Thought for the day:

“Clothes make the man.  Naked people have little or no influence on society.”

Mark Twain

 

If you will read no further:

The Aged Based Limits chart for deducting Long-term Care premiums for 2014 is now available.  Every year, the amounts increase per age band due to inflation. Individuals can deduct LTCi premiums if they itemize more than 10% of their AGI in medical expenses (for age 65 and over, it’s 7.5%).  Also use the chart when an entity pays the LTCi premiums on behalf of employees….C Corps, S Corps, Partnership, and LLC. 

 

Thought for the week:

I recently received the following from a financial planner who has been selling linked-benefit products for several years.  The thoughts he has expressed certainly resonated with me.  Thought you might think so too.

“I believe that LTC should be viewed as an integral part of the retirement income plan.  One hundred percent of retirees will need to have resources to support their lifestyle, some for as long as 30 years. Have you ever heard anyone refuse a plan that would give them more?

Over half of our clients will have to increase that income by $thousands each month for some period of time to pay for the services from a professional caregiver. It only makes sense to acknowledge this and incorporate a strategy in the retirement plan. 

Every purchase/investment is an emotional one on some level. Whether they choose to purchase conventional LTCi insurance or not is largely based on their personal experience or attitude about insurance in general. They say they won’t need it, but that is the excuse they use because they don’t want it. Linked-benefit products allow them to incorporate an “investment” strategy that will predictably increase their income by several thousand dollars a month to help pay the added cost of someone taking care of them. Those with sufficient assets can embrace this approach with more enthusiasm because they won’t be purchasing insurance all the while hoping it will be a waste of money. 

I advise all of my clients to acknowledge that the second most significant financial issue after securing enough income to enjoy life is to arrange for the additional income that is likely to be needed for care down the line. (I always show them what I have done in my own planning for long-term care.)  Once the 100% need and the 50% need are addressed, then we can get on with legacy planning.  LTCi planning, regardless of the approach/product, will help assure the size and predictability of that legacy. “ SRC

 

What to do with the RMD:

It didn’t seem like so long ago, I sold life insurance to you young parents and the most important part of the transaction was to convince them that it was needed.  Most were sure they were going to live for a very long time. 

Now I find myself talking about the value of life insurance to people over the age of 65.  You would think that “a very long time” to 70 year old is about 15 years, since that is what the mortality tables tell us.  It has always made me wonder why someone would want to get rid of life insurance just as they are getting closer to making a claim on it.  But that is what some advisors suggest. “You don’t need it anymore.  Take the money and invest it.”  Rarely do they say, “Take the money and spend it.”   We recently presented a $250k life insurance policy to a 70yr. old client who was beginning to take Required Minimum Distributions from his IRA.  He was in average health and his first withdrawal was going to be about $11,000.  He didn’t need the money; would rather not take it; was looking for options of what to do with it.  He didn’t need any life insurance…but then he didn’t need to put the money into his investment account either.  Bottom line, he already had a substantial managed account with his advisor, but he didn’t have any life insurance.  We showed him that he could put the $8000 per year that would be left after paying the tax on his RMD into a $250k life insurance policy.  If he died a little past life expectancy at age 85 (a 32% chance that year) the tax-free annual rate of return would be 8.77%.  But if he was unfortunate and died at age 80 it would be 20.12%.  Comparing that with some other investments in his portfolio and considering the insurance provided a guaranteed result; he thought it a wise investment to put the money in the life insurance policy.  This was a good choice for all involved.

Thought for the day:

Confidence is contagious.  So is lack of confidence.        -Vince Lombardi

 

 

IMPORTANT ANNOUNCMENT:

Westland Financial Appoints Tim Morton CEO

Tim Morton has been appointed Chief Executive Officer of San Diego based Westland Financial Services (WFS), Founder and President Gene Pastula CFP® announced today.

Mr. Morton has been an integral part of Westland for the past six years with an ever expanding role.  An active member in the broker/dealer community, Mr. Morton was recently elected to FINRA’s (Financial Industry Regulatory Authority) Small Firm Advisory Board (FSAB) and is a member of the Board of Directors for the National Association of Independent Broker/Dealers (NAIBD).  Mr. Morton’s 33 years of success in the financial services industry and his previous senior managerial roles, makes him uniquely qualified to lead Westland to its next level of success, Pastula said.

