider the entire financial picture of a client and then provide a comprehensive solution. To differentiate from the other types of financial planners, some planners may be called 'comprehensive' or 'holistic' financial planners. Other financial planners may specialize in one or more areas, such as insurance planning (risk management) and retirement planning. Financial planning is a growing industry with projected faster than average job growth through 2014

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

An Individual Retirement Arrangement (or IRA) is a retirement plan account that provides some tax advantages for retirement savings in the United States.

There are number of different types of IRAs, which may be either employer-provided or self-provided plans. The types include:

• Roth IRA - contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. Named for Senator William Roth.
• Traditional IRA - contributions are often tax-deductible (often simplified as "money is deposited before tax" or "contributions are made with pre-tax assets"), all transactions and earnings within the IRA have no tax impact, and withdrawals at retirement are taxed as income (except for those portions of the withdrawal corresponding to contributions that were not deducted). Depending upon the nature of the contribution, a traditional IRA may be referred to as a "deductible IRA" or a "non-deductible IRA."
• SEP IRA - a provision that allows an employer (typically a small business or self-employed individual) to make retirement plan contributions into a Traditional IRA established in the employee's name, instead of to a pension fund account in the company's name.
• SIMPLE IRA - a simplified employee pension plan that allows both employer and employee contributions, similar to a 401(k) plan, but with lower contribution limits and simpler (and thus less costly) administration. Although it is termed an IRA, it is treated separately.
• Self-Directed IRA - a self-directed IRA that permits the account holder to make investments on behalf of the retirement plan.

There are two other subtypes of IRA, named Rollover IRA and Conduit IRA, that are viewed as obsolete under current tax law (their functions have been subsumed by the Traditional IRA) by some; but this tax law is set to expire unless extended. However, some individuals still maintain these accounts in order to keep track of the source of these assets. One key reason is that some qualified plans will accept rollovers from IRAs only if they are conduit/rollover IRAs.

What was formerly known as an Educational IRA is now called a Coverdell Education Savings Account.

Starting with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), many of the restrictions of what type of funds could be rolled into an IRA and what type of plans IRA funds could be rolled into were significantly relaxed. Additional acts have further relaxed similar restrictions. Essentially most retirement plans can be rolled into an IRA after meeting certain criteria, and most retirement plans can accept funds from an IRA. An example of an exception is a non-governmental 457 plan which cannot be rolled into anything but another non-governmental 457 plan.

The tax treatment of the above types of IRAs except for Roth IRAs are substantially similar, particularly for rules regarding distributions. SEP IRAs and SIMPLE IRAs also have additional rules similar to those for qualified plans governing how contributions can and must be made and what employees are qualified to participate.

Funding

• An IRA can only be funded with cash or cash equivalents. Attempting to transfer any other type of asset into the IRA is a prohibited transaction and disqualifies the fund from its beneficial tax treatment.
• Rollovers, transfers, and conversions between IRAs and other retirement accounts can include any asset.
• The maximum for an IRA contribution in years 2006 and 2007 is 100% of earned income or $4,000, whichever is less, for an individual under the age of 50. Individuals aged 50 and older can contribute up to 100% of earned income or $5,000, whichever is less. For 2008 and 2009, the limit is $5,000.
• This limit is for Roth IRAs, traditional IRAs, or some combination of the two. You cannot put more than $5,000 into your Roth and traditional IRA combined ($6,000 for individuals aged 50 or more).

For example, if you are 45 and put $3,500 into your traditional IRA this year so far, you can either put $1,500 more into your traditional IRA or $1,500 in your Roth IRA. There may be an additional administrative step needed so that the trustee which holds the IRA proceeds actually retitles or transfers the $3,500 Traditional proceeds into the Roth category for their internal bookkeeping to survive an IRS audit.

Valid investments

Once money is inside an IRA, the IRA owner can direct the custodian to use the cash to purchase most types of securities, and some non security financial instruments. Some assets cannot be held in an IRA such as collectibles (e.g. art, baseball cards, and rare coins) and life insurance. Some assets are allowed, subject to certain restrictions by custodians themselves. For example an IRA cannot own real estate if the IRA owner receives or provides any immediate gain from/to this real estate investment, for instance as his personal residence or as a property manager who takes personal compensation for this service or adds capital value to the property. The IRS specifically states that custodians may impose their own policies above the rules imposed by the IRS. It should also be noted that custodians cannot provide advice.

Most IRA custodians limit available investments to traditional brokerage accounts such as stocks, bonds, and do not permit real estate in an IRA unless it is held indirectly via a security such as a real estate investment trust (REIT). However, self-directed IRA custodians/administrators can allow real estate and other non-traditional assets. They typically charge fees based on asset values. There are certain special restrictions on real estate held in an IRA (the IRA owner cannot benefit from the property in any way, i.e. they cannot use it). Self Directed IRA's allowing non security investments are more complicated and to properly set up may require additional expertise and experience that not all CPAs, attorneys, or other advisors would have.

While certain types of investments are prohibited in an IRA, real estate is not one of them. As a result, real estate owned by an IRA can generate rental income and gain on a sale which escapes immediate taxation. However, the IRA does not get (or, need) the related deductions (e.g., depreciation, mortgage interest,property taxes, etc.).

An IRA may borrow money but any such loan must not be personally guaranteed by the owner of the IRA, and also the loan must be secured solely by assets in the IRA (in other words, a non-recourse loan). Also, the owner of the IRA may not pledge the IRA as security against a debt.

Distribution of funds

Although funds can be distributed from an IRA at any time, there are limited circumstances when money can be distributed or withdrawn from the account without penalties. Unless an exception applies, money can typically be withdrawn penalty free as taxable income from an IRA once the account owner reaches age 59 and a half. Also, non-Roth account owners must begin taking distributions of at least the calculated minimum amounts by April 1st of the year after reaching age 70 and a half. If the minimum distribution is not taken the penalty is 50% of the amount that should have been taken. The amount that must be taken is calculated based on a factor taken from the appropriate IRS table and is based on the life expectancy of the account owner and possibly their spouse as beneficiary if applicable. At the death of the account owner distributions must continue and if there is a designated beneficiary, distributions can be based on the life expectancy of the beneficiary.

There are several exceptions to the rule that penalties apply to distributions before age 59½. Each exception has detailed rules that must be followed to be exempt from penalties. The exceptions include:

• The portion of unreimbursed medical expenses that are more than 7.5% of adjusted gross income.
• Distributions that are not more than the cost of medical insurance while unemployed
• Disability (defined as not being able to engage in any substantial gainful activity)
• Amounts distributed to beneficiaries of a deceased IRA owner.
• Distributions in the form of an annuity, see Substantially equal periodic payments
• Distributions that are not more than the qualified higher education expenses of the owner or their children or grandchildren
• Distributions to buy, build, or rebuild a first home. ($10,000 lifetime maximum)
• Distribution due to an IRS levy of the plan.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people named in the policy.

Insured events that may be covered include:

• Serious illness

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

• Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
• Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.

There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it.

The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.

In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).

Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim.

The face amount on the policy is the initial amount that the policy will pay at the death of the insured or when the policy matures, although the actual death benefit can provide for greater or lesser than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.

The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes.

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting. Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65. Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).

The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.

The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company's operations. Contrary to popular belief, the majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims. Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.

This investigation and resulting evaluation of the risk is termed underwriting. Health and lifestyle questions are asked. Certain responses or information received may merit further investigation. Life insurance companies in the United States support the Medical Information Bureau (MIB), which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer receives permission to obtain information from the proposed insured's physicians.

Underwriters will determine the purpose of insurance. The most common is to protect the owner's family or financial interests in the event of the insurer's demise. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose.

