Two studies show many of us aren’t saving enough
March 8, 2012 | 
Author Two recent studies show many of us aren’t saving enough — to the point we don’t have enough stashed away for an emergency or for a comfortable retirement.
One survey released this week show that just barely half of Americans have more emergency savings than what they owe on their credit cards.
Bankrate.com, that is based in Palm Beach County found that one in four Americans actually has more credit card debt than emergency savings.
“Emergency savings remains a problem area for many Americans, which leaves them only one unplanned expense away from having high-cost debt,” said Greg McBride, Bankrate.com’s senior financial analyst.
“As difficult as it may be to boost savings,” McBride added, “having an adequate emergency savings cushion is critical to maintaining financial stability, and Americans need to find ways to sock away more cash for a rainy day.”
Meanwhile, another national survey indicated Americans are finding it hard to save for retirement: Almost half of Americans believe they are not saving enough to provide “a desirable standard of living” in retirement.
The survey, commissioned by the Consumer Federation of America and the American Savings Education Council, also reported that only two of three Americans have “have sufficient emergency saving to pay for unexpected expenses like car repairs or a doctor’s visit.” The two groups also reported that Americans are saving less than they did three years ago.
“The recession clearly has not ended for millions of American families, especially those with lower incomes,” said Stephen Brobeck, CFA Executive Director and a founder of America Saves. “Many working families are still apparently suffering from the high unemployment rate, stagnant incomes, and a depressed housing market.”
Some South Floridians are finding it hard to stretch their paychecks to cover basic bills.
Adriana Ortiz of Hollywood said her $400-a-week paycheck often doesn’t stretch to pay for rent, food, insurance and other necessities.
She recently went through a financial workshop at Hispanic Unity’s Center for Working Families and loves the idea of saving. Ortiz said she even opened a savings account — but daily expenses and emergencies has prevented her, so far, from adding to it.
Still, the single mom of a 5-year-old daughter said she keeps watching every penny and doesn’t go out to the movies or other entertainment.
“She does amazing things with her money,” said Sandra Tobon, a financial coach at the nonprofit Hispanic Unity.
Now, Tobon is trying to encourage Ortiz and others who may qualify for the Earned Income Tax Credit to save much of their federal income tax refund. It’s the one time of the year when many get a large chunk of cash that can equal a month or two of their paychecks, Tobon said.
Parents of three or more children can qualify for as much as a $5,751 tax credit. The first of the federal tax refunds are coming in now and Tobon would like her students to save most of it.
Others recommend saving by having money taken out automatically out of their paychecks.
“I never see it,” said Lisa Green of Palm Beach County. Money out of her paycheck automatically goes into savings and retirement accounts. “I think it is a matter of discipline,” Green said.
She also tries to increase her savings rate every year.
Like most Floridians, Green said she doesn’t have a pension — and that makes her save even more.
“We are carrying the load ourselves.”
Her mom always saved and was a good role model, Green added.
“She is happily self-sufficient.”
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Advice From Life’s Graying Edge on Finishing With No Regrets
By JANE E. BRODY
At 17, I wrote a speech titled, “When You Come to the End of Your Days, Will You Be Able to Write Your Own Epitaph?” It reflected the approach to life I adopted after my mother’s untimely death from cancer at age 49. I chose to live each day as if it could be my last — but with a watchful eye on the future in case it wasn’t.
Yvetta Fedorova
Tell us what you’ve learned about life in the course of living it.
My goal was, and still is, to die without regrets.
For more than 50 years, this course has served me well, including my decision to become a science journalist instead of pursuing what had promised to be a more lucrative and prestigious, but probably less enjoyable, career as a biochemist. I find joy each day in mundane things too often overlooked: sunrises and sunsets, an insect on a flower, crows chasing a hawk, a majestic tree, a child at play, an act of kindness toward a stranger.
Eventually, most of us learn valuable lessons about how to conduct a successful and satisfying life. But for far too many people, the learning comes too late to help them avoid painful mistakes and decades of wasted time and effort.
In recent years, for example, many talented young people have denied their true passions, choosing instead to pursue careers that promise fast and big monetary gains. High rates of divorce speak to an impulsiveness to marry and a tenuous commitment to vows of “till death do us part.”
Parents undermine children’s self-confidence and self-esteem by punishing them physically or pushing them down paths, both academic and athletic, that they are ill equipped to follow. And myriad prescriptions for antidepressants and anti-anxiety drugs reflect a widespread tendency to sweat the small stuff, a failure to recognize time-honored sources of happiness, and a reliance on material acquisitions that provide only temporary pleasure.
Enter an invaluable source of help, if anyone is willing to listen while there is still time to take corrective action. It is a new book called “30 Lessons for Living” (Hudson Street Press) that offers practical advice from more than 1,000 older Americans from different economic, educational and occupational strata who were interviewed as part of the ongoing Cornell Legacy Project.
