Life Insurance is an incredible tool when used in the right way for the right purposes. Long Term Care Insurance can create a peace of mind for the caregivers and families that is hard to explain if you haven’t been there.
But for some reason, some people don’t like insurance. Won’t consider it. Why?
A couple of reasons come to mind:
1. No one wants to think about the bad things that happen that trigger the need for insurance;
2. The monthly premiums can disrupt a family’s budget;
3. With some types of insurance, you may not get your premiums back if you don’t need the coverage; and
4. Sometimes you simply can not get coverage due to age or health.
When you look at Long Term Care protection, there are options for people who don’t choose to buy insurance for whatever reason, or who can’t buy insurance due to age or health considerations. Let’s look at little closer.
First, consider the family that objects to LTC Insurance because the premiums “are gone if you don’t make a claim”. (Strangely, these same people do not object when they don’t have to make a claim on their auto, health or home insurance.)
For them, I ask, “How would you feel if I showed you (1) LTC Insurance that would return your premium if you did not make a claim, or (2) Permanent Life Insurance that allows you to tap into the death benefit for Long Term Care expenses, or (3) Asset based options that do not have monthly premiums and can guarantee a lifetime income stream to help cover LTC expenses?”
I have been involved in many “Medicaid Meetings”. These are very sad times. I have these meetings with the children of family members who have been diagnosed with something that is going to put them into some type of a Long Term Care program. It is too late for insurance.
Now, thanks to some unique products offered by excellent companies, we may be able to avoid Medicaid and the dreaded “Spenddown” that can wipe out a life savings.
The first criterion is that they have enough assets to work with. The amount determines how much guaranteed cash flow that will paid out for life. If there is more than enough to cover his or her expenses, it may be possible to also recover all or a part of the initial single premium that was paid.
Whatever the mindset that your family may have regarding insurance to protect your lifestyle, there are options that can provide solutions for the growing, critical problems of outliving your Retirement Nest Egg, including if a loved one needs Long Term Care.
Monday, December 3, 2007
Sunday, December 2, 2007
The Stock Market Roller Coaster Rides Again
I am getting too old for roller coaster rides. And if you are within 15 years of planned retirement, you are, too.
Decades ago, when the real estate market, dragging hundreds of savings and loan associations with it, came crashing down thanks to the ’86 Tax Act, a financial salesman I knew said to me, "Well, we'll just have to wait for a whole new group of suckers".
That was crass and nasty, but contained a measure of truth. He understood that financial advisers have a hard time convincing their clients to seek financial goals in logical, ways. And too often they will gravitate to the “hot product” as a better solution. Sadly, by the time a “good investment” becomes a “hot product”, the latecomers are the ones who “buy high/sell low”. And the client becomes angry, frustrated and disenchanted.
By the late ‘90s, the stock market was roaring. Outrageous gains were being made by those who were in the market. On TV the talking heads stared right into the cameras and confidently told us all that there was no reason to think that the market would stall out any time soon.
Back then a number of friends who were planning to retire soon are still working eight years later, thanks to that Nest Egg Meltdown. That should have never happened and could have been avoided.
The market reached its peak and could not sustain itself. Far too many watched the market – and their nest eggs - tumble, bravely hanging on until their portfolios settled back where they had been 10 years earlier. Then they sold.
And they traded in their portfolio for a nice, steady, fixed income investments which , after taxes, barely kept up with inflation.
So, let's review their retirement planning strategy:
They bought into the hot market when stocks were high; sold when they were low; and then placed their future retirement nest egg where it would “safely” lose value. And you wonder why people don’t trust financial advisors?
Let's jump to 2005. My next door neighbors sold their home for about three times what they had purchased it for three years earlier.
At the time they sold, I was working with a couple in their early forties who were in a perfect position to take a very healthy retirement nest egg and place it so that it would continue a healthy growth in the market and still avoid meltdown due to stock market downturns. When the time came to implement this strategy, they backed out because a friend showed them how lucrative the real estate market was.
But they are young enough to recover, hopefully.
As a result of the real ester “correction”, the stock markets are bouncing up and down – not sure how to handle tumbling real estate values and a tightening credit market. The Real Estate Boom That Would Never End has turned into another Nest Egg Meltdown.
So, what is the next hot, sexy, investment product to energize a market that is simply trying to build up its retirement nest egg?
When you find it, run. Run like crazy in the opposite direction.
The Moral:
There is no perfect investment or investment vehicle for you. And there is no magic pill either. All there is is careful planning, knowing your goals, getting a grip on your resources, and selecting the best choice of strategies/solutions.
And stick with it, with annual reviews.
“Gee, Tom that sounds nice, but can’t you be more specific?”