Life insurance companies are never required by law to underwrite or to provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned down) or rated. Rating increases the premiums to provide for additional risks relative to the particular insured.

Many companies use four general health categories for those evaluated for a life insurance policy. These categories are Preferred Best, Preferred, Standard, and Tobacco. Preferred Best is reserved only for the healthiest individuals in the general population. This means, for instance, that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early cancer, diabetes, or other conditions. Preferred means that the proposed insured is currently under medication for a medical condition and has a family history of particular illnesses. Most people are in the Standard category. Profession, travel, and lifestyle factor into whether the proposed insured will be granted a policy, and which category the insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country. Underwriting practices can vary from insurer to insurer which provide for more competitive offers in certain circumstances.

Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays the claim. The normal minimum proof required is a death certificate and the insurer's claim form completed, signed (and typically notarized). If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary's lifetime.

Insurance vs Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In general, in these jurisdictions "insurance" refers to providing cover for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is certain to happen. "Insurance" is the generally accepted term, however, people using this description are liable to be corrected. In the United States both forms of coverage are called "insurance", principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.

Types of life insurance

Life insurance may be divided into two basic classes – temporary and permanent or following subclasses - term, universal, whole life and endowment life insurance.

Temporary Term Insurance

Term assurance: provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:

1. Face amount (protection or death benefit),
2. Premium to be paid (cost to the insured), and
3. Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.

A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. In the past these policies would almost always exclude suicide. However, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if the suicide occurs after the two year period.

Permanent Life Insurance

Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.

The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Also, the cash values are generally kept by the insurance company at the time of death, the death benefit only to the beneficiaries. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates over time. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.

Cash value can be accessed at any time through policy "loans". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only. If the dividend option: Paid up additions is elected, dividend cash values will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary.

Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), and equity indexed universal life insurance.

A universal life insurance policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. Mortality charges and administrative costs are then charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any.

With all life insurance, there are basically two functions that make it work. There's a mortality function and a cash function. The mortality function would be the classical notion of pooling risk where the premiums paid by everybody else would cover the death benefit for the one or two who will die for a given period of time. The cash function inherent in all life insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and company), then the policy matures and endows the face value of the policy.

Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95, then the mortality function alone will not be able to cover the cash function. So in order to cover the cash function, a minimum rate of investment return on the premiums will be required in the event that a policy matures.

Universal life insurance addresses the perceived disadvantages of whole life. Premiums are flexible. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interest-sensitive) or the financial markets (Equity Indexed Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. And universal life has a more flexible death benefit because the owner can select one of two death benefit options, Option A and Option B.

Option A pays the face amount at death as it's designed to have the cash value equal the death benefit at maturity (usually at age 95 or 100). With each premium payment, the policy owner is reducing the cost of insurance until the cash value reaches the face amount upon maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net death benefit as cash values accumulate. Option B offers the benefit of an increasing death benefit every year that the policy stays in force. The drawback to option B is that because the cash value is accumulated "on top of" the death benefit, the cost of insurance never decreases as premium payments are made. Thus, as the insured gets older, the policy owner is faced with an ever increasing cost of insurance (it costs more money to provide the same initial face amount of insurance as the insured gets older).

Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to keep the policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.

Endowments

Endowments are policies in which the cash value built up inside the policy, equals the death benefit (face amount) at a certain age. The age this commences is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier.

In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters (creating modified endowments). These follow tax rules as annuities and IRAs do.

Endowment Insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).

Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when they pass away due to an accident. Accidents include anything from an injury, but do not typically cover any deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurances.

It is also very commonly offered as "accidental death and dismemberment insurance", also known as an AD&D policy. In an AD&D policy, benefits are available not only for accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc.

Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is not covered, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as: parachuting, flying an airplane, professional sports, or involvement in a war (military or not). Also, some insurers will exclude death and injury caused by proximate causes due to (but not limited to) racing on wheels and mountaineering.

Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity coverage. In some cases, some companies may even offer a triple indemnity cover.

Related Life Insurance Products

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

Joint life: insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death or second death.

Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the second (later) death.

Single premium whole life: is a policy with only one premium which is payable at the time the policy is issued.

Modified whole life: is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy.

Group life insurance: is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage.

Senior and preneed productS: Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies: are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary.

Investment policies

With-profits policies:

Some policies allow the policyholder to participate in the profits of the insurance company these are with-profits policies. Other policies have no rights to participate in the profits of the company, these are non-profit policies.

With-profits policies are used as a form of collective investment to achieve capital growth. Other policies offer a guaranteed return not dependent on the company's underlying investment performance; these are often referred to as without-profit policies which may be construed as a misnomer.

Investment Bonds

Pensions: Pensions are a form of life assurance. However, whilst basic life assurance, permanent health insurance and non-pensions annuity business includes an amount of mortality or morbidity risk for the insurer, for pensions there is a longevity risk.

A pension fund will be built up throughout a person's working life. When the person retires, the pension will become in payment, and at some stage the pensioner will buy an annuity contract, which will guarantee a certain pay-out each month until death.

Annuities

An annuity is a contract with an insurance company whereby the insured pays an initial premium or premiums into a tax-deferred account, which pays out a sum at pre-determined intervals. There are two periods: the accumulation (when payments are paid into the account) and the annuitization (when the insurance company pays out). IRS rules restrict how you take money out of an annuity. Distributions may be taxable and/or penalized.

Tax and life insurance
Taxation of life insurance in the United States

Premiums paid by the policy owner are normally not deductible for federal and state income tax purposes.

Proceeds paid by the insurer upon death of the insured are not included in gross income for federal and state income tax purposes; however, if the proceeds are included in the "estate" of the deceased, it is likely they will be subject to federal and state estate and inheritance tax.

Cash value increases within the policy are not subject to income taxes unless certain events occur. For this reason, insurance policies can be a legal and legitimate tax shelter wherein savings can increase without taxation until the owner withdraws the money from the policy. On flexible-premium policies, large deposits of premium could cause the contract to be considered a "Modified Endowment Contract" by the Internal Revenue Service (IRS), which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before applying their premium.

Tax deferred benefit from a life insurance policy may be offset by its low return in some cases. This depends upon the insuring company, type of policy and other variables (mortality, market return, etc.). Also, other income tax saving vehicles (i.e. Individual Retirement Account (IRA), 401K or Roth IRA) may be better alternatives for value accumulation. This will depend on the individual and their specific circumstances.

The tax ramifications of life insurance are complex. The policy owner would be well advised to carefully consider them. As always, the United States Congress or the state legislatures can change the tax laws at any time.

Taxation of life assurance in the United Kingdom

Premiums are not usually allowable against income tax or corporation tax, however qualifying policies issued prior to 14 March 1984 do still attract LAPR (Life Assurance Premium Relief) at 15% (with the net premium being collected from the policyholder).

Non-investment life policies do not normally attract either income tax or capital gains tax on claim. If the policy has as investment element such as an endowment policy, whole of life policy or an investment bond then the tax treatment is determined by the qualifying status of the policy.