Established in 1974 and headquartered in San Diego, CA, Westland Financial Services, is a national insurance consultancy serving the financial planning and investment advisory community. WFS has been instrumental in the development and marketing of new generation insurance products that are uniquely designed for use by financial advisors to expand their value and provide stability and predictability in client portfolios.

 

 

If you will read no further:

Should all of a client’s retirement income be derived from the “I’ll do my best to get you 4-5% with just a little volatility and not too much risk” kind of planning?

Fixed Index Annuities set sales records in 2013; and SPIAs (we think of them as personal pension plans) are increasingly becoming an important tool for planners advising their clients on how to take income from their qualified and non-qualified portfolio.  We have all the top carriers and (most importantly) the expertise to properly incorporate these into your clients’ retirement income plan.

Become an expert in 2014:  Call Josh Ver Hoeve (800-238-8144) every time you have a client who wants income from their portfolio.  Get his recommendation to compare with your (annuity deprived) plan.  If you choose not to recommend Josh’s approach, it won’t be because you never considered it or new nothing about the option.  By this time next year you will know more about annuity planning than 80% of the financial planners and investment advisors out there.

 

 

Thought for the week:

The story of Fred and Alice

About 14 years ago, Fred and Alice began their retirement years.  They had been using a financial planner friend of ours for many years before so had been successful in building a retirement portfolio capable of providing a comfortable lifestyle.  The only thing that had not been considered to that point was what to do about long-term care planning.  Alice was in favor but Fred…well Fred was Fred.  And Fred could not see spending money on some insurance that he knew they would never use.  But Alice convinced him to at least consider it and their planner surprised them by suggesting that rather than purchase a conventional LTCi policy (since they have a substantial portfolio) why not simply “invest” some of their savings into a linked-benefit product.  That way, if LTCi were ever needed there would be extra money to pay the bills and if not; the money wouldn’t be wasted since it would continue to be part of the estate.

Last year, at the age of 83, Fred suffered a serious stroke.   So now Fred and Alice have a caregiver in their home 12 hours a day to take care of Fred.  The linked-benefit plan doesn’t pay all the bills, but it does provide over $5300 a month tax free and will continue to do so for a total of six years if necessary.  Can you imagine the peace-of-mind that gives Alice?

She tells her friends about this policy but unfortunately many of them are already too old or too sick for the idea to do much good.  Their advisors should have told them about it years ago.

You know? The interesting thing about including insurance products in the plan vs. just investments; when things go wrong, the insurance products truly become stars.  And when things go right, they just become part of the planned-for results….all up-side and no down-side.

You need to tell your clients that….before they get too old or too sick.   

Thought for the Year:

All of us at Westland Financial wish you and yours a very Happy Christmas; and Peace, Health and Success in the New Year. We thank you for your business and appreciate the opportunity to have you as a client.

The story of Rudolph the Red Nosed Reindeer

Rudolph came to life in 1939 when the Chicago-based Montgomery Ward company asked one of their copywriters, to come up with a Christmas story they could give away in booklet form to shoppers as a promotional gimmick.  Robert May, who had a penchant for writing children’s stories and limericks, was tapped to create the booklet.

May, drawing in part on the tale of The Ugly Duckling and his own background (he was often taunted as a child for being shy, small, and slight), settled on the idea of an underdog ostracized by the reindeer community because of his physical abnormality: a glowing red nose.

May wrote Rudolph’s story in verse as a series of rhyming couplets, testing it out on his 4-year-old daughter, Barbara, as he went along.  Barbara was thrilled with Rudolph’s story, and once approved by May’s superiors, Montgomery Ward distributed 2.4 million copies of the Rudolph booklet in 1939 alone; and although wartime paper shortages curtailed printing for the next several years, a total of 6 million  copies had been distributed by the end of 1946.

The post-war demand for licensing the Rudolph character was tremendous, but since May had created the story on a “work made for hire” basis as an employee, Montgomery Ward held the copyright to Rudolph, and May received no royalties for his creation. Deeply in debt from the medical bills resulting from his wife’s terminal illness (she died about the time May created Rudolph), May persuaded Montgomery Ward’s corporate president, Sewell Avery, to turn the copyright over to him in January 1947, and with the rights to his creation in hand, May’s financial security was assured.
“Rudolph the Red-Nosed Reindeer” was reprinted commercially beginning in 1947 and shown in theaters as a nine-minute cartoon the following year, but the Rudolph phenomenon really took off when May’s brother-in-law, songwriter Johnny Marks, developed the lyrics and melody for a Rudolph song. Marks’ musical version of “Rudolph the Red-Nosed Reindeer” (turned down by such popular vocalists as Bing Crosby and Dinah Shore) was recorded by cowboy crooner Gene Autry in 1949, sold two million copies that year, and went on to become one of the best-selling songs of all time (second only to “White Christmas”). A stop-action television special about Rudolph produced by Rankin/Bass and narrated by Burl Ives was first aired in 1964 and remains a popular perennial holiday favorite in the U.S.