OK, follow these three tips…
(1) Let the professionals work for you. Major investment company fund managers get paid big bucks to select what’s best for every different client scenario. They are not perfect, but, whereas the market has averaged over 10% growth each year since 1929, the individual investors earned just over 3% a year
(2) Do not be afraid of investment programs that offer guarantees that the dollars you invest will always be there no matter what the market does, and further guarantees a set level of income if you choose to tap into those funds for retirement. These are not the perfect solution for everyone, but when they fit, they can fit very nicely. And finally…
(3) Call me to explain the first two.
Forget the Space Mountain roller coaster ride. I think I’ll go ride the Trolley down Main Street.
Decades ago, when the real estate market, dragging hundreds of savings and loan associations with it, came crashing down thanks to the ’86 Tax Act, a financial salesman I knew said to me, "Well, we'll just have to wait for a whole new group of suckers".
That was crass and nasty, but contained a measure of truth. He understood that financial advisers have a hard time convincing their clients to seek financial goals in logical, ways. And too often they will gravitate to the “hot product” as a better solution. Sadly, by the time a “good investment” becomes a “hot product”, the latecomers are the ones who “buy high/sell low”. And the client becomes angry, frustrated and disenchanted.
By the late ‘90s, the stock market was roaring. Outrageous gains were being made by those who were in the market. On TV the talking heads stared right into the cameras and confidently told us all that there was no reason to think that the market would stall out any time soon.
Back then a number of friends who were planning to retire soon are still working eight years later, thanks to that Nest Egg Meltdown. That should have never happened and could have been avoided.
The market reached its peak and could not sustain itself. Far too many watched the market – and their nest eggs - tumble, bravely hanging on until their portfolios settled back where they had been 10 years earlier. Then they sold.
And they traded in their portfolio for a nice, steady, fixed income investments which , after taxes, barely kept up with inflation.
So, let's review their retirement planning strategy:
They bought into the hot market when stocks were high; sold when they were low; and then placed their future retirement nest egg where it would “safely” lose value. And you wonder why people don’t trust financial advisors?
Let's jump to 2005. My next door neighbors sold their home for about three times what they had purchased it for three years earlier.
At the time they sold, I was working with a couple in their early forties who were in a perfect position to take a very healthy retirement nest egg and place it so that it would continue a healthy growth in the market and still avoid meltdown due to stock market downturns. When the time came to implement this strategy, they backed out because a friend showed them how lucrative the real estate market was.
But they are young enough to recover, hopefully.
As a result of the real ester “correction”, the stock markets are bouncing up and down – not sure how to handle tumbling real estate values and a tightening credit market. The Real Estate Boom That Would Never End has turned into another Nest Egg Meltdown.
So, what is the next hot, sexy, investment product to energize a market that is simply trying to build up its retirement nest egg?
When you find it, run. Run like crazy in the opposite direction.
The Moral:
There is no perfect investment or investment vehicle for you. And there is no magic pill either. All there is is careful planning, knowing your goals, getting a grip on your resources, and selecting the best choice of strategies/solutions.
And stick with it, with annual reviews.
“Gee, Tom that sounds nice, but can’t you be more specific?”
OK, follow these three tips…
(1) Let the professionals work for you. Major investment company fund managers get paid big bucks to select what’s best for every different client scenario. They are not perfect, but, whereas the market has averaged over 10% growth each year since 1929, the individual investors earned just over 3% a year
(2) Do not be afraid of investment programs that offer guarantees that the dollars you invest will always be there no matter what the market does, and further guarantees a set level of income if you choose to tap into those funds for retirement. These are not the perfect solution for everyone, but when they fit, they can fit very nicely. And finally…
(3) Call me to explain the first two.
Forget the Space Mountain roller coaster ride. I think I’ll go ride the Trolley down Main Street.
Nine Questions to Ask Your Parents
Estate planning, retirement planning, and long-term care planning (a.k.a. “ my life") are very, very touchy discussion subjects. Getting the information needed to properly plan is not easy - even (especially?) for families. Talk about trying to get someones attention! But the sooner we "bite the bullet" and have a serious family sit-down, the better off you will be. Eventually parents and kids must talk about the inevitable.
A way to "break the ice" and make it easier is to start with a Checklists. Children, you don't want to ask and your parents don't want you to ask. But it's time you put get some answers. Here are nine questions you need to ask your parents:
1. "What types of insurance do you have?" You need to find out what medical coverage, long- term care coverage, and life insurance that your parents have with the name of each provider. Contract numbers would be a huge help.
2, "How much money (cash and investments) do you have?" (I’d love to be around to see the look in their eyes when you ask THAT one).
3. "Do you think you will need financial support in the future?" Let's face it, the answer will probably be "no, we'll be OK", so, you may have to delve deeper into that.
4. "Do you have a complete list of all your accounts, passwords, financial institutions, and phone numbers for all advisers?" And, of course...Where is that list?
