Baby Boomers: Retirement or Survival?

I recently spoke with a couple looking for life insurance to protect their mortgage. They had just completed a refinance on their home for a new 30 year term. As I was taking down information from this woman, I asked her for her birthday. I believe I gasped when she told me the year she was born. 1927! Yes, you can refinance a house at the age of 84. She was calling me from her office where she works to supplement income for her and her husband. Let me just tell you: If you can afford the payment for $100,000 in life insurance at age 84, you could afford to pay off your house.

This story illustrates everyone’s greatest fears in retirement. Scraping by. Refinancing to afford payments. Fearing death because our spouse might become homeless. Having no money to pay for a funeral. And working a job in our 80’s!

Startling fact: Almost half of all Baby Boomers will not have sufficient funds to cover basic needs and health care cost during retirement.

Most people are just in denial of their financial situations. You cannot make $50,000 a year and retire with $50,000 in the bank. These numbers don’t add up. A Boomer couple age 65 can expect at least one person to live to age 88. That’s $1,150,000 of money you will spend at the same rate in retirement. Well what about Social Security you say? At $50,000 a year at current age 55 you can expect around $1,385 a month. That will cover $386,400 of your $1,150,000 needed. Are these numbers adding up yet? You still need $763,600 to continue at the same pace in retirement.

Even those of us that save for retirement usually try to amass as large of a pile that we can and then eat away at pieces of the pile over the years. But what happens if you live to 95? What if you need some help with a trip to the restroom? We all love the idea of Social Security. A monthly check that never stops until you are gone. There is a private version of what SS does called annuities. Annuities are a retirement tool that protects us from ourselves. Most people who do everything right and save what they think is needed for retirement can still run out of money. My grandma is a great example. My grandfather retired from Phillips 66 with plenty to supply their needs, but my grandma had nothing when she passed away.

As you approach retirement, take a chunk of your money and put it into and annuity. Consider it gone. You won’t have that piece of your retirement anymore, but it will be a monthly check that pays out until the day you die. Even if have only $50,000 heading into retirement I might put it all in an annuity. You could spend the $50,000 in a year or two, but if it were stretched would last the rest of your life. Consider annuities as part of your retirement. They are safe and give you many options on payouts.

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It Wasn’t Raining When Noah Built the Ark

With all the recent tornadoes, talks of rapture, and nuclear reactors failing: one is often led down a thought-path where our own end is visualized. Who will miss us? Will our kids be OK? How will things continue without me? This is not a bad way of thinking. I believe it is a good thing to often examine if our lives are making the difference we want and if we are the person we enjoy being. Socrates was the one who said, “An unexamined life is not worth living.” How true is that.

Through my vocation I talk with so many who people who wished they had done it different. Sitting across from the 70 year old lady who is so worried about passing headache onto her children. Filling out a life insurance application with the son of an 82 year old who has to have her 3 kids pool money together for her funeral costs. Last week I sat with an attorney who has a rare condition that came on suddenly 6 months ago. He knows he will be on disability and out of work for possibly long periods of time in the future, but now it’s too late to apply for disability insurance. Being in his mid-30’s, that is over 30 years of income protection he will never be able to get.

Will your children suffer the frustration and pain of not only loosing you, but having to pull out the credit cards to see you off? Or, will they not have to worry about it and just be able to miss you? We all know we are going to die some day right? I didn’t see anyone raptured yet. This attorney I met with never thought he would have any kind of disability. He’s not even 35 yet. Well, what is he going to do when this incurable disease rears its ugly head at any random time? What can he do except save as much money as he can now and pray that this thing doesn’t affect him again.

It wasn’t raining when Noah built the Ark. He was told the rains would come so he got prepared for the season. Are you prepared? I sure am. No one is guaranteed a tomorrow. And definitely not guaranteed a perfect tomorrow.

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Filling the Generation Gap

As my generation is getting into their 30’s and 40’s, we are having to deal with concerns about our parents’ health and financial well-being. Dealing with cancer, health problems, money problems, and estate issues. The Boomer generation (our parents) were taught by their parents (the beloved WWII generation) not to talk about money. And so that is how it has been. Never talk to your kids about your financial situation and kids are never to ask their parents how much money they have.

