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.

Thought for the day:

Behind every great man is a woman rolling her eyes.   –Jim Carrey

 

If you will read no further:

On a typical day in 2009, 42million family caregivers nationwide were providing care for an adult with LTSS needs, with women being the vast majority of unpaid caregivers. When you do not insist upon a sound plan to pay for long-term care, you may be essentially advising your clients to possibly go to work as a caregiver in order to earn again what has been accumulated in the estate to support him/herself once their loved one is deceased.

Thought for the week:

Believe it or not, there are other things happening on Capitol Hill besides the budget, debt ceiling and Obama Care.

Most PEARLS readers will not be reading the Commission on Long-Term Care Report to Congress, submitted on Sept.18, 2013; yet it delves into one to the most significant issues affecting our clients and by association, should be of concern to all advisors. So from time to time over the next several weeks I shall endeavor to impart some of the more important (as I see them) pearls from this 114 page report. Hopefully you will find the information interesting and useful. If not, there is still the “Delete” button.

• The new government acronym is LTSS, Long-Term Services and Supports and encompasses everything from (paid and unpaid) human assistance with activities of daily living (ADLs) to the systems, institutions, facilities and technologies involved.

• About half of the physical functional impairments associated with LTSS needs of older adults have onset after age 65 and are caused primarily by arthritis, heart condition and diabetes. An additional 22% of older adults suffer from Dementia (60-80% Alzheimer’s disease) and stroke. One in 8 Americans over age 65 has Alzheimer’s and the disease affects 42.5% of Americans over 85. That includes families responsible for provide the care or paying the bills. All numbers are expected to increase as the boomers (our clientele) reach 65 and above.

• Currently, the majority of care is provided by family members due to the cost of professional care and lack of sufficient financial resources to pay for it. But too often they do not have training in the medical/nursing tasks they need to perform this function, making the entire process an even greater burden.

• Currently there is no comprehensive community-based approach to care coordination for individuals and caregivers. Absent the commercial insurance system, services and support may not be provided in the most appropriate setting by the most appropriate provider, the individual’s needs and preferences may not be met and their caregivers may experience substantial stress trying to arrange for or provide care…..putting individuals at risk for injuries and or adverse health consequences requiring additional medical attention.

If you have been following these pages for some time, you are probably aware of most of this information. But it is good to be reminded of the specifics, especially when confirmed by an in-depth study such as this; all the more reason to seriously counsel your clients on long-term care planning. The assistance that is provided by an LTCi carrier at the time of need is an invaluable service to both you and your client. And no benefit such as the extra income available from a quality insurance solution is more valuable and appreciated at a most difficult time.

Thought for the day:

Wisdom is the reward you get for a lifetime of listening when you’d have preferred to talk.

 Doug Larson

 

 

If you will read no further:

When allocating money in the portfolio for future health emergencies or for loss of retirement income due to the death of a spouse, the best, most predictable rate of return will probably be realized by using a life insurance policy for that purpose.

 

 

Thought for the week:

I was recently visiting with a prospective client who attended one of my workshops on long-term care.  I was showing him how to use life insurance to provide extra monthly income to pay for any care he might need while providing extra security for his wife to replace lost social security income if he was fortunate enough to dodge that bullet.

Because he is still interested in building his estate for the future (he is 55 and his wife is 10 years younger) he is always on the lookout for impressive investment strategies.  He understands investing in a managed portfolio of stocks, bonds and alternative investments; and he has an investment advisor taking care of that.  But he was intrigued by my approach of using life insurance to pay LTCi bills and was interested in what else it might do that he wasn’t aware of.  So I showed him a universal life policy that would provide $500,000 to his wife when he dies; or if he ever needed convalescent care, he could tap it for $10,000 per month of tax free income to pay for an in-home caregiver for over 4 years.

He thought that the $6000 per year premium investment was certainly doable, but wanted to know how the return (IRR) compared to the 7.7% that his planner had been averaging over the years.  I showed him how the rate of return on his “investment” would depend on when he (or his wife) ended up receiving the money.  For example, if he was unfortunate at age 75 and collected a benefit (long-term care for himself or the death benefit to his wife,) the tax-free rate of return would be 12.04%.  At 85 it would be 5.82%.  His comment to me was, “ya know?…after taxes and fees about what I’m getting now”.  I suggested that if he wanted to max out the IRR all he had to do was die soon!  He smiled, but I don’t think he thought it was very funny.  He actually had another thought in mind.  His 80+ year old mother would probably need long-term care someday and he is planning on taking care of it; but if something happened to him before then, it would be nice to have this money for mom’s care.