Qualifying status is determined at the outset of the policy if the contract meets certain criteria. Essentially, long term contracts (10 years plus) tend to be qualifying policies and the proceeds are free from income tax and capital gains tax. Single premium contracts and those run for a short term are subject to income tax depending upon your marginal rate in the year you make a gain. All (UK) insurers pay a special rate of corporation tax on the profits from their life book; this is deemed as meeting the lower rate (20% in 2005-06) liability for policyholders. Therefore a policyholder who is a higher rate taxpayer (40% in 2005-06), or becomes one through the transaction, must pay tax on the gain at the difference between the higher and the lower rate. This gain is reduced by applying a calculation called top-slicing based on the number of years the policy has been held. Although this is complicated, the taxation of life assurance based investment contracts may be beneficial compared to alternative equity-based collective investment schemes (unit trusts, investment trusts and OEICs). One feature which especially favors investment bonds is the '5% cumulative allowance' – the ability to draw 5% of the original investment amount each policy year without being subject to any taxation on the amount withdrawn. If not used in one year, the 5% allowance can roll over into future years, subject to a maximum tax deferred withdrawal of 100% of the premiums payable. The withdrawal is deemed by the HMRC (Her Majesty's Revenue and Customs) to be a payment of capital and therefore the tax liability is deferred until maturity or surrender of the policy. This is an especially useful tax planning tool for higher rate taxpayers who expect to become basic rate taxpayers at some predictable point in the future (e.g. retirement), as at this point the deferred tax liability will not result in tax being due.

History

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in 17th century England, originally as insurance for traders : merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London.

The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.

Stranger Originated Life Insurance

Stranger Originated Life Insurance or STOLI is a life insurance policy that is held or financed by a person who has no relationship to the insured person. Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of the insured person's death. STOLI has often been used as an investment technique whereby investors will encourage someone (usually an elderly person) to purchase life insurance and name the investors as the beneficiary of the policy. This undermines the primary purpose of life insurance as the investors have no financial loss that would occur if the insured person were to die. In some jurisdictions, there are laws to discourage or prevent STOLI.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

In the U.S. an annuity contract is created when an individual gives a life insurance company money which may grow on a tax-deferred basis and then can be distributed back to the owner in several ways. The defining characteristic of all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. Perhaps confusingly, the majority of modern annuity customers use annuities only to accumulate funds and to take lump-sum withdrawals without using the guaranteed-income-for-life feature.

General

Annuity contracts in the United States are defined by the Internal Revenue Code and regulated by the individual states. In the U.S., annuity contracts may be issued only by life insurance companies, although private annuity contracts may be arranged between donors to non-profits to reduce taxes. Insurance companies are regulated by the states, so contracts or options that may be available in some states may not be available in others. Their federal tax treatment, however, is governed by the Internal Revenue Code.

There are two possible phases for an annuity, one phase in which the customer deposits and accumulates money into an account (the deferral phase), and another phase in which customers receive payments for some period of time (the annuity or income phase). During this latter phase, the insurance company makes income payments that may be set for a stated period of time, such as five years, or continue until the death of the customer(s) (the "annuitant(s)") named in the contract. Annuitization over a lifetime can have a death benefit guarantee over a certain period of time, such as ten years. Annuity contracts with a deferral phase always have an annuity phase and are called deferred annuities. An annuity contract may also be structured so that it has only the annuity phase; such a contract is called an immediate annuity.

Immediate annuity

The term "annuity," as used in financial theory, is most closely related to what is today called an immediate annuity. This is an insurance policy which, in exchange for a sum of money, guarantees that the issuer will make a series of payments. These payments may be either level or increasing periodic payments for a fixed term of years or until the ending of a life or two lives, or even whichever is longer. It is also possible to structure the payments under an immediate annuity so that they vary with the performance of a specified set of investments, usually bonds.

The overarching characteristic of the immediate annuity is that it is a vehicle for distributing savings with a tax-deferred growth factor. A common use for an immediate annuity might be to provide a pension income. In the U.S., the tax treatment of an immediate annuity is that every payment is a combination of a return of principal (which part is not taxed) and income (which is taxed at ordinary income rates, not capital gain rates). When a deferred annuity is annuitized, it works like an immediate annuity from that point on, but with a lower cost basis and thus more of the payment is taxed.

Annuity with period certain

This type of immediate annuity pays the annuitant for a designated number of years (i.e., a period certain) and is used to fund a need that will end when the period is up (for example, it might be used to fund the premiums for a term life insurance policy). Thus this option is not necessarily suitable for an individual's retirement income, as the person may outlive the number of years the annuity will pay.

Life annuity

A life or lifetime immediate annuity is used to provide an income for the life of the annuitant similar to a defined benefit or pension plan.

A life annuity works somewhat like a loan that is made by the purchaser (contract owner) to the issuing (insurance) company, which pays back the original capital or principal (which isn't taxed) with interest and/or gains (which is taxed as ordinary income) to the annuitant on whose life the annuity is based. The assumed period of the loan is based on the life expectancy of the annuitant. In order to guarantee that the income continues for life, the insurance company relies on a concept called cross-subsidy or the "law of large numbers". Because an annuity population can be expected to have a distribution of lifespans around the population's mean (average) age, those dying earlier will give up income to support those living longer whose money would otherwise run out. Thus it is a form of longevity insurance.

A life annuity, ideally, can reduce the "problem" faced by a person that he/she doesn't know how long he/she will live, and so he/she doesn't know the optimal speed at which to spend his/her savings. Life annuities with payments indexed to the Consumer Price Index might be an acceptable solution to this problem, but there is only a thin market for them in North America.

Life annuity variants

For an additional expense (either by way of an increase in payments (premium) or a decrease in benefits), an annuity or benefit rider can be purchased on another life such as a spouse, family member or friend for the duration of whose life the annuity is wholly or partly guaranteed. For example, it is common to buy an annuity which will continue to pay out to the spouse of the annuitant after death, for so long as the spouse survives. The annuity paid to the spouse is called a reversionary annuity or survivorship annuity. However, if the annuitant is in good health, it may be more advantageous to select the higher payout option on his or her life only and purchase a life insurance policy that would pay income to the survivor.

The pure life annuity can have harsh consequences for the annuitant who dies before recovering his or her investment in the contract. Such a situation, called a forfeiture, can be mitigated by the addition of a period-certain feature under which the annuity issuer is required to make annuity payments for at least a certain number of years; if the annuitant outlives the specified period certain, annuity payments continue until the annuitant's death, and if the annuitant dies before the expiration of the period certain, the annuitant's estate or beneficiary is entitled to the remaining payments certain. The tradeoff between the pure life annuity and the life-with-period-certain annuity is that the annuity payment for the latter is smaller. A viable alternative to the life-with-period-certain annuity is to purchase a single-premium life policy that would cover the lost premium in the annuity.

Impaired-life annuities for smokers or those with a particular illness are also available from some insurance companies. Since the life expectancy is reduced, the annual payment to the purchaser is raised.

Life annuities are priced based on the probability of the annuitant surviving to receive the payments. Longevity insurance is a form of annuity that defers commencement of the payments until very late in life. A common longevity contract would be purchased at or before retirement but would not commence payments until 20 years after retirement. If the nominee dies before payments commence there is no payable benefit. This drastically reduces the cost of the annuity while still providing protection against outliving one's resources.

Deferred annuity

The second usage for the term annuity came into being during the 1970s. Such a contract is more properly referred to as a deferred annuity and is chiefly a vehicle for accumulating savings with a view to eventually distributing them either in the manner of an immediate annuity or as a lump-sum payment.

All varieties of deferred annuities owned by individuals have one thing in common: any increase in account values is not taxed until those gains are withdrawn. This is also known as tax-deferred growth.

A deferred annuity which grows by interest rate earnings alone is called a fixed deferred annuity (FA). A deferred annuity that permits allocations to stock or bond funds and for which the account value is not guaranteed to stay above the initial amount invested.

A new category of deferred annuity, called the equity indexed annuity (EIA) emerged in 1995. Equity indexed annuities may have features of fixed deferred annuities. The insurance company typically guarantees a minimum return for EIA. An investor can still lose money if he or she cancels (or surrenders) the policy early, before a "break even" period. An oversimplified expression of a typical EIA's rate of return might be that it is equal to a stated "participation rate" multiplied by a target stock market index's performance excluding dividends. Interest rate caps or an administrative fee may be applicable.