May quit his copywriting job in 1951 and spent seven years managing the Rudolph franchise his creation had spawned before returning to Montgomery Ward, where he worked until his retirement in 1971. May died in 1976, comfortable in the life his reindeer creation had provided for him.

The story of Rudolph is primarily known to us through the lyrics of Johnny Marks’ song (which provides only the barest outlines of Rudolph’s story) and the 1964 television special. The story Robert May wrote is substantially different from both of them in a number of ways.

Rudolph was neither one of Santa’s reindeer nor the offspring of one of Santa’s reindeer, and he did not live at the North Pole. Rudolph dwelled in an “ordinary” reindeer village elsewhere, and although he was taunted and laughed at for having a shiny red nose, he was not regarded by his parents as a shameful embarrassment; Rudolph was brought up in a loving household and was a responsible reindeer with a good self-image and sense of worth. Moreover, Rudolph also did not rise to fame when Santa picked him out from a reindeer herd because of his shiny nose; instead, Santa discovered the red-nosed reindeer quite by accident, when he noticed the glow emanating from Rudolph’s room while he was delivering presents to Rudolph’s house. Worried that the thickening fog that night (already the cause of several accidents and delays) would keep him from completing his Christmas Eve rounds, Santa tapped Rudolph to lead his team, which the young reindeer agreed to do, after first stopping to complete one last task: leaving behind a note for his mother and father.

Thought for the day:

“Do, or do not.  There is no try”                

Yoda

 

If you will read no further:

Next year PEARLS will be a biweekly publication with broader array of financial planning topics that will include additional creative uses for insurance and annuity products as well as timely information around retirement planning. You can receive notice of this BLOG as well as access to prior issues by subscribing now below.  You will also be encouraged to weigh in with your own reaction and ideas about the topics that we all must address as we help our clients navigate through the issues facing them in preparing for, and living through their financial lives.

 

Thought for the week:

We are receiving a growing number of calls from advisors trying to find long-term care policies for their aging clients who are coming to accept the elevated chance that they will need long-term care someday.  This usually occurs as they are experiencing some chronic illness that convinces them of their own mortality and the likely need to pay for the expensive care that often precedes death.  Now they would like to have insurance; but they are too old and/or too sick to get it. 

Some planners are seeing the light and using this situation as an opportunity to help others, specifically the heirs of these clients.

Dorothy is an 84 year old client who has inquired to her advisor about long-term care insurance.  Unfortunately, her arthritis has become more serious and because of that and her advanced age, LTCi is not possible.  Fortunately, she has enough money to pay for her care; it’s just that it will put a significant dent in her estate.  She was disappointed we could not help her; but she understood.

We suggested to her advisor that this might be a good opportunity to do something to preclude this from happening to her son and his wife.  Since she was now aware of what the financial impact can be on one’s wealth, we suggested that Dorothy help her son and his wife prepare for long-term care by purchasing a joint linked-benefit life insurance policy on them.  He’s 59 and she is 55.  Both are in good health. 

Dorothy will not be giving away her money to do this.  But she sees the value in moving $150,000 from a couple of bank accounts into the joint policy on the “kids”.  She will be the owner of the policy and they are the insureds.  So she continues to control the money and will have easy access to it if she needs it for her own care…or anything else for that matter.  If not, the ownership of the policy will pass to the kids when she dies; and just as important…they will have significant long-term care protection so that when they are in their 80’s and become sensitive to the issue, they will not have to be concerned about the source of income to pay for it like their mom.  In the meantime, she still owns and controls the money; it is just safely tucked away in the insurance policy securing significant benefits for the parents of her grandchildren.

This is just one example of the many ways to use life insurance to add guarantees and predictability to the portfolio to benefit your clients and their families.  We believe the more you understand the many applications of insurance in a financial planning context, the more your clients will benefit.  Call us with questions and cases with which we may be of assistance.