In my own situation, this made it difficult not knowing the lack of preparation my parents did before my father passed away from cancer. I had little idea the poor financial state my parents were in or the fact that my father had only $15,000 in life insurance. To make it all even more difficult, we split the payment on a house we lived in with my parents at the time. Needless to say, it was hard enough when my dad was gone. The financial strain really didn’t help. I’m not sure what we would have done had I known certain facts.

So, if you are finding yourself in a situation where you have no idea the current state of your parents’ affairs, then you’re not alone. Maybe it’s time to sit down and have a little talk. More for your benefit than theirs because they won’t be here. They will be gone and you will be left trying to find documents that you have no idea if they even exist. Here is a list of things to sit down and talk to your parents about. Write them down so you don’t forget and tell them that you need to know these things so that their financial legacy will be taken care of the way they want it. It will keep you from getting those big scary surprises also.

Financially:

1. Do you have a trust, a will, or a living will? Make sure it is up to date.
2. Do you have any kind of life insurance? Where is the policy? (They may have more or less than they think) Check.
3. Do you have an accountant, lawyer, financial guy? Get names, numbers. If yes, go meet with them at least once.
4. Checking, Savings accounts? Get names, account numbers.
5. Are your beneficiary designations on documents up to date? Probably not.
6. Do you have any long-term care insurance? Read policy with them to check.
7. Do you have any CD’s, Investments, stocks, bonds, mutual funds? Get account numbers, passwords.

Health:

1. Do you have any health issues I need to know about?
2. What is your doctor’s name, address, phone #?
3. Who would you like to live with if things go south?
4. Are you taking medications? What? Amounts? Doctor that prescribed?
5. What is your health insurance? Look at policy to get phone numbers, policy #.
6. Do you have a power of attorney? Who?

Funeral:

1. Did you already plan for your funeral? Plot, service, cremated or buried?
2. Do you have enough life insurance or cash to pay for it? Maybe a good time to talk about pre-planning.

This doesn’t have to be a weird conversation. Just tell them that you don’t want any big surprises when they are gone. If they are in ailing health, they will usually be willing to have the conversation. Do yourself and your family a favor and get it done.

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Where is the absolute Best return on your money?

Where is the absolute best place to put money where you have almost no risk of losing your principal and huge guaranteed return? Sounds like a Facebook add you can click on over to the right doesn’t it. Who clicks on those by the way? Let me go through an example of someone I recently worked with and how he grew the money he wanted to leave to his wife and children by leaps and bounds.

I will call him John for example’s sake. John is 61 years old and he wanted to leave $100,000 to his wife and children when he passed away. He had life insurance through the police department, but he was retired now and his $10,000 whole life policy wasn’t anywhere near that $100,000 mark. I showed John how he could pay $155.75 a month into a universal life policy and it would give him that $100,000 benefit he was looking for. That’s not too bad. The best part comes when you look at what he gets for his money though.

These details are where you will see the great value in life insurance. If John lives to age 100, he would have only paid $72,896 for the $100,000 left to provide for his family. That’s over a 1.5% compounded interest earning on the money paid in, but most people don’t live to 100. If he lived to age 90, the money would have had to earn almost 3.9% fixed to grow to $100,000. The current life expectancy for a male is 76.5 years. Not to be bleak, but he would have paid in less than $29,000 and his family will receive $100,000. Which would be the equivalent of earning over 13.5% fixed return on your investment elsewhere?

Yes $155.75 is a large amount to pay for many people in John’s shoes. I know some people who talk with their children about paying a portion of the premium payments. What if you sat down with your children and asked them how much money they wanted you to leave them? Well they may be able to help you leave them more. The keys to leaving more to children with life insurance are simple: Start as young as possible, get in good health, and ask the kids if they want to come on board if you aren’t in a position to pay into a policy. Please don’t wait until you are 75 to start looking at your financial legacy. Be responsible and put a plan in place when you are younger. That will give you some room to tweak your objectives along the way as your needs change.

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Keep the Change!

In a time where so many are struggling, why are we so reluctant to change? Individuals are hurting. Businesses are hurting and governments can’t pay their bills either. Most people are stuck in one way of doing things when it comes to money and spending. So why are we unwilling to do things differently than they’ve been done on the past?

Stubborn. Lazy. Not willing to put in any extra effort. Or maybe we just plain don’t realize there is a better way out there. Dave Ramsey is a millionaire. Why? Because he tells people how to get rich and where to invest? No. He simply shows you a different way to structure your finances.