Its author, Karl Pillemer, a professor of human development at the College of Human Ecology at Cornell and a gerontologist at the Weill Cornell Medical College, calls his subjects “the experts,” and their advice is based on what they did right and wrong in their long lives. Many of the interviews can be viewed at legacyproject.human.cornell.edu.
Here is a summary of their most salient thoughts.
ON MARRIAGE A satisfying marriage that lasts a lifetime is more likely to result when partners are fundamentally similar and share the same basic values and goals. Although romantic love initially brings most couples together, what keeps them together is an abiding friendship, an ability to communicate, a willingness to give and take, and a commitment to the institution of marriage as well as to each other.
An 89-year-old woman who was glad she stayed in her marriage even though her young husband’s behavior was adversely affected by his military service said, “Too many young people now are giving up too early, too soon.”
ON CAREERS Not one person in a thousand said that happiness accrued from working as hard as you can to make money to buy whatever you want. Rather, the near-universal view was summed up by an 83-year-old former athlete who worked for decades as an athletic coach and recruiter: “The most important thing is to be involved in a profession that you absolutely love, and that you look forward to going to work to every day.”
Although it can take a while to land that ideal job, you should not give up looking for one that makes you happy. Meanwhile, if you’re stuck in a bad job, try to make the most of it until you can move on. And keep in mind that a promotion may be flattering and lucrative but not worth it if it takes you away from what you most enjoy doing.
ON PARENTING The demands of modern life often have a negative effect on family life, especially when economic pursuits limit the time parents spend with their children. Most important, the elders said, is to spend more time with your children, even if you must sacrifice to do so.
Share in their activities, and do things with them that interest them. Time spent together enables parents to detect budding problems and instill important values.
While it’s normal to prefer one child over others, it is critical not to make comparisons and show favoritism. Discipline is important when needed, but physical punishment is rarely effective and can result in children who are aggressive and antisocial.
ON AGING “Embrace it. Don’t fight it. Growing older is both an attitude and a process,” an 80-year-old man said. The experts’ advice to the young: “Don’t waste your time worrying about getting old.”
Another said, “Each decade, each age, has opportunities that weren’t actually there in the previous time.”
Maintain social contacts. Avoid becoming isolated. When an invitation is issued, say yes. Take steps to stay engaged, and take advantage of opportunities to learn new things. Although many were initially reluctant, those who moved to a senior living community found more freedom to enjoy activities and relationships than they had before.
To those who worry about dying, these men and women said the best antidote is to plan for it: Get things organized, let others know your wishes, tidy up to minimize the burden on your heirs.
ON REGRETS “Always be honest” was the elders’ advice to avoid late-in-life remorse. Take advantage of opportunities and embrace new challenges. And travel more when you’re young rather than wait until the children are grown or you are retired.
As Dr. Pillemer summarized the elders’ view, “Travel is so rewarding that it should take precedence over other things younger people spend money on.” Create a bucket list now and start whittling it down.
ON HAPPINESS Almost to a person, the elders viewed happiness as a choice, not the result of how life treats you.
A 75-year-old man said, “You are not responsible for all the things that happen to you, but you are completely in control of your attitude and your reactions to them.” An 84-year-old said, “Adopt a policy of being joyful.”
The 90-year-old daughter of divorced parents who had lived a hardscrabble life said, “I learned to be grateful for what I have, and no longer bemoan what I don’t have or can’t do.”
Even if their lives were nine decades long, the elders saw life as too short to waste on pessimism, boredom and disillusionment.
Need to Know: Life Insurance 101
By RACHEL EMMA SILVERMAN
Life insurance is one of those financial products that can give people the heebie-jeebies. It can sound confusing and complicated, and it involves thinking about a very scary proposition: death.
But life insurance really isn’t as frightening or complex as it seems. It’s actually a fantastically useful and flexible estate-planning tool that can provide income-tax-free security for your loved ones. It can also provide liquidity to pay estate taxes, especially if your estate largely consists of assets such as real estate or a closely held business that you may be reluctant to sell to raise cash. (If the policy is owned by an irrevocable trust, the insurance payout can avoid estate taxes too.)
Here’s a rundown of some of the basics of life insurance:
1 ‘How do I buy insurance?’
You can go directly to an insurance company or use a broker, either in person or online, that compares products from multiple insurance companies and can help you find the best quote.
You also can check if your employer, union or trade association offers a group life-insurance policy. Group life-insurance policies may not offer as much flexibility as some individual policies, but they typically don’t require a medical exam — a boon for those in poorer health seeking to be insured.
When you’re shopping for policies, stick to companies with high financial strength ratings from firms such as A. M. Best, since the last thing you want when spending money for peace of mind is to have to worry about your insurer going bust.