Thought for the Day:

Thanksgiving dinners take eighteen hours to prepare.  They are consumed in twelve minutes.  Half-times take twelve minutes.  This is not a coincidence.                       Erma Bombeck

 

If you will read no Further:

In honor of the final week of LTCi Awareness Month (aren’t you glad I spared you the other three?) we present our partners Tom Rieske Jr. and Steve Cain in a special webcast titled “Top 10 Things We’ve Learned From Industry Meetings This Year”.  One item you might find most interesting is that among affluent investors, being able to afford health care (including long-term care) is the issue that concerns them the most. 

Unfortunately, experience tells us they will seldom bring it up until they are faced with a serious health event that puts the issue front and center for them.  And that is when it is probably too late for you to help them do some serious planning.  Experience also tells us that if you bring up the subject seriously as part of their retirement planning; and you do a credible job of framing the issue with planning options, they gladly consider your recommendations and usually accept them.

Contact us about doing client workshops to explain their options and possible solutions.  To view Tom and Steve’s entire presentation go to http://www.screencast.com/t/lUD17DFdbL

 

Thought for the week:

Insurance is a complex product, not because of what it does, but for how it must be contractually formed to protect the client’s rights to benefits and protect the company from abuse.  Combine the legalese of the contract with the salesperson’s attempt to explain the benefits and confusion is sure to reign. Now add the distastefulness of the subject matter,( death, disability, illness, long-term care) and it is no surprise that most clients are woefully underinsured.  How can you expect insurance to be purchased when neither the client nor the advisor is interested in discussing it.  Yet incurring a huge loss when you could have/should have purchased insurance, costs even more money and makes one feel stupid.

When it comes to life insurance, most advisors younger clients have life insurance equal to less than half the value of their potential lost future income. A head of household who earns $150k per year is insured for a $million or less when clearly his future earning expectancy is will over $3million.  They would not think of insuring their home for 1/3 it value.

Planners take great pains to manage a retiree’s portfolio against losses in down markets by investing some of the money in safer assets that will not appreciate as much, but will be less likely to go down as well.  We know that if we ignore that strategy, the downturns and recessions that we experience every 6 to 10 years can destroy much of what we have achieved in the interim.  Yet what is the difference if we ignore a 60% risk of paying up to $1/4million or more for nursing care?  Either way, the money is lost to the client and the estate.   That is exactly why we developed linked-benefit life.  We created a place to safely store some of the portfolio wealth in a liquid cash value account to minimize volatility and reduce portfolio risk while leveraging its value 3 to 5 times if the client ever needs to pay for long-term care. 

Financial Planners and Investment Advisors, who excel at leading their clients thru the maze of options to grow their wealth, must not keep insurance as secondary in importance.  When the client is unlucky and under-insured the results can be devastating to the spouse and family; and no amount of investment expertise can make up for it.

The cost of insurance can seem excessive.  The cost of not having it can be devastating.

Thought for the day:

The first person to live to age 150 has already been born.   Dr. Aubry de Grey

 

If you will read no further:

LTCi RATE INCREASES EXPLAINED

From Chris Ridd, Westland LTCi guru:

Insurance companies conduct comprehensive claims studies every three years to examine the usage trends for each LTCi block of business.  John Hancock has recently received permission from the states for a third rate increase since 2008.  Not all blocks of business are affected. In order for a carrier to increase rates on existing LTCi policies, they have to request it from each state insurance dept. on a certain policy form and/or a “block” of business.  (For example:  policy form XYZ in the state of CA sold between 2001 & 2003)  They can never single someone out because they are older and are paying a low premium for their age.

The state can either accept the percentage increase requested, a lesser percentage or deny the request altogether.  Usually the LTC Company has enough data to back up their original request….even for “rate stabilized” states, like California.  Long-term Care insurance companies collect data constantly to sure their policies are priced correctly.  In addition to the current low interest rates they are finding that people keep their policies (instead of lapsing a certain percentage), live longer, and claims are lasting longer. All this means that there will be more claims then anticipated in the future.

For outstanding insights into the world of long-term care planning, go here http://goo.gl/aCGnnL and consider attending the LTCi Summit next May.  There is still time to get in on the $69 pre-registration.

Our own Gene Pastula, CFP will be a featured speaker.