5. "Where are your documents (will, trust, advance directives, insurance policies, account statements) kept?" Hopefully with the above list.
6. “Are your wills and advance directives up to date?" As for the wills, you are looking for such issues as deceased persons nominated to be Personal Representative, provisions for young children who are now grown up adults, a change in desired beneficiaries or method of distributionto them.
Advance Directives (Living Will, Health Care Surrogate Designation, Durable Power of Attorney) should be updated every several years just so they are "fresh". It's not really a legal requirement, but it makes doctors and bankers happy.
8. "Are the beneficiaries on your insurance policies, qualified plans and annuities the way you want them?" This is a critical question to help reduce or eliminate the need for Probate.
9. "Do your other investments (bank accounts, savings accounts, CDs, mutual funds) have the proper Joint Tenancy or Payable on Death provision with the remainderman that you want?" This is the other critical question to help reduce or eliminate the need for Probate to let things pass as seamlessly as possible.
This is vital information that can help smooth the path in the future, in the case of serious health issues or the death of a loved one. Again this week, I had a call from a client who could not find "anything" since a parent died a short time ago. This can result in more than frustration and confusion. It can mean additional time and legal costs to settle the estate.
These are not the easiest questions to ask or to answer. However, sometimes you just have to do what you have to do. But I still want to see the look in their eyes when you ask much money they have.
- Tom Willoughby
News Item: Chicago Tribune 8/4/07. Children Outsourcing Parents to India
We’ve all seen the bumper sticker that says, “Be Nice to Your Children, They Get to Choose Your Nursing Home”. Believe it.
A recent story in the Tribune cites an 89 years old woman with advanced Parkinson’s disease who receives daily massages, physical therapy and 24 hour help in transference and bathroom assistance, for just over $15 a day. In the USA, that would be more like $18 to $20 an hour.
Add to that the expense of drugs – about 20% of those in this country – and the numbers look pretty good. Plus the cost of “staff” (wouldn’t you love to have “staff”?) is so low that retirees – even those needing long term care - can actually bank some of their Social Security checks!
With nursing home costs averaging over $6,000 a month (and climbing rapidly) in the USA and home health care expenses that exceed that amount if 10 or more hours of care a day is required, people are seeking other solutions.
Too many families are still looking desperately to Medicaid to help them. It is probably not a good idea to count on this in the future. A recent study shows that only 7% of the all the Medicaid recipients are receiving benefits for Long Term Care. The vast majority are receiving assistance for poverty programs – not for Long Term Care.
But those 7% LTC recipients actually cost the state and federal governments over 54% of the Medicaid budget! Clearly, Medicaid, as we know it, can not continue without bankrupting our nation.
Moving to a foreign countries is a solution, I guess. One friend is really planning to retire to Thailand, but he already has children there who are missionaries. Another plans to use St Kitts as his “Long Term Care Solution”. But he, too, has family there.
Thanks, but no thanks.
More and more families are looking to Long Term Care Insurance, or asset based LTC solutions. Personally, I would prefer this solution to being shipped off to India, or Thailand, or St Kitts.
Not that I have anything against these place, but do they have pizza? Or UCF and U of Toledo football games on TV? Probably not.
A recent story in the Tribune cites an 89 years old woman with advanced Parkinson’s disease who receives daily massages, physical therapy and 24 hour help in transference and bathroom assistance, for just over $15 a day. In the USA, that would be more like $18 to $20 an hour.
Add to that the expense of drugs – about 20% of those in this country – and the numbers look pretty good. Plus the cost of “staff” (wouldn’t you love to have “staff”?) is so low that retirees – even those needing long term care - can actually bank some of their Social Security checks!
With nursing home costs averaging over $6,000 a month (and climbing rapidly) in the USA and home health care expenses that exceed that amount if 10 or more hours of care a day is required, people are seeking other solutions.
Too many families are still looking desperately to Medicaid to help them. It is probably not a good idea to count on this in the future. A recent study shows that only 7% of the all the Medicaid recipients are receiving benefits for Long Term Care. The vast majority are receiving assistance for poverty programs – not for Long Term Care.
But those 7% LTC recipients actually cost the state and federal governments over 54% of the Medicaid budget! Clearly, Medicaid, as we know it, can not continue without bankrupting our nation.
Moving to a foreign countries is a solution, I guess. One friend is really planning to retire to Thailand, but he already has children there who are missionaries. Another plans to use St Kitts as his “Long Term Care Solution”. But he, too, has family there.
Thanks, but no thanks.
More and more families are looking to Long Term Care Insurance, or asset based LTC solutions. Personally, I would prefer this solution to being shipped off to India, or Thailand, or St Kitts.
Not that I have anything against these place, but do they have pizza? Or UCF and U of Toledo football games on TV? Probably not.
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