Deferred annuities in the United States have the advantage that taxation of all capital gains and ordinary income is deferred until withdrawn. In theory, such tax-deferred compounding allows more money to be put to work while the savings are accumulating, leading to higher returns. A disadvantage, however, is that when amounts held under a deferred annuity are withdrawn or inherited, the interest/gains are immediately taxed as ordinary income.

Features

A variety of features and guarantees have been developed by insurance companies in order to make annuity products more attractive. These include death and living benefit options, extra credit options, account guarantees, spousal continuation benefits, reduced contingent deferred sales charges (or surrender charges), and various combinations thereof. Each feature or benefit added to a contract will typically be accompanied by an additional expense either directly (billed to client) or indirectly (inside product).

Deferred annuities are usually divided into different kinds:

• Fixed annuities offer some sort of guaranteed rate of return over the life of the contract. In general such contracts are often positioned to be somewhat like bank CDs and offer a rate of return competitive with those of CDs of similar time frames. Many fixed annuities, however, do not have a fixed rate of return over the life of the contract, offering instead a guaranteed minimum rate and a first year introductory rate. The rate after the first year is often an amount that may be set at the insurance company's discretion subject, however, to the minimum amount (typically 3%). There are usually some provisions in the contract to allow a percentage of the interest and/or principal to be withdrawn early and without penalty (usually the interest earned in a 12-month period or 10%), unlike most CDs. Fixed annuities normally become fully liquid depending on the surrender schedule or upon the owner's death. Most equity index annuities are properly categorized as fixed annuities and their performance is typically tied to a stock market index (usually the S&P 500 or the Dow Jones Industrial Average). These products are guaranteed but are not as easy to understand as standard fixed annuities as there are usually caps, spreads, margins, and crediting methods that can reduce returns. These products also don't pay any of the participating market indices' dividends; the trade-off is that contract holder can never earn less than 0% in a negative year.

There are several types of performance guarantees, and one may often choose them à la carte, with higher risk charges for guarantees that are riskier for the insurance companies. The first type is comprised of guaranteed minimum death benefits (GMDBs), which can be received only if the owner of the annuity contract, or the covered annuitant, dies.

GMDBs come in various flavors, in order of increasing risk to the insurance company:

• Return of premium (a guarantee that you will not have a negative return)
• Roll-up of premium at a particular rate (a guarantee that you will achieve a minimum rate of return, greater than 0)
• Maximum anniversary value (looks back at account value on the anniversaries, and guarantees you will get at least as much as the highest values upon death)
• Greater of maximum anniversary value or particular roll-up

Insurance companies provide even greater insurance coverage on guaranteed living benefits, which tend to be elective. Unlike death benefits, which the contractholder generally can't time, living benefits pose significant risk for insurance companies as contractholders will likely exercise these benefits when they are worth the most. Annuities with guaranteed living benefits (GLBs) tend to have high fees commensurate with the additional risks underwritten by the issuing insurer.

Some GLB examples, in no particular order:

• Guaranteed minimum income benefit (GMIB, a guarantee that one will get a minimum income stream upon annuitization at a particular point in the future)
• Guaranteed minimum accumulation benefit (GMAB, a guarantee that the account value will be at a certain amount at a certain point in the future)
• Guaranteed minimum withdrawal benefit (GMWB, a guarantee similar to the income benefit, but one that doesn't require annuitizing)
• Guaranteed-for-life income benefit (a guarantee similar to a withdrawal benefit, where withdrawals begin and continue until cash value becomes zero, withdrawals stop when cash value is zero and then annuitization occurs on the guaranteed benefit amount for a payment amount that is not determined until annuitization date.)

Criticisms of deferred annuities

Deferred annuities are generally sold by financial professionals, some of whom may work directly for an insurance company. Most financial professionals, however, are independent agents of the insurance company, not employees. The financial professional who sells an annuity collects a commission from the insurance company. This commission will be a percentage of the total premium paid by the investor. This percentage can be as little as 1% and as high as 12%; the average is 6%. Since these commissions appear high and there are deferred sales charges on annuities, many financial gurus have criticized annuity products.

The investor will, generally, not pay any of this commission directly to the financial professional; the commission is paid by the insurance company to the financial professional up front. The insurance company will recapture the commission paid to the financial professional through the fees charged to the customer (in a equity indexed annuity) or the spread in the interest rate market (for a fixed annuity). There are also deferred back-end charges that will be applied if the investor closes out his or her contract before the agreed-upon time frame, usually 8 years. These charges can last for as little as 1 year or as many as 20 years, depending on the type of annuity and issuing company. These back-end charges concern many financial professionals and financial gurus.

Some annuities do not have any deferred surrender charges and do not pay the financial professional a commission, although the financial professional may charge a fee for his or her advice. Of course various charges are still imposed on these contracts, but they are less than those sold by commissioned brokers. It is important that potential purchasers—of annuities, tax-exempt municipal bonds, commodities futures, interest-rate swaps, in short, any financial instrument—understand the fees on the product and the fees a financial planner may charge.

A controversial practice of insurance sales is the selling of insurance contracts within an IRA or 401(k) plan. Since these investment vehicles are already tax deferred, investors do not receive additional tax shelters from the annuities. The benefit of the annuity contract is the guaranteed lifetime income that all annuity contracts must have by state law. Approximately 90% of annuitants, however, have not taken the life annuity upon retirement. If an investor does not intend to take the life income option from an annuity contract at retirement he or she may want to consider a low-cost deferred annuity.

If an investor needs to take lifetime income at retirement, on the other hand, he or she may want to try to buy an annuity upon retirement or might consider selecting a 401(k) plan account with an option to buy the annuity just before retirement.

In the October 2003 edition of Wealth Manager, an article titled "Photo Finish" by W. McAfee, Jr. examined the effects of taxation on annuities relative to other investment vehicles. The author found that annuities are generally not effective as a tax-deferral vehicle and that there are significant flaws in the use of annuities for financial planning during the accumulation phase.

Taxation

In the U.S. Internal Revenue Code, the growth of the annuity value during the accumulation phase is tax-deferred, that is, not subject to current income tax, for annuities owned by individuals. The tax deferred status of deferred annuities has led to their common usage in the United States. Under the U.S. tax code, the benefits from annuity contracts do not always have to be taken in the form of a fixed stream of payments (annuitization), and many of annuity contracts are bought primarily for the tax benefits rather than to receive a fixed stream of income. If an annuity is used in a qualified pension plan or an IRA funding vehicle, then 100% of the annuity payment is taxable as current income upon distribution (because the taxpayer has no tax basis in any of the money in the annuity). If the annuity contract is purchased with after-tax dollars, then the contractholder upon annuitization recovers his basis pro-rata in the ratio of basis divided by the expected value, according to the tax regulation Section 1.72-5. (This is commonly referred to as the exclusion ratio.) After the taxpayer has recovered all of his basis, then 100% of the payments thereafter are subject to ordinary income tax.

Since the Jobs and Growth Tax Relief Reconciliation Act of 2003, the use of variable annuities as a tax shelter has greatly diminished, because the growth of mutual funds and now most of the dividends of the fund are taxed at long term capital gains rates. This taxation, contrasted with the taxation of all the growth of variable annuities at income rates, means that in most cases, variable annuities shouldn't be used for tax shelters unless very long holding periods apply (for example, more than 20 years).

Also, any withdrawals before an investor reaches the age of 59 are generally subject to a 10% tax penalty in addition to any gain being taxed as ordinary income.

In the October 2003 edition of Wealth Manager, an article titled "Photo Finish" by W. McAfee, Jr. [4] examined the effects of taxation on annuities relative to other investment vehicles. The author found that annuities are generally not effective as a tax-deferral vehicle and that there are significant flaws in the use of annuities for financial planning during the accumulation phase.