While we were filling out an application for the insurance policy, he commented that he wondered why his financial advisor had never suggested anything like this.  I told him I couldn’t answer that, but I had recently read an article in an investment news publication that a survey by The Futures Company, an industry research and consulting organization, found that a majority of middle aged folks admitted they were underinsured and that most were very open to discussing how to fix it. 

It has been my experience that when they know what these modern products can do, they are much more interested in putting one in their portfolio.  Why not make an early New Year’s Resolution to consider what role life insurance can play to address the various issues that concern each of your clients and call Randy or Nancy here at Westland (800)238-8144 to assist you with a strategy for them.

 

Thought for the day:

“Leadership is a potent combination of strategy and character.  But if you must be without one, be without strategy.”                              Norman Schwarzkopf

If you will read no further:

There is a reason why our annuity sales are growing each month.  More and more advisors are discovering that their clients want to minimize the uncertainty they face day to day in retirement. The only way to maximize retirement income is to be able to spend all of their assets by the day they die.  Since no individual advisor can guarantee to accomplish that, we must rely on the insurance companies (the only institution that knows statically when death will occur) to get the job done.  It’s called a pension (also known as an annuity).  I guarantee if given a choice between certain results and uncertainty more and more of our clients will be opting out of the latter.

Thought for the week:

Last week we reflected on the increase we are seeing in life insurance, particularly Index Life Insurance set up to provide an amazing alternative to a Roth IRA; max funding a life insurance policy where the cash value crediting rate is equal to the annual increase in the S&P (up to 13%) each year so that a young family can have significant life insurance protection and our client can look forward to significant tax free retirement income.

But now what to do with clients who have a modest portfolio and must retire with sufficient income to cover their basic living costs now and in the future.  This is also the client probably least interested in much risk and volatility as they have little downside margin to play with.  If your practice is primarily funded by gathering assets, you might have a slight dilemma here as you want to take charge of his portfolio, but it’s difficult (impossible?) to guarantee the results. You need the most income at the lowest risk.  Enter the Annuity Ladder.  Read more

Assume we have a couple ages 65 that have accumulated $600k in their retirement portfolio.

Step one is to determine the monthly shortfall between their social Security income, Pension income (if any), and basic living expenses; housing, insurance, utilities, transportation and food….and taxes. I don’t think I am going out on a limb to assume most people prefer a monthly income that will cover that amount free of risk or uncertainty.  Suppose that shortfall is $1,500 per month.  The chart at the left says that they can receive about 7% per year income, guaranteed for life. So $250k to $300k of their assets should be used to purchase a joint annuity.  That leaves $300k that can be invested in a managed portfolio designed to grow in a manner commensurate with their risk tolerance.

At age 75, the portfolio (which certainly you can grow at 6% net) will now be worth $537k. If needed/desired, another $150k can be used to purchase a new annuity to provide another $14,000 per year of income.  The remaining $380,000 can continue to grow so that by age 85($680k) they can use $180k to purchase yet another annuity that will add $20,000 more per year.  Total annuity income by then will be $52k per year, up from an original amount of $18k at age 65.

Over their retirement years their portfolio has generated $665,000 of secure, no stress income and left a legacy of $638,000.   All income is 100% risk free*

Of course all these numbers except the annuity rates are hypothetical, and each situation would be done a little differently.  The idea is to use part of the retirement portfolio to get as much secure income as possible.  Then you can invest the rest of the money for future needs and inflation.  Investing some of the money in a linked-benefit policy for long-term care would be perfect for these folks and on policy could cover both of them.

By the way, if you think getting 6% net for the client is a little too ambitious, I wouldn’t argue with you.  That is all the more reason why they need a layered Annuity Strategy.

PS.  If you read all the way down to here, that is great.  I trust you enjoyed it.  Pleasee sure to subscribe to our blog if you haven’t already. You will be notified whenever something is posted.  You will also be able to respond and comment on the things I post.  That way I can learn something with this as well.