Most individual life-insurance policies require you to get a medical evaluation so that the insurer can assess your health and longevity risks. That’s typically arranged by your insurance broker or the insurer, at no cost to you. In most cases, a medical technician will come to your home or office to get some vital stats and blood and urine samples.
2 ‘Do I need insurance?’
You generally can skip life insurance if you’re single with no dependent kids and don’t expect to 
have a taxable or debt-ridden estate. Also think twice about forking over for life insurance if your premature death wouldn’t affect the ability of your surviving partner to pay for daily living expenses.
But do consider life insurance if you have dependent children, are a business owner or if your spouse doesn’t work or you have a big income disparity. In these cases, if you die prematurely, a life-insurance policy can help the survivor pay for your family’s day-to-day cost of living, including mortgage payments or help your business remain viable after your death.
There are many variables to factor in when considering how much life insurance to buy. It depends on your current and projected income and assets, your family’s annual living expenses, the length of the policy you are considering and whether you have any specific future economic needs — such as a child’s college tuition, a special-needs child who needs lifelong support, or expected estate taxes to pay off. Your insurance broker or salesperson can help you come up with a coverage amount that’s suitable for your situation.
3 ‘Term or permanent?’
Life insurance, in its most basic form, can be divided into two categories: term and permanent, also called cash-value. Term life, the simplest and cheapest form of life insurance, is when you buy an insurance policy that lasts for a set period, typically 10, 20 or 30 years.
A term policy, which usually costs just a few hundred dollars a year if you’re in good health, is appropriate for people who only want life insurance for a limited number of years — such as until your children are grown or until you reach retirement age.
Permanent or cash-value life insurance, by contrast, lasts for the remainder of your lifetime. These policies are often used for specific estate-planning purposes, such as funding future estate taxes or for ensuring the continuity of a family business.
4 ‘Why the cost difference?’
Permanent insurance is more costly than term life insurance because it lasts longer and because it provides more than just a death benefit: It also has an investment component in which money accumulates tax-free within the policy.
In other words, a portion of your premium is placed in a separate investment account; this money grows tax-free while the policy is in force. (How it’s invested depends on the policy.) As more money builds up inside the policy, you might eventually use this stash of cash to help you pay the policy’s premiums.
Many insurers tout the tax-free investment benefits of cash-value policies. Not only does the money grow inside the policy tax-free, but your beneficiaries don’t have to pay income taxes when they receive the policy’s payout. A cash-value policy might make sense if you have already contributed the maximum amount to other tax-deferred investment accounts, such as 401(k)s and individual retirement accounts.
On the other hand, the higher premiums, commissions, and sometimes limited investment choices might not make a cash-value account worth it.
Some people choose to buy a special kind of permanent policy called a “second-to-die” or “survivorship” policy.
These policies pay out when the second person in a couple — you or your spouse — dies, and the money generally goes to your children or other heirs. They typically cost less than traditional permanent insurance because they are based on the life expectancies of two people, rather than one
Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
The high cost of caring for parents
By Liz Weston
Lucy Lazarony was 34 when her mother was diagnosed with Alzheimer’s disease.
The diagnosis didn’t immediately change Lazarony’s life. She had recently left her reporting job at Bankrate.com to travel, and she followed through with her plans to spend several months in Scotland.
When Lazarony returned in February 2006, though, she moved into her parents’ home in Delray Beach, Fla. For the next five years, she lived off her savings and any freelance gigs she could cobble together while helping to care for her parents as their health declined. The couple recently moved into an assisted-living complex, and Lazarony is trying to restart her career at a time when unemployment rates are the highest since the Great Depression.
“I felt good at the time I made the decision. . . . I knew I wanted to spend that time with my mom, because you don’t get that time back,” said Lazarony, now 40. What she hadn’t realized is how much of her life she was committing. “A lot of people I know did really well in their careers in their 30s, or they started families. I’ve had a different type of caregiving experience.”
Caring for aging parents can be rewarding, frustrating and exhausting in turns. It also can be expensive in more ways than caregivers may realize.
That toll doesn’t include out-of-pocket expenses associated with caregiving, such as travel costs and purchasing needed household items. Those expenses average about $5,531 per year, according to the study. And it certainly doesn’t include the costs of professional care, such as home health aides or nursing homes, which can total tens of thousands of dollars annually.
Some people find their parents require so much time that it’s impossible to hang on to a job — the caregivers either quit or get fired for missing so much work. The cost in lost wages and retirement benefits can be enormous, with estimates ranging from $303,260 to $659,139 per person.
Those who remain employed may have to reduce their hours, pass up promotions, turn down relocations and bypass educational opportunities — all of which can reduce current wages and future retirement benefits.