Thought for the week:

Contrary to common belief, preparing for long-term care or guaranteeing income for life cost nothing if done correctly.  But it can be financially devastating if it is not done at all.

Stretch or no stretch that is the question:

I see it every time I do a client seminar on long term care. A third of the audience raises their hands when I ask “who has to take required minimum distributions from their qualified plan that they don’t need and would rather leave behind?”

There is an app for that….available from the insurance carriers.

1. The Straight Forward Stretch IRA.

• Put the amount of money you want to stretch in an annuity inside the IRA.  (a separate annuity for each beneficiary)
• Take only the RMDs as required leaving the rest to grow in the Annuities.
• Sign forms with each beneficiary acknowledging that they will receive their share of the IRA remaining at your death through annual payments for the rest of their lives.  At death, each beneficiary will commence receiving annual taxable income for life. Any remaining funds will go to their heirs.

• 2. More clever way to stretch the IRA

• Use the RMD to purchase one or more life insurance policies for the benefit of the heirs.
• The death benefit can be accessed, tax-free by the insured, if needed for long-term care.
• At death the heirs will receive any undistributed death benefit, free of income tax, allowing them to “recapture” much or all of the taxes paid on the RMDs.
• This can be done in tandem with the Straight Forward Stretch.

The point here is to assist the client who wants to leave a greater after-tax legacy for his/her heirs with assurances that it will all work out as planned regardless of the uncertainty in the economy, the political climate or even the need to pay for long-term care.

Thought for the Day:

This life we lead was made possible by men and women who paid the ultimate price for their country. Whether we agree with the recent wars or not, please take a moment on Veterans Day to thank God for this wonderful life we have with all of its many opportunities.

He gave his life for our country but she will never let him go. Nor will we. God bless them both. 

If you will read no further:

Think about this. You’re managing money for a retired couple.  They have given you $1million to invest and the market is doing fine; you have their money in the best performing stocks and funds to get them the best results possible.  All of a sudden the market takes a dump and you stand by and do nothing while they lose $350,000 before the bleeding stops on its own.

Of course you would never do that would you?  But think about it.  They could afford it, couldn’t they?

I mean, they still have $650,000.  That’s a lot more than most people have.  I wonder if they would still keep you on as their advisor.

That happened a while back to some friends of mine.  The market was coming back from the 2008 debacle in which they did not get hurt badly at all.  Everything was going fine until Jeff was diagnosed with Parkinson’s and shortly thereafter he had a few strokes.  He recently died after being cared for at home for almost three years and $362,000.   The market was still doing fine, but they lost over $1/3million because his advisor never suggested they do anything about long-term care, “they could afford to self-insure”.  Funny!  He was able to save them from a down market by proper money management.  But he didn’t employ any risk management and encourage them to hedge against the 50/50 chance they would deplete their portfolio with home care costs someday.  Apparently they could afford it.

NOVEMBER IS LONG-TERM CARE AWARENESS MONTH… a good time to encourage your clients to protect their portfolio from the devastation that a future long-term care event can impart.

 

Thought for the week:

We are beginning to see signs of an awaking in the financial planning community as more and more planners and money managers are beginning to suggest that their retired clients include fixed immediate annuities (SPIAs) in their portfolios so they can receive a secure 6-8% tax-favored income; then invest the rest in a managed portfolio for growth and additional income needs.

There is an excellent paper written by a renowned NYC-based consulting firm that you should read.  It is based on the Health and Retirement Survey launched in 1992 by the University of Michigan.  It queries  approximately 26,000 Americans over age 50 on retirement issues, such as wealth, income, job history, health and cognition to determine their “happiness quotient”.  The results show that at every age through retirement, those with annuity income were measurably happier than those without.

Key findings

• Retirement satisfaction has steadily declined over the last decade.
• Satisfaction is highest among those with high levels of wealth and income who are very healthy and annuitize their income.

• Among retirees with similar wealth and health characteristics, those with annuitized incomes are happiest.

• Annuities provide the biggest satisfaction boost to retirees with less wealth and those in poor health.

No matter how much money they have, there is always a certain fear of losing it.  And for most people there is nothing more reassuring than a steady, dependable income.  It is your job to make that come true for your clients for the rest of their lives.  The uncertainty that exists today that will be exacerbated by the next market crash is what makes this job so ominous, but vital.

Go here to download the report and perhaps give to your clients when you make an annuity recommendation.