Thought for the day:

“You know you’re old if they have discontinued your blood type”

Phyllis Diller

 

If you will read no further:

One in 9 – The number of Americans age 65 living with Alzheimer’s Disease.*

One in 3 – The number of victims age 85 and over.*

Five million – The total number of Americans currently living with Alzheimer’s disease. *

Sixteen million – The projected number of victims in 2050.*

                                    *According to the Alzheimer’s Association

Add to that Heart disease, Cancer, Respiratory Diseases and strokes (the top four causes of death) how can you not encourage your clients to adopt a long-term care strategy while they are still young enough and healthy enough to choose from all their options?

 

Thought for the week:

RETIREMENT STRATEGIES INVOLVING INSURANCE EVERY PLANNER SHOULD UNDERSTAND. 

Not all clients will have enough money in retirement to provide their desired income and protect themselves against the exorbitant cost of long-term care. For the client who still has time before he/she retires, one should make a concerted effort to offer the new life insurance products that pay for long-term care. Many clients carry insurance policies (or at least they should) to provide financial protection for their family should they die prematurely. Some use term insurance designed to expire when they reach their middle 60’s or even before….inexpensive but limited.

The most popular life insurance policies today include accelerated benefit riders that pay the death benefit early for long-term care. Having a life insurance policy in force today for, say, $500k that could pay $10,000 per month for long-term care is much more useful than one that only pays at death. Whether it’s term insurance or Universal Life, your clients should be converting their coverage to one of these products. This is not the same as MoneyGuard or the other products we offer as a specific strategy for LTCi. Instead they offer the opportunity to grow the equity in the policy over the younger years so that at retirement, long-term care is addressed with a policy that is paid up, or at least requires little to maintain it in force.

We suggest that your clients pay a little more and purchase a UL policy that will build cash value so they will be able to utilize it in retirement for long-term care protection and not have to deal with that issue at a much higher cost. Almost every company offers these new riders, but only a few provide their benefits under Section 7702B of the code and pay true long-term care benefits vs. Sec.101(g) plans which are more limited in their ability to address long-term care. Of course we offer both to give the greatest flexibility when addressing the particular needs of your client.

In order to better understand what I am talking about, pick a couple of clients in their 40’s or 50’s who own (or should own) existing insurance policies and call Nancy Woo or Randy Masciarelli (both are at 800-238-8144), tell them the age, sex, health status, the amount of insurance they currently own and how much they are paying for it. We will show you how little it will cost to upgrade their coverage and take a major LTCi issue off the table for them in retirement. You will be amazed at what a great service you will be doing for your client.

NEXT WEEK, ANOTHER STRATEGY DESIGNED TO MAKE SURE THEIR PORTFOLIO PROVIDES AS MUCH SECURE RETIREMENT INCOME AS POSSIBLE

Quote of the week:

“Why wouldn’t everyone do this?”

A question from a new client who heard my presentation about linked-benefit life.

 

If you will read no further:

Read this short article in the Wall Street Journal (9/13/13) then consider what your self-insuring client must do if suddenly he has a serious stroke and requires eighteen hour per day care in his home like a friend of mine did for 3 ½ years before he died. Trust me, his wife won’t last 3 months doing that. How would $10,000 to $12,000 per month in expenses impact the portfolio you are managing? Now project it out at 5% (historical increase) per year for the next ten years and you are facing $16,000 per month. Now add the fact that you are competing with thousands of other patients for these services. You think the price isn’t going even higher?

Under those circumstances wouldn’t you feel better knowing that you (successfully) advised your clients to create an additional $5,000 or $6,000 per month to add some needed flexibility to their financial resources at the time of need.

 

Thought for the week:

You probably are tired of me talking about long-term care. I get it. You give investment advice.  You are not an insurance agent. But you need to hear me out (or at least read to the end of this piece) because, like most advisors, you are under the misimpression that many (even most) of your clients can self-insure. They have plenty of money, and they probably won’t need to pay for care anyway, because they are “in good health”.

But if you read this article and think about it, you will soon discover that you and your clients are leaving out a very important factor in your thinking about their future. LTCi options are going to become scarcer as the millions of boomers consume available resources.  This means that the cost of the kind of care your clients would come to expect will rise to levels that are not even conceivable right now.  Most planners advise their clients to self-insure but without a strategy like linked-benefit insurance it may become almost impossible to “self-insure” the level of care at an acceptable cost. 

Consider what your self-insuring client must do if suddenly he has a serious stroke and requires eighteen-hour-per-day care in his home like a friend of mine did for 3½ years before he died. Trust me, his wife won’t last 3 months doing that. What would $10,000 to $12,000 per month in expenses affect the portfolio you are managing? Now project it out at increases in cost at 5% (historical increase) per year for the next ten years and you are to $16,000 per month. Now add the fact that you are competing with thousands of other patients for these services. You think the price isn’t going even higher?