“The time you used to spend working . . . you’re now spending making phone calls, sending emails, dealing with finances, going on doctor visits,” said Elizabeth Roberts, a senior vice president at Bryn Mawr Trust who frequently advises clients as they assume caregiver duties — and who cares for an elderly mother. “It’s harder to get the next promotion. If there are layoffs, well, you’re not doing as much as you used to,” so you’re more vulnerable to getting the ax.
And the toll can afflict future generations as well. Caregivers who lose the opportunity to save adequately for their retirements may someday become a financial burden to their own children.
In addition, caregivers’ physical and emotional health can take a beating. Nearly a third of caregivers reported problems with stress, anxiety or depression in a 2009 survey conducted by the National Alliance for Caregiving and AARP. Caregivers were more likely to report their health as “fair” or “poor” than those not providing care. Caregivers’ health declined more the longer they provided care.
“If you’re taking time off for doctor’s appointments and crises,” Roberts said, “you don’t have as much time for your own vacations to rest up or for your own doctor’s appointments.”
Family caregivers may not have a lot of options, unfortunately. Medicare, the government health insurance program that covers people 65 and over, typically doesn’t pay for custodial care — help with activities like bathing, cleaning or cooking that elderly parents may need. Medicaid, which does cover such custodial care, is available only to the poorest elderly and may require the care to be in a nursing home.
If the parents don’t have long-term-care insurance or savings to cover the cost of hiring help, the adult children usually have to figure out a way to provide it themselves.
Here are some things to consider when those responsibilities loom:
Assess your parents’ resources
It may not be easy to get your parents to open up about their savings and investments. Parents might be embarrassed about their financial situation, or they may be defensive or paranoid about ceding control, particularly if they’re suffering the beginning stages of dementia, Roberts noted. But getting a clearer idea of their resources can help you figure out whether you can afford help, and how much.
If your parents have equity in their home, a reverse mortgage can help them pay for care without having to move into a facility. (Read “A deal that could save your parents” for more.)
Create a team
The caregiving load can quickly become too big to carry by yourself. Enlist siblings, other family members or friends if you can, or paid help if you can afford it. Eventually all four of Lazarony’s siblings played key roles in taking care of their mother, now 80, and their father, 79, who was diagnosed two years ago with vascular dementia.
When it became clear the family needed to hire a daytime caregiver, they opted to chip in to pay Lazarony sisters to do the work — with the bulk of the funds donated by two brothers who lived farthest away, in California. A brother who lived close by pitched in on weekend evenings and all day Sunday so Lazarony and her sister could have a day off each week.
“My father used to joke, ‘I’m just glad we had so many kids,’” Lazarony said.
Whether you have a lot of help or a little, one professional who can be well worth hiring is a geriatric care manager, who can assess your parents’ situation, help you anticipate what might be next and connect you to resources in the community. You can get referrals from the National Association of Professional Geriatric Care Managers.
Learn about Medicare and Medicaid
While Medicare provides health insurance for people 65 and over, it doesn’t cover everything. Caregivers may need to account for premiums, deductibles and services that aren’t covered when budgeting their parents’ money, and their own.
If your parents are poor enough to qualify for Medicaid, see if your state provides payments to family members who care for their parents. The programs don’t pay much and aren’t available in all states, but every little bit can help. Explore all available benefits
Your community may offer a number of services for the elderly, from meals to day care, that can make caregiving easier. Start your search at the Eldercare Locator website. Another site, BenefitsCheckUp, can help you find programs that may help pay for prescription drugs, rent, utilities, meals and other needs. If money is tight, ask service providers if discounts or other financial help is available. Lazarony’s family was paying $55 a day for a day care center when Lazarony discovered they were eligible for a scholarship that reduced the cost as a respite for caregivers. The scholarship reduced the bill to less than $90 a month.Think twice about quitting your job
Trying to juggle caregiving and a job can be difficult and stressful. Before you quit your job, though, see if you might have other options that would allow you to continue earning wages and contributing to your retirement funds. Some companies offer flextime or the opportunity to share a job with another part-time worker. You also may qualify for up to 12 weeks of unpaid time off under the Family and Medical Leave Act. (Read about leave benefits here.) Take care of yourself
If you’re a caregiver, try to make sure you get enough rest, exercise, healthful food, time off and appropriate health care screenings. Support groups can help you deal with the stress of caregiving and inform you about resources you might not otherwise hear about. Taking good care of yourself applies to your finances, too. Boost your retirement savings if you possibly can to insulate yourself against end-of-life expenses, and consider long-term-care insurance. Caregiving is an act of love for your parents; taking care of your finances is an act of love for yourself — and your kids.
Liz Weston is the Web’s most-read personal-finance writer. She is the author of several books, most recently “The 10 Commandments of Money: Survive and Thrive in the New Economy.” Weston’s award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Click here to find Weston’s most recent articles and blog posts.
Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
The Need For Insurance
The below pictures illustrate why men (women need it too) need life (and disability) insurance.
Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
A Squirt of Insulin May Delay Alzheimer’s
By GINA KOLATA
A small pilot study has found preliminary evidence that squirting insulin deep into the nose where it travels to the brain might hold early Alzheimer’s disease at bay, researchers said on Monday.
It comes at a time when there are no effective ways to prevent or delay the progress of Alzheimer’s. And although the results are preliminary and must be viewed with caution, “it is a provocative study,” said Dr. Jason Karlawish, an Alzheimer’s researcher and ethicist at the University of Pennsylvania. But he and other experts caution that a bigger and longer study is needed to see if the initial results hold up and whether there are adverse effects that might negate any benefits.
“It’s important readers realize this is a pilot trial,” said Dr. P. Murali Doraiswamy, an Alzheimer’s researcher at Duke University who was not part of the study. “It’s not ready for prime time.”
The study, published online in the Archives of Neurology, included 104 people, a group small enough that the promising results could have occurred by chance.
Researchers at the University of Washington divided the subjects into three groups. One got a placebo, one got 20 international units of aerosolized insulin a day, and the third got 40 international units a day.
In the four-month study, the group randomly assigned to receive intranasal insulin twice a day either improved slightly or remained the same in tests of memory and assessments of their ability to handle day-to-day activities. The lower dose seemed more effective than the higher one. Those who received placebos got worse.
A third also had scans to assess their brains’ use of glucose. One hallmark of Alzheimer’s disease is reduced metabolism in the brain, which shows up on scans as less use of glucose, the fuel for brain cells. In this assessment, those getting insulin used more glucose in their brains; those taking placebos used less.
For years, the study’s principal investigator, Suzanne Craft, has studied insulin’s effects in Alzheimer’s. She is professor of psychiatry at the University of Washington in Seattle and director of the memory disorders clinic at the Veterans Affairs Puget Sound Health Care System.
Brain cells need insulin, Dr. Craft said. And conditions in which the body makes too little insulin or is resistant to its effects — diabetes, prediabetes, even untreated high-blood pressure — are associated with an increased risk of Alzheimer’s.
In addition, she said, beta amyloid, a toxic protein that accumulates in the brain of Alzheimer’s patients, seems to tie up insulin in the brain.
So, Dr. Craft reasoned, perhaps if more insulin could be put into the brains of people with the degenerative brain disease, their memories and ability to function might improve. The problem was to find a way to get more insulin to the brain but not to the body.
The solution was a special device made by Kurve Technology that delivers a spray of insulin deep into the nose. From there the hormone travels along the path of nerves into the brain.
The investigators first tried a single dose of insulin delivered via nasal spray to the brains of people with Alzheimer’s disease. Their memories improved temporarily. Then they tried giving insulin daily for three weeks. Again, the hormone seemed to help. That led to the current study, lasting four months.
But Dr. Martha Daviglus of Northwestern University, who led a panel last year that assessed published papers on preventing and treating Alzheimer’s, urged caution. In her field, cardiovascular medicine, she has seen many exciting findings in small studies that fall apart in larger or longer ones.
Now Dr. Craft wants to test insulin again in a much more extensive study. .
In the meantime, she cautions Alzheimer’s patients not to rush out and try to take insulin. It is too soon to say if the treatment is even safe, she said. And patients would need a special device to get it deep into the nose. Kurve’s device is not yet on the market.
“The individual person will not be able to get this device,” Dr. Craft said. But, she added, if her study goes forward, many will be able to participate in it.
I hope you enjoyed reading the above article. Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
Axa Equitable Pitches in an Online Game
By STUART ELLIOTT
Playing games online, known as online gaming or casual gaming, is becoming increasingly popular with marketers because it is becoming increasingly popular with consumers. Even companies in categories that have not been taking part in the trend are starting to, well, play.
A case in point is Axa Equitable, the insurance giant owned by Axa, which has introduced an online game devoted to demonstrating the need to buy life insurance. (Axa Equitable, it just so happens, sells life insurance.)
Putting the discussion in game form is an acknowledgment by Axa Equitable that most consumers are not keen to think about life insurance. So, too, is the incentive to play the game: a sweepstakes with two cash prizes, $25,000 and $15,000.
The game, called Pass It On, can be played on axa-equitablepassiton.com. (Visiting the Web site will generate a prompt asking you to install a Web player to view the content. Mac users can download the player here.)
The game and the sweepstakes are being promoted in a banner ad on the Axa Equitable Web site.
The game and sweepstakes went live last week and will run through Dec. 31. Axa Equitable is working on the initiative with a company in New York named BrandGames.