First of all: how many people do you know have decided to price shop for their car and home insurance? Not many. A friend of mine has rental properties and he saved over $10,000 a year just by switching his insurance to a different company. Now that’s a lot, but would you be willing to spend a couple hours to save $500 a year? What about $1,000? Progressive reminds us constantly that car insurance rates will vary greatly from one company to the next. So, why haven’t you looked into it? You did last year. Well why don’t you check again. Rates are constantly on the move.

Investing is a tough topic because everyone has their own opinion. If you haven’t looked into no-load mutual funds, you should. You pay no commission to anyone and they have a low annual fee. Putting your money in individual stocks should be a hobby, not your retirement account. If you left a job, move your retirement money now. Put it in a no-load fund with Vanguard or another big company with low fees. If you have over $25,000, you may want to put it in a managed account, but still not necessary. Whatever you do don’t stop saving for retirement.

Health insurance rates are definitely going up again next year, so why not check now for yourself or your business what rate you could get locked into for the next year. The majority of the companies I speak with aren’t willing to even look into different options like high deductible plans or optional benefits. Even with the notion of saving $50-$100 an employee a month isn’t enough for most people to look into changing anything. Most people say, “Call me back next year. I don’t want to deal with it right now.” Are you sure? Even if you spend $25,000 more for the same coverage if I call you back next year?

So, my point is this: explore your options! Don’t keep doing business this way because you’ve done it the same way for years. Things have changed. The same business models don’t work like they used to and we can’t keep spending like we still are. Spend a few hours on saving yourself some money. It will pay you a lot more than your job probably does.

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Saving Money Through Insurance

In a time when we are all scraping the bottom of the barrel to survive, why on earth would we worry about insurance? Normally we take care of the insurances that we are required by law to have and when we are financially sound, get the “extras”. So how am I saving money? Let me show you a couple of ways to save money on all the major types of insurance.

Most of the major insurance companies compete pretty hard for your car and house insurance. Shop around and see what could save you a lot of money. Insurance is one of those things you can switch instantly in most cases, so check prices frequently to see if a company you looked at before has gone down in price now. Yes you do get what you pay for even with insurance, but all the major companies have different claims experience. This means one company might be cheaper for you, but not for someone else depending on your specifics. Don’t buy from the company that has only been around a few years, or advertises only after 11:00pm. They will probably not have good customer service.

Health insurance is going to go up again next year, so run some prices now and try to get locked in if you have an individual policy. Most people have insurance through their jobs. If you are a business owner, there are a lot of options aside from just getting more quotes. You can put in place a bridge program that allows you to have a higher deductible plan. The bridge program will pay for any deductible amount you choose up to $3,000 and reduce the cost of your insurance by having a high deductible. If you choose to cut benefits altogether, you can offer optional benefits that are often deducted pre-tax. This gives your employees minimal coverage, but reduces your payroll taxes at the same time. You might say, “I’m just a little guy and can’t do anything about it.” Get to know your HR person. Suggest some of these things to them. Every single company I meet with had no idea they had these options available.

Now I come to optional insurances:life, disability, and long-term care. Insurances that are not required, but the events they insure devastate a family’s financial well-being. Could you afford to retire today? If you don’t have disability insurance and get in an accident, you just involuntarily retired. You probably don’t have long-term care insurance either, so your spouse also just retired. If the bread winner passes away, what happens to the ones left without their income? Life, disability, and long-term care insurance are critical in times of financial strain because of what could happen without them. I hear stories every day of people who waited just a little too long to decide on that life insurance policy. The way our society is setup does not allow for individuals to go without life insurance. Most of us would probably carry car insurance even if it wasn’t required. If you do have a life insurance policy that you bought several years ago, check the newest rates. Rates are low right now and you can switch policies at any time.

My advice in these times of financial strain: Check and recheck your insurance to make sure you have the companies you want, the price you can live with, and the coverage that you can sleep at night if anything should happen. Yes God will provide. He has provided you a way to support your family if anything bad happens. It is called insurance and is unwise to go without.

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The Truth About Disability Insurance

Most people think disability insurance is that little extra benefit at work that they will never use and aren’t even sure how it works. Disability Insurance(Income Protection) is the most crucial, overlooked insurance you can purchase. Dave Ramsey says, “Some of the saddest financial situations I’ve seen are disabilities–not death.”