I’m not suggesting you purchase an insurance policy to cover all the expenses to provide a free long-term care experience. I’m just suggesting that if I were their advisor, I would sure want to have advised them (successfully) to create an additional $5,000 or $6,000 per month to add some needed flexibility to his financial resources at the time of need.

Having an asset in their portfolio that can add $thousands to their monthly income will be a godsend to even the wealthier clients.  Accomplishing this without spending money for insurance premiums just may be viewed in retrospect as a “genius strategy”. Certainly it should be an “automatic” for clients who can afford to allocate 10% of their assets not needed to support their lifestyle to a strategy that will create this additional income.

We continue to present the linked-benefit concept to clients in seminars with amazing acceptance. If you think your clients don’t want this, it’s probably because you have not presented it so they understand the issues and how easily they can be addressed. Call us. We can help.

Thought for the day:

The difference between a meeting and a funeral is that you know why you are at a funeral. Unknown

 

If you will read no further:

When the next “crash” occurs, most of our clients will see their accounts drop by $10,000 or $20,000 or more.  Probably temporary, but a drop non-the-less.  Take $20,000 now and purchase a long-term care “stop-loss” instead of a long-term care policy… one time, paid up, even tax deductible. In some cases it is totally paid for with tax free income.  Now you have protected several hundred thousand dollars of their estate from a very high risk, high cost event.  Read on for specifics or call me or your marketing director for details.

 

Thought for the week:

Do you sometimes wonder just what it takes to get people to adopt you as their advisor; or once committed, to actually agree to move on your advice?  A recent “Fear of Financial Planning Study” conducted by Nationwide Financial showed that 83% of adults over 18 are afraid of another financial crisis and 62% are scared of investing in the stock market.  Only 58% fear death and 57% fear public speaking.

As financial planners we sometimes lose sight of the fact that part time observers of the markets (our clients and prospects) will never have the deep understanding of how it all works that you do.  When you mix that lack of understanding with the fear of losing their money, then add a little of that greed that we all have, it makes it very difficult to make decisions that are ultimately in their best interest.

I had a prospect recently that was interested in (and could afford) a linked-benefit annuity with a long-term care rider for her 68 year old husband.  He has type 2 diabetes and a metal plate in his head from an accident 6 years ago and she believes that he is a strong candidate for eventually needing long-term care. I was able to confirm for her that no conventional long-term care insurance would be available.

She approached me about linked-benefit (which was more appealing to her anyway) and after being told by the underwriters that they would be interested in considering such a risk, I showed her how she could move $100k into an annuity that would grow at current rates of 1.5% if she ever wanted to cash out and 2% if they needed the money for long-term care.  Attached to that would be a pretty inexpensive rider that would pay substantial (one might even say “impressive”) benefits.  I explained to her that the $100k would be in a safe A+ rated company and although there is a 6.5% surrender charge the first year, by the end of the 4^th year her money would be over 100% refundable. Since the money had to reside somewhere when it came time to pay for her husband’s long-term care, putting it here would possibly give her access to insurance coverage not available anywhere else. By choosing the annuity to store some savings, she could purchase the LTCi rider (available from no other source) for a one-time payment of $23,000 that would pay for as much as $150K to $300K of tax free income.  Pretty good, huh?   But all that didn’t motivate her to move forward. 

This is what did it.  I pointed out that, after depositing the money in the annuity and acquiring the extension insurance, whenever she wanted, she could withdraw all but $1000 from the annuity and the “stop-loss” extension would remain in force for life.  No commitment to the annuity.  Now she can go for better returns on the principal and still have a “stop-loss” long term care policy in place with no further premiums and each year protecting hundreds of thousands of dollars of assets from being destroyed by long-term care costs.  Now that she has alternatives with which she is comfortable, she is ready to put the strategy in place.

All the financial planners your prospect/client meets can invest, allocate, diversify and grow their money.  You can provide solutions and strategies to solve their problems. Now that’s what I call financial planning.   

Products like this vary somewhat from state to state, so pick out a client that you think should consider this concept and let’s work on it together to see just how impressive a case we can make.

PS. Don’t forget to ask me how we can pay for the “stop-loss” extension rider with tax free income.