“Life insurance sales are at a 50-year low,” said Connie O’Brien, senior vice president for Internet strategy and development at Axa Equitable in New York. “And 11 million households with children under 18 don’t have” life insurance, she added.
So Axa Equitable is keen on finding ways to “educate, show people in real time” what life insurance may offer them.
The game and sweepstakes are also being promoted on blogs, Ms. O’Brien said, among them Mom Start and Cash Money Life.
I hope you enjoyed reading the above article. Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
Longevity Insurance: Buying Down the Risks of Living Too Long
Most people buy life insurance to protect against the risks of dying too soon. Now, there are new products offering the same protection if you live too long.
It’s known as longevity insurance, and there’s clearly a huge market for it: Life expectancies are on the rise, cushy pensions are on the decline, and most people don’t have enough savings to carry them through two decades or more of retirement. This is not lost on insurance companies, which would like you to think about the product as a pension of sorts — albeit one that you have to buy with your own money.
I wrote about the pros and cons of longevity insurance — which, at its core, is really just an annuity — at the end of last year. But now, New York Life will roll out its own version, which it’s calling a “guaranteed future income annuity,” on July 11.
So how exactly does it work? With basic immediate annuities, also known as income annuities, you give a pile of money to an insurance company in exchange for a lifetime stream of income that generally starts right away.
What’s different about New York Life’s product is that the stream of income is deferred — you pay the premium, but agree to receive the income stream at some point in the future. But there are two distinct ways to use the product.
With the first way, you might think about it as a way to prepay for an annuity (or a pension) well before you plan to use it. That makes it cheaper than an immediate annuity, because, well, there’s a chance you’ll die before you begin to collect. In addition, the insurance company has the advantage of investing your money over a longer period of time. You might buy the annuity at age 55, but decide to begin collecting it at age 67, for instance.
But it can also be used as a pure insurance policy — hence the name, longevity insurance. You can agree to begin collecting the insurance at a much later date in the future, like your 85th birthday. So if you live past your life expectancy, you’re covered. And since most people don’t know when they’re going to die, this allows you to spend down your retirement savings more liberally because you know your payments will kick in later. The big risk, of course, is that you won’t see a dime because you die before you can collect.
“Mathematically, it makes a lot of sense,” said Christopher Blunt, an executive vice president at New York Life, referring to the lower costs of using the annuity purely as an insurance policy. “It’s probably the most efficient and effective way of taking that pure risk off the table.”
So let’s take a closer look at some of the numbers. It would cost a 55-year-old man $100,000 to buy $1,000 a month in guaranteed lifetime income that begins at age 65, compared to $103,500 for a woman. (It’s more expensive for women because their life expectancy is generally longer.)
It would cost $122,000 to cover both partners’ lives, which is much lower than the $203,000 it would cost to buy an immediate annuity (at age 65).
But if a man decides to make those payments over ten years, investing $10,000 a year, his income stream might be slightly less, perhaps closer to $880 a month. That’s because the insurance company is investing your money for a shorter period of time (and there’s a higher likelihood you’ll collect the income stream with each passing year). Also remember that your payments will be influenced by the interest rate environment: if rates rise, you’ll lock in a higher payout rate, and vice versa.
If you want to use the annuity purely as an insurance policy, it’s much cheaper. It would cost a 55-year-old man $12,100 to buy $1,000 in guaranteed monthly income that starts at age 85, compared to $13,750 for a woman. It would cost a 65-year-old man $17,740, whereas it would cost a woman $21,600. To cover them both, it would cost $20,340 if they’re both 55, and $31,240 if they’re both 65.
That seems like a decent deal, until you remember that little bug called inflation – your dollars are likely to be worth a lot less that far into the future. One option is to figure out how much you’ll need in inflation-adjusted dollars and buy that amount.
Now, for some of the rules of the game: The initial premium payment must be at least $10,000, but subsequent payments can be as little as $100. You can make payments at any time up to 2 years before you start collecting payments.
You also have the ability to change your start date. So if you were to retire early, you could start collecting earlier, though your payments would be less. You’re also given one shot at deferring your start date, though you can’t defer the start of your payments for more than 40 years from your initial payment.
As for costs, a one-time commission of as much as 5 percent of the premium amount is extracted from the amount you’re ultimately paid.
There are obviously risks associated with any annuity. The most obvious is that you’re giving up control of a big pile of money, and you may not live long enough to collect. You have the ability to buy survivor benefits, but that will lower your monthly payments. For instance, you can arrange for a beneficiary to receive the money back if you haven’t begun receiving payments, or to continue to receive the payments for a certain period of time.
And then there’s the issue of inflation. You can also buy an option that will allow your payments to rise a certain percentage each year, but again, it will cost you. (There is also a feature that says if rates rise more than two percentage points within five years of buying the contract, the company will reset your contract at the higher prevailing rate).