Thought for the day:

“Never put at risk, money you already have, for something you don’t need”

Willis Allen…. as told to me by Larry Osborne

 

If you will read no further:

The biggest risk most of your retired clients face is longevity.  The longer they live the greater the risk.

Risks to their portfolio from the economy and an uncertain world, over which they have no control and health risks that can destroy their wealth.  Have you done your very best to include strategies in their portfolio that provide guarantees that protect their lifestyle from these risks?

 

Thought for the week:

Having been a CFP for almost 40 years I totally embrace many common concepts of money management and asset growth.  But I also have a great appreciation for (and knowledge of) the legitimate role of insurance products properly included in the portfolio.  It saddens me to see folks who have built a respectable portfolio of assets under the rules of the last 30 years who are yet to understand the New Rules going forward.  Their rules are different for several reasons.

1. They are now in the last 20 (more or less) years of their lives which will require them to live off the assets they have built up,
2. They will reduce their spending as they move through the “Go-Go years” in early retirement to the “Slow-Go years” as they continue to age.
3. At some point, most will experience diminished capacity when many of them will need assistance with activities of daily living.

Advisors should understand the needs of their clients and recognize that older clients have an even greater need for more predictability and less uncertainty in the plans you provide them.  For example, 2008 was serious; but younger clients have time to recover and can still be positive about the future. Clients in their 70s and 80s experienced much greater stress.  In 2008 your 75 year old client was very nervous when she saw her portfolio take a serious hit.  It has now recovered and we are ready to experience yet another “event” in the next year or two.  She will be 81 or 82.  Are you ready to start all over reassuring her that things will get better?  What if she is taking out more money each month to pay for care, will that help her recover in a timely fashion?  Will it make it more difficult to reassure her? She should be offered products and strategies to assure that she will have extra money to pay for eventual long-term care; and that there is basic monthly income that will be there every month as long as she lives, no matter what.  The products and strategies we offer do just that, and should be included in a well balanced portfolio.

 

Something to think about:

The great bull market of the 70s-90s was substantially driven by the baby boomers.  They earned and spent us into a period of growth and increased value of everything around us.  But now they are retiring at the rate of 8,000 per day.  They will be spending vs. investing but they will be spending much less than during the last 25 years when they were driving the economy.  Now the GenXrs and Millennials will be much less well-off due to increased taxes, reduced income and reduced growth. How is that going to affect your ability to build wealth in a financial portfolio?  What annual rates of return should your clients expect?  Taxes will be going up. What impact will that have?  Once average ROR reside in the 5-7% range, it becomes more difficult to outperform insurance products.  It might be a good idea to get more accomplished at including them in your recommendations.  We can help.

A client with 100k to “invest” safely could put it into an index annuity with Genworth and receive an interest rate each year equal to the increase in the S&P up to 5.75%.  If he has $250k his max goes up to 5.95%.

Of course that cap will change every year, but if it goes down more than 50bps below the initial rate, the client can take his money out free of surrender charge which reduces annually to zero over 7 years.  So if he can do better elsewhere he can move on without cost.

Thought for the day:

In life, as in Golf, You can hit a two acre fairway 10% of the time and a two inch branch 90% of the time.   -Unknown

If you will read no further:

Just about every day at Westland Financial we are made aware of another individual who has waited too long to buy insurance that they now would pay almost anything to have.  We wonder if the advisor ever thinks about what would be if they had approached the client sooner instead of waiting for the client to ask them to look into it.  Westland helps make the process of buying/selling insurance as painless as possible.  Reviewing current coverage and considering additional, is not all that difficult with us by your side in the process.

In the grand scheme of life, buying insurance that is never needed is a small item.  Needing insurance and not having it….makes you feel foolish

Thought for the week:

Recently I was asked to help one of our advisor’s clients who has term insurance which is terminating after 15 years and the client wants to continue coverage for a while.  Whoever originally sold him the policy was clearly not interested in preparing for such a possibility, as our client has few options because he is now pre-diabetic.  And now we know why he wants to “continue the coverage for a while”.

Not all term insurance is created equal.  We have a great website quote engine that will provide you with alternatives and prices of the best insurance carriers in the business.  But it is important to understand that price should not necessarily be the only consideration when purchasing term insurance for your client.