Insurance company default risk and state guaranty associations

An investor should consider the financial strength of the insurance company that writes annuity contracts. Major insolvencies have occurred at least 62 times since the conspicuous collapse of the Executive Life Insurance Company in 1991.

Insurance company defaults are governed by state law. The laws are, however, broadly similar in most states. Annuity contracts are protected against insurance company insolvency up to a specific dollar limit, often $100,000, but as high as $500,000 in New York, New Jersey, and the state of Washington. This protection is not insurance and is not provided by a government agency. It is provided by an entity called the state Guaranty Association. When an insolvency occurs, the Guaranty Association steps in to protect annuity holders, and decides what to do on a case-by-case basis. Sometimes the contracts will be taken over and fulfilled by a solvent insurance company.

The state Guaranty Association is not a government agency, but states usually require insurance companies to belong to it as a condition of being licensed to do business. The Guaranty Associations of the fifty states are members of a national umbrella association, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). The NOLHGA website provides a description of the organization, links to websites for the individual state organizations, and links to the actual text of the governing state laws.

A difference between guaranty association protection and the protection e.g. of bank accounts by FDIC, credit union accounts by NCUA, and brokerage accounts by SIPC, is that it is difficult for consumers to learn about this protection. Usually, state law prohibits insurance agents and companies from using the guaranty association in any advertising and agents are prohibited by statute from using this Web site or the existence of the guaranty association as an inducement to purchase insurance(e.g. ). Presumably this is a response to concerns by stronger insurance companies about moral hazard.

Compensation for advisors or salespeople

Deferred annuities, including fixed, equity indexed, typically pay the advisor or salesperson 1 percent to 4 percent of the amount invested as a commission, with possible trail options of 25 basis points to 1 percent. Sometimes the advisor can select his payout option, which might be either 7 percent up front, or 5 percent up front with a 25 basis point trail, or 1 percent to 3 percent up front with a 1 percent trail.

Some firms allow an investor to pick an annuity share class, which determines the salesperson's commission schedule. The main variables are the up-front commission and the trailing commission.

Fixed and Indexed Annuity commissions are paid by the insurance companies the licensed agent represents. Commissions are not paid out of the clients principal

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

City of Irvine Motto: Innovation. Integrity. Professionalism. Flexibility. Responsiveness. Location of Irvine within Orange County, California. ZIP code 92602, 92603, 92604, 92606, 92612, 92614, 92616, 92617, 92618, 92619, 92620, 92623, 92697, 92709, 92710 Area code(s) 714/949 FIPS code 06-36770 GNIS feature ID 1660804 Area notes Sphere of Influence 25.6 miles Misc. Information City flower Lily of the Nile City tree Camphor City insect Western Swallowtail Butterfly City vegetable Asparagus Website http://www.cityofirvine.org/

Irvine is an incorporated city in Orange County, California, United States. It is a planned city, mainly developed by the Irvine Company since the 1960s. Formally incorporated on December 28, 1971, the 69.7 square mile (180.5 km²) city has a population of about 209,806 (as of January 1, 2008). It has annexed in the past an undeveloped area to the north, and has also annexed the former El Toro Marine Corps Air Station, most of which is planned to be converted into the Orange County Great Park.

Because of its good schools, jobs and housing, the city was chosen in 2008 by CNNMoney.com as the fourth best place to live in the United States. In June 2008, the Federal Bureau of Investigation reported that Irvine had the lowest violent crime rate (four homicides, 17 rapes, 50 robberies and 55 aggravated assaults in 2006) among cities in the United States with populations of more than 100,000, and in August 2008 the Census Bureau ranked Irvine as having the seventh highest median income among cities in the United States with populations of more than 65,000.

Irvine is home to the University of California, Irvine (UCI), Concordia University, the Orange County Center of the University of Southern California, and the Irvine campuses of Alliant International University, California State University Fullerton, and Pepperdine University. Irvine Valley College, a community college, is also located in the city.

Irvine is home to a number of corporations, particularly in the technology sector.

A planned city

The layout of Irvine was designed by Los Angeles architect William Pereira and Irvine Company employee Raymond Watson, and is nominally divided into townships called villages. The townships are separated by six-lane streets. Each township contains houses of similar design, along with commercial centers, religious institutions and schools. Commercial districts are checker-boarded in a periphery around the central townships.

Pereira originally envisioned an Atlantis-like circular plan with numerous man-made lakes and the university in the center. When the Irvine Company refused to relinquish valuable farmland in the flat central region of the ranch for this plan, the University site was moved to the base of the southern coastal hills. The design that ended up being used was based on the shape of a necklace (with the villages strung along two parallel main streets, which terminate at University of California, Irvine (UCI), the "pendant") . Traces of the original circular design are visible in the layout of the UCI campus and the two man-made lakes at the center of Woodbridge, one of the central villages.

All streets have landscaping allowances. Rights-of-way for powerlines also serve as bicycle corridors, parks and greenbelts to tie together ecological preserves. The greenery is irrigated with reclaimed water.

The homeowners' associations which govern some village neighborhoods exercise varying degrees of control on the appearances of homes. In more restrictive areas, houses' roofing, paint colors, and landscaping are regulated. Older parts of the Village of Northwood that were developed beginning in the early 1970s independent of the Irvine Company, have the distinction of being a larger village that is not under the purview of a homeowners' association. As a result, homeowners in the older Northwood areas do not pay a monthly village association fee; and its neighborhoods are generally not as uniform in appearance as those in other villages such as West Park and Woodbridge, the latter which, however, generally offer more amenities such as members-only swimming pools, tennis courts, and parks.

In addition to association dues, homeowners in villages developed in the 1980s and later may be levied a Mello-Roos assessment, which came about in the post-Proposition 13 era. For homeowners in these areas, the association dues coupled with the Mello-Roos assessment may add significantly to the cost of living in the city.

The Irvine Ranch played host to the Boy Scouts of America's 1953 National Scout Jamboree. Jamboree Road, a major street which now stretches from Newport Beach to the City of Orange, was named in honor of this event.

The Villages

Rue Rueda Gigante Square in Irvine Spectrum

Each of the villages was initially planned to have a distinct architectural theme.

El Camino Glen College Park The Colony Deerfield (mixed styles) East Irvine El Camino Real (Spanish/Neo-Eclectic) Greentree Irvine Groves Irvine Spectrum (Contemporary/Moroccan) Harvard Square Heritage Fields Laguna Crossing (under construction) Northpark/Northpark Square (Spanish Mission) Northwood (Bungalow, Craftsman) Oak Creek (mixed styles) Old Towne Irvine Orangetree Orchard Hills (Rural Craftsman/Spanish/Tuscan) Parkside Portola Springs (Spanish/Tuscan)

Planning Area 40 (Future Village) Quail Hill (Spanish/Tuscan) Racquet Club The Ranch Rancho San Joaquin (Shed style) Rosegate (Spanish/Tuscan) Shady Canyon (Tuscan Ranch) Turtle Ridge (Tuscan) Turtle Rock (mixed styles) University Hills University Park (California Modern) University Town Center (mixed styles) Walnut (Prairie Style) West Irvine (California Modern) Westpark (Italian Riviera/Mediterranean) The Willows Windwood Woodbridge (Atlantic Coast) Woodbury (Tuscan/Spanish/French) Woodbury East (Spanish)

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

City of Lake Forest, California
Seal
Location of Lake Forest within Orange County, California
Coordinates: 33°38'30"N 117°41'27"W / 33.64167°N 117.69083°W / 33.64167; -117.69083
Country	United States
State	California
County	Orange
Government
- Mayor	Mark Tettemer
Area
- Total	12.6 sq. mi. (32.7 km2)
- Land	12.5 sq. mi. (32.3 km2)
- Water	0.1 sq. mi. (0.3 km2)
Elevation	400 ft (148 m)
Population (2007)
- Total	78,243
- Density	6,274/sq. mi. (2,422.4/km2)
Time zone	PST (UTC-8)
- Summer (DST)	PDT (UTC-7)
ZIP codes	92609, 92610, 92630, 92679
Area code(s)	949
FIPS code	06-39496
GNIS feature ID	1656503
Website	city-lakeforest.com

Lake Forest is a city in Orange County, California, United States. The population was 78,243 as of 2007. With 6,274 inhabitants per square mile (2,422 /km²), it is currently the most densely populated city in South Orange County.