And then there’s always the question of the financial stability of the insurance company many years into the future. Mr. Blunt pointed to New York Life’s triple-A ratings from each of the big rating agencies and said the company had $30 billion in life insurance reserves on people over the age of 65, and $5 billion in reserves on individual annuities. And since the company is a mutual (as opposed to a publicly-traded company), he said it could stockpile as much capital as it needed since it was not beholden to Wall Street and shareholders.
But what happens if Merck invents the magic pill and we all live until 105? “Continued improvements in medicine that allow people to live longer could create losses on our individual annuity business,” he said, “but these would be more than offset by higher gains on the life insurance.” Still, he added, if something like that were to happen, “at some point, capacity might be limited.”
What’s the biggest reason you would or would not buy this guaranteed future income annuity?
I hope you enjoyed reading the above article. Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
Long-term care insurance gets a makeover
By Reuters Money
Less than two decades ago, Meryl Comer and her husband Dr. Harvey Gralnick embodied the American Dream: He was a physician, while she had built a career as an Emmy-winning reporter, producer and broadcast journalist. Everything looked perfectly in place for their careers to soar, their nest egg to grow.
Then came the news any couple would dread: Gralnick was diagnosed with early-onset Alzheimer’s Disease at 57. Soon he couldn’t recognize Meryl, and the couple went into financial free-fall as Comer took over his round-the-clock care.
“Here we have two people without income, and all the financial planning we have in place has disappeared,” Comer recalls. “It’s a straight financial bleed. With dementia, you’re easily looking at $9,000 a month.”
How does she make it, then, considering the couple had no long-term healthcare plan? “I don’t,” she says. “I’m going broke. The house will go next.”
Comer, who serves as president of the Geoffrey Beene Foundation Alzheimer’s Initiative, has become an outspoken advocate of long-term care insurance — an option barely understood, if not downright ignored, by most American consumers, including an alarmingly large percentage of Baby Boomers.
With long-term care policies, the costs of assisted living facilities, in-home care and private nursing homes are covered, in many cases with inflation protection. But since not many people are signing up for policies, the companies that offer them are trying to make them more palatable. On Monday, Genworth Life Insurance Company launched Privileged Choice Flex, a long-term care solution that allows consumers to more easily choose an insurance plan that best suits their lifestyle and budget.
“It’s been 24 months in development and it will be another eight months before it’s fully available across the United States,” says Matthew Sharpe, Genworth’s long-term care product manager. “It takes a long time. We had three different products in the marketplace and combined them into one offering.”
Some features of Privileged Choice Flex include a shared benefit where a husband or wife can reach into their spouse’s portion of the policy for additional coverage. Even if a sick spouse exhausts the total benefit, the well spouse still maintains 50 percent minimum coverage, Sharpe says.
Privileged Choice Flex also allows access to Genworth’s new Live+Well, a wellness program run in partnership with the Mayo Clinic that provides tools, resources and services to long-term care policyholders, and their spouses or partners.
“We wanted to provide a feature that would be available immediately, and that fills the gap between employer benefits and a long-term benefit,” Sharpe says.
Genworth has been in the long-term care business more than 35 years, and was the first such provider in the U.S. Even so, the company has faced challenges educating consumers about long-term care policies because most people avoid the subject.
“Long-term care is definitely under-penetrated, there’s no doubt about it,” Sharpe says. “About 4 percent of the population that is eligible actually has a policy. But it’s a tough topic to broach. We’re still fighting this battle.”
“Long-term care is a growing, looming threat to retirement security,” says Whit Cornman, spokesman for the American Council of Life Insurers in Washington D.C. He cited figures from Genworth’s 2011 Cost of Care Survey, which shows a private nursing home stay rising 3.4 percent over the last year to $77,745 annually. That cost, Cornman says, “is only going to go up”— to a whopping $330,000 in 2040.
“It’s incredible,” Cornman says, “and really the only product that can help people pay for it is long-term care insurance. When you’re looking at retirement savings, a 401(k), or a pension if you’re lucky, it’s still going to be very difficult to save for retirement and still pay for long-term care.”
The eye-popping numbers explain why Jim Darguzis, a State Farm Insurance agent based in Shorewood, Illinois, bought a long-term care policy for his wife two years ago. The couple is healthy but Darguzis, 67, wants to make sure any potential health problems won’t impact his children and grandchildren.
“My mother was in a nursing home for two years and the cost at that time, 11 years ago, was $100 a day,” Darguzis says. Now it’s $175. He tells people that they’ve worked hard all their lives to accumulate a nest egg, and “the long-term care policy is designed to protect that nest egg, so they don’t have to spend what they’ve accumulated.”
Darguzis says a policy with 5 percent inflation protection for a 50-year-old male, offering $127,750 in lifetime benefits today, would more than double to almost $323,000 in benefits if long-term care begins at 70. The annual premium would start at $2,261, or less than $190 a month.