Several questions should be considered

1. 1. Is the insurance really just temporary? If your client’s health were to fail, would you want him/her to have viable conversion alternatives?
      1. Most policies have conversion privileges, but sometimes the cheapest do not allow you to choose from their regular portfolio for a conversion. In such a case your client may be required to pay considerably more to convert.
      2. If we are talking about $1/2 million or less, probably no big deal. But, if it is a large amount of insurance, it’s a good idea to go with a carrier with a full inventory of alternatives available?
   2. How healthy is your client?  The difference between Super Preferred (fairly rare) and Standard risk class is substantial within one carrier.
      1. That may not be the case when comparing one carrier to another, depending on the health issues the client has. Concern about various health conditions vary in significance from carrier to carrier. If your client has any health issues and you are purchasing a large policy, it’s best to have us do some pre-qualification before selecting the carrier.
   3. Will the client be paying Annual or some other mode?
      1. Be sure to check to make sure there isn’t a big surcharge for monthly or quarterly premiums.
   4. Are the clients future needs important to consider? While this is often hard to know now, reducing insurance in the future may be an issue.
      1. Consider laddering or splitting term policies so that one can be dropped while leaving others in force. Or purchase half the insurance with a longer term period even though that is not anticipated now. The difference in cost may be modest, but the value 10 years from now could be great.

Questions like these are the kind that our life insurance experts, Nancy Woo and Randy Masciarelli deal with daily. Take advantage of their expertise when you have to acquire term insurance for your client. They can help you provide expert service your client won’t get from an online provider. They can also make it easier to sell it. Call them at (800)238-8144

A couple of announcements:

• John Hancock’s Cost of care survey is available now to provide you with current costs for long-term care in your community.  We know you have been curious so, indulge yourself.
• Genworth has increased the credited interest rate for the new Total Living Coverage policies from 3.25% to 3.85%. This new rate will be available in all states except CA, CT, FL, HI, IN, NJ and NY.  We are liking TLC more and more.

Thought for the day:

Human beings, who are most unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so.     -Douglas Adams.

 

If you will read no further:

When is six percent really seven percent?

Since annuities provide a way of evoking principal and spending down the last dollar of the clients’ money the day he/she dies, 60% to 90% of the income is going to be tax free until the total of all income payments equals the amount of the original principal. By using annuity income as a base to cover the retiree’s basic living expenses that are unlikely ever to go down, you free up more money to invest for growth to cover inflation and additional expenditures while increasing the predictability of results and reducing the financial stress as your clients watch in horror, the goings on in our country and in the world.

Thought for the week:

The financial industry press is awash in articles about how to create retirement income from clients’ portfolios.  What is the best way? …. Bonds, dividend paying stocks, some of both, bond ladders, floating rate and private debt instruments? Most of these discussions completely ignore annuities as options.  I sometimes wonder it that is because they don’t understand annuities, don’t get paid asset fees from annuities, or they truly think that annuities are not a good strategy for retirement income regardless of what history, The Wharton School, and common sense tells them.

Think about this…the most efficient way to get the maximum amount of retirement income from one’s portfolio regardless of the return he actually receives is to create an income stream that will spend his last dollar on the day he dies.

No reputable advisor can provide assurance of accomplishing that for the client, but the insurance companies can.  A Guaranteed Refund Annuity, a type of Single Premium Immediate Annuity (SPIA)will pay the retiree an income for life while promising to pay all of their money out, even if the annuitant dies before expected.  Even if the annuity company is wrong in estimating their life expectancy, (which they certainly can be) they will continue paying income for as long as the annuitant lives, even if it is well after the original premium deposit has been exhausted.

The result is typically a monthly income (annualized) rate for life of 6% to 10% of the premium deposit.  When you include this as a part of the portfolio you will provide a guaranteed income rate of return 40% to 100% higher than you can currently offer using previously mentioned investments, while providing a guarantee that the income will last as long as the client. And the fact that this income is largely tax free for the bulk of the rest of their life further increases the relative value.

Now consider the possibility of laddering SPIAs as the client ages and inflation requires they have additional income.  Older clients enjoy higher monthly rates, see chart on the left.  Or for added security purchase a longevity annuity that employs a super discounted investment today to provide additional income at some predetermined point in the future. Call Josh at (800)238-8144 and he can explain all of this to you, and then ask him for help with a client.  I’ll bet you will be impressed.

As we have been saying for years, insurance planning is not an alternative to portfolio management; but should play a role in providing a safe, secure and predictable stress free retirement income.