Lake Forest incorporated as a city on December 20, 1991. Since being incorporated, it has expanded its limits to include the communities of Foothill Ranch and Portola Hills. Foothill Ranch and Portola Hills are master planned developments that brought new homes and commercial centers to the Eastern boundary of Lake Forest throughout the 1990s. Lake Forest (along with its neighboring cities Mission Viejo and Irvine) is ranked as one of the safest cities in the country. The private research firm Morgan Quitno ranked Lake Forest as the 15th safest city and another firm later ranked Lake Forest 10th in 2007 in the United States.

The city has two lakes from which the city gets its name. The lakes are man-made, and condominiums and custom homes ranging from large to small line their shores. The Lake Forest Beach and Tennis Club and Sun and Sail Club feature tennis courts, gyms, basketball courts, barbecue pits, volleyball courts, multiple swimming pools, saunas, hot tubs and club houses for social events. The "forest" for which the city is also named lies in the area between Ridge Route, Jeronimo, Lake Forest and Serrano roads, and consists mostly of Eucalyptus trees. It began in the 1900s when a local landowner, Dwight Whiting, planted 400 acres of Eucalyptus groves in the vicinity of Serrano Creek as part of a lumber operation. In the late 1960s, the Occidental Petroleum company developed a residential community in and around the Eucalyptus groves which had long since expanded and grown much more dense.

EL Toro Road Business Corridor Revitalization

El Toro Road at the Interstate 5 Freeway was the epicenter of the Saddleback Valley from the late 1800s to the end of the twentieth century. However, the area gradually deteriorated, and most of the shops closed or moved to other cities. After years of planning, the City has worked with the property owners of some aging strip malls and developed the "Arbor at Lake Forest" commercial district. The new center can now compete with large shopping centers in cities that surround Lake Forest.

Notable Businesses and Organizations

The city is home to the headquarters of eyewear manufacturer Oakley, Inc.; in flight entertainment provider Panasonic Avionics; hard-drive maker Western Digital; telecommunications software developer Greenlight Wireless Corp.; barbecue retailer Barbecues Galore; medical equipment maker Apria Healthcare; and skateboarding companies Sole Technology, Inc., Etnies, and Tilly's; among others. It is also the home of the corporate headquarters for Eagle Community Credit Union, a credit union focused on serving postal and federal employee's who live or work in Orange County. In addition, one of the county's most famous churches and the largest independent church in California, Saddleback Church (pastor, Rick Warren), is located in Lake Forest.

Parks and Education

Lake Forest is also home to two county parks. Whiting Ranch in the eastern part of the city was the site of an infamous mountain lion mauling in 2004 that captured the West Coast news media.

Heritage Hill historical park is home to some of the oldest buildings in the county, including the Serrano Adobe, the old El Toro School House, and St. George's Episcopal Church.

Lake Forest has one high school, El Toro High School. The high school was opened in 1973. It has established itself as one of the top schools in Southern California, along with the other three comprehensive high schools in the Saddleback Valley Unified School District. The mascot is a bull and its teams are known as the Chargers. School colors are blue and gold.

Lake Forest is served by two libraries of the Orange County Public Library.

Geography

Lake Forest is located at 33°38'30"N 117°41'27"W / 33.64167°N 117.69083°W / 33.64167; -117.69083 (33.641642, -117.690733).

According to the United States Census Bureau, the city has a total area of 32.7 km² (12.6 mi.²). 32.3 km² (12.5 mi.²) of it is land and 0.3 km² (0.1 mi.²) of it (0.95%) is water.

El Toro/Lake Forest/Portola is located in the heart of the Saddleback Valley. It is also in the northern section of South Orange County.

It has two man-made lakes identified by the clubhouses on the lakes: the Beach and Tennis Club (Hidden Lakes, formerly Lake I) and the Sun and Sail Club (Lake II).

Demographics

As of the census of 2000, there were 58,707 people, 20,008 households, and 14,745 families residing in the city. The population density was 1,814.8/km² (4,698.8/mi.²). There were 20,486 housing units at an average density of 633.3/km² (1,639.7/mi.²). The racial makeup of the city was 76.02% White, 1.83% African American, 0.50% Native American, 9.70% Asian, 0.20% Pacific Islander, 7.51% from other races, and 4.24% from two or more races. Hispanic or Latino of any race were 18.59% of the population.

There were 20,008 households out of which 39.2% had children under the age of 18 living with them, 59.1% were married couples living together, 10.3% had a female householder with no husband present, and 26.3% were non-families. 19.4% of all households were made up of individuals and 5.1% had someone living alone who was 65 years of age or older. The average household size was 2.89 and the average family size was 3.31.

In the city the population was spread out with 27.0% under the age of 18, 8.0% from 18 to 24, 33.3% from 25 to 44, 23.2% from 45 to 64, and 8.6% who were 65 years of age or older. The median age was 35 years. For every 100 females there were 96.7 males. For every 100 females age 18 and over, there were 93.6 males.

According to a 2007 estimate, the median income for a household in the city was $90,084, and the median income for a family was $100,829. Males had a median income of $52,019 versus $37,100 for females. The per capita income for the city was $28,583. About 3.2% of families and 5.3% of the population were below the poverty line, including 5.0% of those under age 18 and 4.4% of those age 65 or over.

Government & Politics

Marine Corps Air Station El Toro was located one mile (1.6 km) from the city of Lake Forest in the city of Irvine. At one time, El Toro was considered a military town, but the city blossomed independently in the 1980s and 1990s and the base closed in 1999.

Of the 40,352 registered voters in Lake Forest; 25.8% are Democrats and 53.4% are Republicans. The remaining 20.8% either declined to state political affiliation or are registered with one of the many minor political parties. Richard Dixon serves as Lake Forest's mayor and Mark Tettemer is Mayor Pro Tem. The three other city council members are Kathryn McCullough, Marcia Rudolph, and Peter Herzog.

In the state legislature Lake Forest is located in the 33rd Senate District, represented by Republican Dick Ackerman, and in the 70th Assembly District, represented by Republican Chuck DeVore. Federally, Lake Forest is located in California's 48th congressional district, which has a Cook PVI of R +8 and is represented by Republican John Campbell.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

City of Laguna Hills, California
Seal
Location of Laguna Hills within Orange County, California
Coordinates: 33°35'59"N 117°41'58"W / 33.59972°N 117.69944°W / 33.59972; -117.69944
Country	United States
State	California
County	Orange
Government
- Mayor	Randal Bressette
Area
- Total	6.4 sq. mi. (16.5 km2)
- Land	6.3 sq. mi. (16.4 km2)
- Water	0.0 sq. mi. (0.1 km2)
Elevation	371 ft (113 m)
Population (2000)
- Total	31,178
- Density	4,909.8/sq. mi. (1,895.7/km2)
Time zone	PST (UTC-8)
- Summer (DST)	PDT (UTC-7)
ZIP codes	92637, 92653, 92654, 92656
Area code(s)	949
FIPS code	06-39220
GNIS feature ID	1667917
Website	http://ci.laguna-hills.ca.us/

Laguna Hills is a city located in southern Orange County, California Located Off El Toro Road in the northern most portion of the city is the new Laguna Hills Civic Center and City Hall. This area also is home to the Laguna Hills Mall, bringing vast wealth to the small city's finances by having a major mall in its borders. The mall is anchored by Sears, Macy's, and JC Penney, but suffers by being in between the more upscale Shops at Mission Viejo 5 minutes south and the Irvine Spectrum 5 minutes north, both offering more shops in a more modern design. The mall caters primarily to the community of senior citizens, Laguna Woods Village.