In my opinion, everyone should carry some kind of disability insurance, but those making over $50,000, or with a high level of schooling should definitely have some. If you are in a car wreck, crash your bike, or get a sickness that keeps you from working, disability will pay you a portion of what you were making at your job. The amount is usually 60% of your income, but can vary if you have it through your employer.

What good is 60% of my income? Well, if you have a personal policy, that 60% comes to you tax-free and is calculated from 60% of your gross income. It can sometimes be up to 75% depending on certain factors. The problem comes when you carry a policy from work. Your company most likely pays the premiums on the policy tax-free, so the benefit to you is taxed as regular income. How are you going to save for retirement, or help anyone else if you are scraping by on 30-50% of your previous income? You can definitely get a small personal policy to fill in the gap if you choose.

We always insure inanimate objects like our car or house. If we are wise, we will include some life insurance in there also. Why would you not insure the biggest asset you have? Your ability to work. A 30 year old is 12 times more likely to become disabled than pass away by age 65. What about Social Security during a disability? Half of the people that apply are turned down. If you do get Social Security, it will most likely be very small. When my dad had cancer, Social Security gave him $2,000 a month less than what he would have received from a disability policy.

Here are the facts:

• 30% of all Americans entering the workforce today will become disabled before retirement.
• 62% of all personal bankruptcies in 2007 were due to an inability to pay medical expenses.
• $1,004 is the average monthly benefit paid by Social Security.
• 90% of disabling accidents and illnesses are non-work related.

Do your family a favor and check what kind of disability policy you have at work. If you don’t have any, it is usually around 1-3% of your yearly income depending on your occupation. Most people believe it would be absurd not to insure your car and house, what about your life and income. We buy insurance not to use it, but hoping we will never have to. Transfer the financial risk over to the insurance company and sleep well knowing your family is protected financially if something happened.

Proverbs 24:3-4
“Through wisdom a house is built, and by understanding it is established; and by knowledge the rooms shall be filled with all precious and pleasant riches.”

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Insurance Ads

Since I did have one view of my blog today, I thought I had better write something worthwhile to read.

Insurance Ads. We see them all the time in emails, in the form of an ad on a web page, in the mail, and even coming home from our kids school. They are always promising the lowest rates in the industry. They tell you that a 10 year Term Insurance policy will cost only $10 a month. I am not sure who buys insurance from these companies, but they are obviously used due to the constant exposure I see.

The bottom line is: please don’t buy insurance from these people. They just sit behind a desk and crank out policies all day. They don’t care what you buy as long as they keep selling more policies. What you need to do is sit down with an independent insurance agent or financial planner and determine exactly how much insurance you need and where it fits into your life. The insurance company charges a fixed price that they have determined to be appropriate. Whether you buy it online or from someone you actually sit across from, it will cost the same amount. The rates they are giving you are probably for a 25 year old in perfect health also. The insurance company will be the one determining what health class you are in and what rate to charge.

For those that don’t understand insurance terms: 10 year Term is a policy for a stated amount that will pay out that amount if you passed away any time in that 10 years. If you had a $500,000 20 year term policy, you would pay your monthly fee and if you passed away in a day or 19 and 1/2 years, the insurance company would pay your survivor $500,000 of tax-free money. Term insurance is the simplest form of life insurance. There are several other forms that build cash value, but not necessary for most people. It just depends on your situation.

So, if you want to look at insurance rates, call someone who will talk with you and help you determine how much insurance you need and with what company. A financial planner is best because they can determine how it fits into the big picture of your goals. There are also lots of good insurance agents out there. I work with several for health insurance and property and casualty. The key is to find an independent one you can trust.

comments always appreciated

God Bless

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“Why I’m here”

Well, I guess I shouldn’t write anything about the financial world since this is my first post and I am the only one who may read it for a while. I have created this place to write my challenges and joys learning to be a financial planner. Insurance is a tough business. It is a business that seems fairly simple on the surface, but when used correctly, can create large amounts of money from nothing. Most people believe they understand the products and know how it all works.

This is my first challenge. I must convince people that I can help them and save them money in the same aspect if they will only give me a few minutes of their time. Most people are suspicious, and/or don’t believe what I am telling them. I don’t blame them one bit. Some of my least favorite people to deal with are salespeople. I do sometimes wonder why God has placed me in this profession. It is tough to get started, but once you get going can be much easier.

I will be writing about the knowledge I gain that could be useful to any reader and how it relates to your life. It is such a joy to step into the calling God has placed on my life. I want others to benefit from what He is doing with me.

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