Those counting on the Affordable Care Act of 2010 to provide long-term care coverage shouldn’t wait. Such protections won’t be announced until later this year at earliest. “The law is still being written, and a lot of questions are being raised by the Congressional Budget Office and the American Academy of Actuaries,” Cornman says.
Meanwhile, Comer has a warning for those who’d rather roll the dice and hope their assets can cover a crisis like the one she’s endured. Today she not only cares for her husband, now in his mid-70s, but also a second family member with Alzheimer’s: her mother, who stays in the family dining room.
“If you’re 60 and rather act like 40, go for it, but don’t kid yourself,” she says. “Anticipate the future. Who wants to be remembered as a burden to their kids?”
Comer draws a long sigh. She pauses. Her voice conveys equal parts pain and imperative: “Anticipate, anticipate, anticipate.”
I hope you enjoyed reading the above article. Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
Plan for long term care for a dignified retirement
| Author: | Bronwyn Vermeulen |
The best laid plans can be derailed by unforeseen life circumstances
We all dream about a retirement filled with foreign travel, the joy of grandchildren and carefree days far from the trappings of a frenetic work schedule and the responsibilities that come with raising a family.
We all believe that we will lead better lives once we retire and hope that our health will allow us to fulfil all the dreams and leisure activities we’ve delayed doing.
Many people do. But many don’t! Key to a sound retirement is solid financial planning that takes into account all the eventualities that life can throw at us.
”Generally retirement planning begins as soon as one starts working by setting aside money in retirement annuities, pension schemes and various savings policies.”
”But even the best laid plans can be derailed by unforeseen life circumstances.”
”Given the statistics around lengthening life expectancies, it’s not unrealistic for a number of us to be to be ‘retired’ for as long as we have worked. Couple this with the higher risk of serious illness or chronic disease and a lifetime of retirement savings can evaporate very quickly,” says Craig Harding, managing director of Altrisk.
“Financial advisors need to be prudent in getting clients to take a critical look at whether they – and their families – are really financially prepared for the medical expenses and the costs of having home or facility care in the event of a prolonged or permanent illness.”
”Given the already severely overburdened and strained public healthcare system, chances are that a bad turn in a client’s autumn years could leave them dependent on their spouse, children, grandchildren or other relatives who may not be in a financial position to support them,” warns Craig.
”Home or facility care costs money and depending on the facility and the level of care needed, it can cost significantly more than their retirement savings allow for.”
Altrisk’s newest benefit – Long Term Care – caters for this exact eventuality. Bene?ts are payable after 65 and may be paid either directly to the insured or ceded to a care provider.
Children who have a particular interest in supporting their parents in need of care can take this cover out on behalf of their parents. In addition, a death benefit is available before or after the life insured’s 65th birthday.
”Long-term care insurance is designed for policyholders while they are alive and in need of care, giving them the flexibility and freedom to preserve their assets, lifestyle and dignity.”
”It’s a benefit that makes the golden years that much more manageable no matter what life throws at them” concludes Craig.
Long Term Care in a nutshell:
The policy can be ceded to the long-term care provider
- It pays a monthly benefit on the need for long-term care
- The benefit can be taken out by the children of the insured
- It offers a death benefit before and after age 65
- Benefits are payable while the insured is in long-term care after the age of 65 having met the impairment definition. Impairment means the inability to perform 3 or more activities of daily living.
- Long-term care means full-time care with a registered frail care facility, hospice or nursing home, or with a registered medical professional, on a contractual basis
- Full-time care includes direct supervision and assistance for at least 25 hours a week
- Partial benefit payments are paid where care is less than 25 but more than 5 hours a week on a proportional basis
At a glance:
- Maximum cover amount: the lower of 100% of previous earnings or R30 000 per month
- Waiting period: 1 month
- Term: For life
- Min entry age: age 19 next birthday
- Max entry age: age 60 next birthday
- Guarantee period: 5 years (fixed) or experience rated
- Voluntary escalations: 0%-15% of premium or benefit
- Claim escalation (optional): CPI (maximum 10%)
- Premium pattern: Level or 5% compulsory premium escalation
- There is one general exclusion – self-inflicted injuries
- The benefit is available as a stand-alone or ancillary benefit
- Premiums are payable during the waiting period but are waived while claim payments are being made.
- Previous earnings” refers to income at the time of taking out the policy
- For death before age 65, the amount payable is equal to the premium for this benefit at date of death x the number of months the policy has been in force.
- For death after age 65, the amount payable is equal to twice the monthly benefit sum insured
I hope you enjoyed reading the above article. Please feel free to contact me if you have questions or comments. Steve 954-640-6225 x113 or slippman@mackinsurance.com