Geography

Laguna Hills is located at 33°35'59"N 117°41'58"W / 33.59972°N 117.69944°W / 33.59972; -117.69944 (33.599590, -117.699569).

According to the United States Census Bureau, the city has a total area of 16.5 km² (6.4 mi.²). 16.4 km² (6.3 mi.²) of it is land and 0.1 km² (0.04 mi.²) of it (0.47%) is water.

Demographics

As of the census of 2000, there were 31,178 people, 10,895 households, and 7,942 families residing in the city. The population density was 1,895.7/km² (4,911.1/mi.²). There were 11,303 housing units at an average density of 687.3/km² (1,780.4/mi.²). The racial makeup of the city was 76.83% White, 1.38% African American, 0.44% Native American, 10.20% Asian, 0.15% Pacific Islander, 7.19% from other races, and 3.81% from two or more races. Hispanic or Latino of any race were 16.40% of the population.

There were 10,895 households out of which 37.5% had children under the age of 18 living with them, 61.0% were married couples living together, 8.5% had a female householder with no husband present, and 27.1% were non-families. 21.6% of all households were made up of individuals and 10.0% had someone living alone who was 65 years of age or older. The average household size was 2.82 and the average family size was 3.29.

In the city the population was spread out with 26.2% under the age of 18, 7.3% from 18 to 24, 28.8% from 25 to 44, 25.4% from 45 to 64, and 12.1% who were 65 years of age or older. The median age was 38 years. For every 100 females there were 92.6 males. For every 100 females age 18 and over, there were 89.0 males.

According to a 2007 estimate, the median income for a household in the city was $89,781, and the median income for a family was $102,191. Males had a median income of $59,144 versus $38,761 for females. The per capita income for the city was $36,133. About 3.6% of families and 5.0% of the population were below the poverty line, including 5.3% of those under age 18 and 5.1% of those age 65 or over.

Politics

In the state legislature Laguna Hills is located in the 33rd Senate District, represented by Republican Mimi Walters, and in the 73rd Assembly District, represented by Republican Diane Harkey. Federally, Laguna Hills is located in California's 48th congressional district, which has a Cook PVI of R +8 and is represented by Republican John Campbell.

Emergency service

Fire protection in Laguna Hills is provided by the Orange County Fire Authority with ambulance service by Doctor's Ambulance. Law enforcement is provided by the Orange County Sheriff's Department. There is also the Saddleback Memorial Medical Center, a hospital with an emergency room, where a 14-pound male baby boy was successfully delivered- setting a hospital record- in December of 2008.

Education

Laguna Hills is served by the Saddleback Valley Unified School District. Laguna Hills students attend a variety of high performing elementary schools, and for middle school attend either La Paz Intermediate School or Los Alisos Intermediate School in neighboring Mission Viejo. The city has its own high school, Laguna Hills High School, the smallest school in the district and one of the smallest in south Orange County with under 1,700 students.

Nellie Gail Ranch

The ranch sits on a promontory within the city and is a contrast to the higher density neighborhoods that surround it. It is one of the better-known upscale communities in the state and is not gated. Nellie Gail is a Planned Unit Development of 1407 lots on 1350 acres (5.5 km²) and consists of a mixture of tract and custom houses in an equestrian setting, with homes ranging from 1,700 to more than 10,000 square feet (160 to 930 m²). It is one of only a few communities left in Orange County zoned for large lots and equestrian trails, and joins only Anaheim Hills, Villa Park, and Orange Park Acres in their respective communities that limit the density of the homes in the county .

The community includes several large parks, miles of equestrian trails and arenas, as well as substantial open space with acres of trees.

Nellie Gail's reputation as an upscale California community is softened by its equestrian setting and residential focus, unlike that of the Beverly Hills or Newport Beach. The community also shuns what it perceives as the flashy, commercial "nouveau riche" reputation of other wealthy communities in the area.

The OC Weekly frequently pokes fun at Nellie Gail and Laguna Hills. Its October 19, 2001 issue gave Laguna Hills a tongue-in-cheek "Best of OC" award:

[Laguna Hills has] the tony distinction of having crosswalk buttons set high so ultra-rich Nellie Gail Ranch residents can reach them while on horseback.

The Nellie Gail Ranch has also been mentioned in movies such as "Wild Things" (1998) and even newspaper comics like Bil Keane's "The Family Circus." Such references usually make fun of the wealth of the Ranch's inhabitants. Personal residences have also been featured in advertisements for Lexus and other luxury car brands.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

Laguna Woods Village is an age-restricted community for active mature adults aged 55 and over. The development, formerly known as Leisure World, was developed by Ross Cortese.

Location

Laguna Woods Village is located within the City of Laguna Woods, USA, incorporated in 1999 as Orange County's 32nd city. Laguna Woods Village comprises approximately ninety percent of the City’s 4 square miles (10 km²). Laguna Woods is bordered by Irvine, Lake Forest, Laguna Hills, Aliso Viejo, and Laguna Beach. Aliso Creek roughly bisects the community.

The average residents’ age in Laguna Woods Village is 78.

History

Ross Cortese’s early success in 1961 with Leisure World Seal Beach provided the concept of what would become Laguna Woods Village. Cortese purchased several sites across the nation, including 3,500 acres (14 km²) rural of the Moulton Ranch, located in the Saddleback Valley of southern Orange County, California.

Construction of Laguna Woods Village began in the spring of 1963 with an initial phase of 530 units. The first ten homeowners moved into the community September 10, 1964.

In October 2005 the community formally changed its name to what is now known as Laguna Woods Village, to avoid copyright disagreements with the estate of Ross Cortese over the use of the Leisure World name.

Governance Structure

The governance of the community is organized under the California Non Profit Mutual Benefit Corporation Law. There are four such corporations, three of which are mutual housing corporations and the fourth is the Golden Rain Foundation (commonly called GRF). The housing mutuals are responsible for services directly related to housing and common areas and GRF is responsible for all shared community amenities.

Recreation and Amenities

The community has fourteen guarded gates with a private security department that provides traffic enforcement, patrol service and gate control 24 hours a day. Housing consists of one and two bedroom cooperatives as well as one, two or three-bedroom condominiums and single family homes. Recreation opportunities include five swimming pools, and 27-hole 12-par golf course, a nine-hole course, two fitness centers, ten tennis courts, four paddle tennis courts, seven clubhouses, woodworking and art studios, a sewing room, lawn bowling courts, shuffleboard courts, ping-pong tables, pool tables and other amenities.

There are over 200 official clubs in Laguna Woods Village. Dozens of classes and activities are organized by the community’s recreation department. In addition, nearby Saddleback College offers over 200 emeritus classes within Laguna Woods Village.

Management

Laguna Woods Village is managed by Professional Community Management, Inc.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

City of Laguna Woods, California
Seal
Location of Laguna Woods within Orange County, California
Country	United States
State	California
County	Orange
Government
- Mayor	Robert Bouer
Area
- Total	3.2 sq. mi. (8.3 km2)
- Land	3.2 sq. mi. (8.3 km2)
- Water	0.0 sq. mi. (0.0 km2)
Elevation	381 ft (116 m)
Population (2000)
- Total	16,507
- Density	5,158.5/sq. mi. (1,991.7/km2)
Time zone	PST (UTC-8)
- Summer (DST)	PDT (UTC-7)
ZIP codes	92653-92654
Area code(s)	949
FIPS code	06-39259
GNIS feature ID	1848119
Website	http://www.lagunawoodscity.org/

Laguna Woods is a city in Orange County, California, United States. The population was 16,507 at the 2000 census with a median age of 78. About 90% of the City consists of Laguna Woods Village, a retirement community, formerly known as Leisure World. Incorporation efforts in the late 1990s were largely driven by the need for residents to have a stronger voice against the prospective construction of an international airport at the nearby decommissioned Marine Corps Air Station El Toro. The airport proposal was ultimately defeated and the land in question has been tabbed for development as the Orange County Great Park.

Geography

Laguna Woods is located at 33°36'33"N 117°43'58"W / 33.60917°N 117.73278°W / 33.60917; -117.73278 (33.609165, -117.732791).

According to the United States Census Bureau, the city has a total area of 8.3 km² (3.2 mi.²), all land.

It is bordered by Laguna Hills on the north and east, Aliso Viejo on the south, Laguna Beach on the southwest, and the Crystal Cove State Park on the northwest.

Demographics

As of the census of 2000, there were 16,507 people, 11,699 households, and 3,989 families residing in the city. The population density was 1,991.7/km² (5,158.4/mi.²). There were 12,650 housing units at an average density of 1,526.3/km² (3,953.1/mi.²). The racial makeup of the city was 96.12% White, 0.25% Black, 0.12% American Indian, 2.50% Asian, 0.05% Pacific Islander, 0.19% from other races, and 0.78% from two or more races. Hispanic or Latino of any race were 2.06% of the population.

There were 11,699 households out of which 0.4% had children under the age of 18 living with them, 30.7% were married couples living together, 2.8% had a female householder with no husband present, and 65.9% were non-families. 62.2% of all households were made up of individuals and 57.5% had someone living alone who was 65 years of age or older. The average household size was 1.40 and the average family size was 2.06.

In the city the population was spread out with 0.6% under the age of 18, 0.2% from 18 to 24, 2.2% from 25 to 44, 10.6% from 45 to 64, and 86.4% who were 65 years of age or older. The median age was 78 years. For every 100 females there were 51.8 males. For every 100 females age 18 and over, there were 51.6 males.

The median income for a household in the city was $30,493, and the median income for a family was $46,889. Males had a median income of $56,563 versus $35,188 for females. The per capita income for the city was $32,071. About 2.6% of families and 6.0% of the population were below the poverty line, including none of those under age 18 and 5.8% of those age 65 or over.

Emergency services

Fire protection in Laguna Woods is provided by the Orange County Fire Authority with ambulance service by Doctor's Ambulance. Law enforcement is provided by the Orange County Sheriff's Department. Security services provided by Laguna Woods Village Security.

Politics

In the state legislature Laguna Woods is located in the 33rd Senate District, represented by Republican Dick Ackerman, and in the 70th Assembly District, represented by Republican Chuck DeVore. Federally, Laguna Woods is located in California's 48th congressional district, which has a Cook PVI of R +8 and is represented by Republican John Campbell.

STANDARD DISCLOSURE: The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, MA, MD, NC, PA, VA, WA. Securities and advisory services offered through LPL Financial - Member FINRA / SIPC. CD's are FDIC insured and offer a fixed rate of return if held to maturity. Annuities are not FDIC insured. Annuities are long-term, tax-deferred investment vehicles design for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawl. Withdrawals made prior to age 59 1/2 are subject to 10% IRS penalty tax. Surrender charges apply. Guarantees are based on the claims paying ability of the issuing insurance company.

Orange County is a county in Southern California, United States. Its county seat is Santa Ana. According to the 2000 Census, its population was 2,846,289, making it the second most populous county in the state of California, and the fifth most populous in the United States. The state of California estimates its population as of 2007 to be 3,098,121 people, dropping its rank to third, behind San Diego County. Thirty-four incorporated cities are located in Orange County; the newest is Aliso Viejo.

Unlike many other large centers of population in the United States, Orange County uses its county name as its source of identification whereas other places in the country are identified by the large city that is closest to them. This is because there is no defined center to Orange County like there is in other areas which have one distinct large city. Five Orange County cities have populations exceeding 170,000 while no cities in the county have populations surpassing 360,000. Seven of these cities are among the 200 largest cities in the United States.

Orange County is also famous as a tourist destination, as the county is home to such attractions as Disneyland and Knott's Berry Farm, as well as sandy beaches for swimming and surfing, yacht harbors for sailing and pleasure boating, and extensive area devoted to parks and open space for golf, tennis, hiking, kayaking, cycling, skateboarding, and other outdoor recreation. It is at the center of Southern California's Tech Coast, with Irvine being the primary business hub.

The average price of a home in Orange County is $541,000. Orange County is the home of a vast number of major industries and service organizations. As an integral part of the second largest market in America, this highly diversified region has become a Mecca for talented individuals in virtually every field imaginable. Indeed the colorful pageant of human history continues to unfold here; for perhaps in no other place on earth is there an environment more conducive to innovative thinking, creativity and growth than this exciting, sun bathed valley stretching between the mountains and the sea in Orange County.

Orange County was Created March 11 1889, from part of Los Angeles County, and, according to tradition, so named because of the flourishing orange culture. Orange, however, was and is a commonplace name in the United States, used originally in honor of the Prince of Orange, son-in-law of King George II of England.

Incorporated: March 11, 1889 Legislative Districts: * Congressional: 38th-40th, 42nd & 43 * California Senate: 31st-33rd, 35th & 37 * California Assembly: 58th, 64th, 67th, 69th, 72nd & 74 County Seat: Santa Ana County Information: Robert E. Thomas Hall of Administration 10 Civic Center Plaza, 3rd Floor, Santa Ana 92701 Telephone: (714)834-2345 Fax: (714)834-3098 County Government Website: http://www.oc.ca.gov

CITIES OF ORANGE COUNTY CALIFORNIA:

Noteworthy communities Some of the communities that exist within city limits are listed below: * Anaheim Hills, Anaheim * Balboa Island, Newport Beach * Corona del Mar, Newport Beach * Crystal Cove / Pelican Hill, Newport Beach * Capistrano Beach, Dana Point * El Modena, Orange * French Park, Santa Ana * Floral Park, Santa Ana * Foothill Ranch, Lake Forest * Monarch Beach, Dana Point * Nellie Gail, Laguna Hills * Northwood, Irvine * Woodbridge, Irvine * Newport Coast, Newport Beach * Olive, Orange * Portola Hills, Lake Forest * San Joaquin Hills, Laguna Niguel * San Joaquin Hills, Newport Beach * Santa Ana Heights, Newport Beach * Tustin Ranch, Tustin * Talega, San Clemente * West Garden Grove, Garden Grove * Yorba Hills, Yorba Linda * Mesa Verde, Costa Mesa

Unincorporated communities These communities are outside of the city limits in unincorporated county territory: * Coto de Caza * El Modena * Ladera Ranch * Las Flores * Midway City * Orange Park Acres * Rossmoor * Silverado Canyon * Sunset Beach * Surfside * Trabuco Canyon * Tustin Foothills

Adjacent counties to Orange County Are: * Los Angeles County, California - north, west * San Bernardino County, California - northeast * Riverside County, California - east * San Diego County, California - southeast

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