July 22, 2014

Thought for the day:

I always wanted to be somebody, but now I realize I should have been more specific.

Lily Tomlin

 

If you will read no further:

Too bad because you will miss a very profound message. But OK. At least take a moment soon to go to www.westlandinc.com and view our new website launched just a few days ago. It is designed for simplicity and functionality. Forms, information, proposal requests and access to information from our major carriers; all easily accessed in an attractive new package at www.westlandinc.com.

 

Thought for the week:

When compared to other investment options for liquid assets for medical emergencies the creation of a large asset from small deposits (life insurance) is a most desirable alternative.

Those who say that life insurance is a bad investment are not relating to real life.

Since everyone dies, we know exactly what the end result of a life insurance program is going to be. Because we don’t know when any individual will die, we don’t know how efficient the program will be.

•   Walt purchased a $1million life insurance policy at the age of 47 and died from a brain tumor at age 53. Anyone disagree that (no matter what Walt paid for it) he made a good investment buying that policy…an IRR of about 92% per year?
•   Sharon purchased the same kind of policy at the age of 63 and died at the age of 93. After 30 years of paying premiums….an IRR of about 4.5% per year. Should have put her money in a mutual fund. Who knew?

When you sell life insurance for a living you must concentrate on the “need”. That is what all the critics of insurance focus on. How expensive is it, and do you really “neeeed” it? You will sell only to those clients to whom you can effectively point out that the individuals untimely death will leave a significant deficiency in the financial condition of those he/she leaves behind. Then you must be convincing, and good at motivating them to take action to “purchase” the policy so the money will be there “in case” they die.

On the other hand, if you are a financial planner or investment advisor you can clearly see the value in your clients’ portfolio and to their family of having a portion of their assets “invested” in a life insurance policy. And the way you can tell if it is a good value is to know when the insured will die and then you can calculate the rate of return. In most cases the tax free rate of return is about 4.5% if one dies at age 93 and much greater (8.5%/yr.) if you are lucky enough to die at 85 and EVEN GREATER (24%/yr.) if you are EVEN LUCKIER and die at 75…..well, hopefully you get my point.

Now consider the risks of Critical, and Chronic Illness that (in many cases) occur before death. Just think of the rate of return on your money if you are lucky enough to have a heart attack or kidney failure or need a lung transplant after only 10 or 15 years of owning and paying for that policy. That is assuming your advisor was wise enough to make sure the insurance you were “investing in” contained an acceleration rider to access a portion of the death benefit while you are still alive and need some big bucks to cover the cost of that lung transplant. 

Westland Financial affiliated advisors are just such advisors because they are constantly being informed of the value of committing a portion of their clients’ portfolio to an insurance policy that creates large assets just at the time it is needed, no matter when that may be. And yet….if it is never needed, the heirs will think of them as a hero for doing such a good job of protecting the portfolio from life’s many occurrences that could have befallen their folks and maybe caused great damage to their portfolio just when it was about to make great gains in the upcoming bull market.

The End

 Watch this short video on Critical Illness

July 7, 2014

Thought for the day:
https://www.youtube.com/embed/uaWA2GbcnJU

 

If you will read no further:

If you are not just an investment advisor (or wealth manager) to your clients it is quickly becoming clear that you must become more knowledgeable about insurance and annuity products; when they are appropriate and how they work. Unless you have been specializing in insurance for years, it is wise to affiliate with a quality marketing organization (I have one in mind) that understands the business and the tax laws to be sure your client is properly served and taking appropriate advantage of the benefits available through the innovative products emanating from the insurance industry.

For example, no one should own life insurance that doesn’t provide access to the death benefit for terminal or critical illness. Start with your own insurance policies. Call Nancy Woo or Randy Masciarelli at (800)238-8144 for more information and assistance. You will be surprised at how simple it is to provide increased value for yourself and your clients.

Thought for the week:
As more and more of our planners are coming to us for insurance evaluations and fine tuning of their clients’ life insurance policies, we are noticing how often the tax implications are being ignored when policies are lapsed….especially when there is a large loan outstanding that is causing the policy to lapse without value.

When a policy lapses with loans against the cash value, it is not uncommon to see the owner incur an income tax as a result of “phantom income”. Any time a policy lapses or is terminated, the possible taxable gain is calculated by totaling the premiums paid, subtracting the dividends received (if any; as they are a refund of excess premiums) to ascertain the cost basis. Then find the difference between the cost basis and the cash value to determine if there is a taxable gain. It is not unusual to see policy loans ignored as they reduce or eliminate completely any net cash available; but this is where some glaring errors can be made. This is because interest has been accruing and added to the loan. So even if there is no net cash value to be received from the policy upon termination, the total loan actually represents the total cash value in the policy that is often in excess of the cost basis. For example, a $100,000 loan minus $80,000 in net premiums paid equates to $20,000 of ordinary income; yet the owner will receive no proceeds when the policy terminates. This is the “phantom income” and will sometimes represent significant gains and the carrier will issue a Form 1099R reflecting the taxable amount.

Before considering terminating a policy with a cash value loan or exchanging it for a new more efficient one, it is important to receive a statement of cost basis from the insurer so that any taxable income is known in advance; such information can then be used in the process of determining a strategy going forward….with no surprises.

Contact Randy or Nancy before allowing any client’s policy to terminate.

June 23, 2014

Thought for the day:
“How did you go bankrupt?” “Two ways. Gradually, then suddenly.” Ernest Hemingway the sun also Rises

If you will read no further:
Financial advisors are about showing clients and helping them to become financially successful. That means not losing what they already achieve while growing it more. That’s why it is important for you to understand risk in the real sense and learn how to incorporate insurance-based strategies in you clients’ portfolios.

Thought for the week:
Most of what I write in these weekly messages is inspired by what we are seeing day to day in our business and yours. In the past few weeks I have seen an increase in the number of requests for LTC quotes and information from advisors for clients who will have no chance of qualifying for an insurance-based strategy. In the conversation I always try to find out how long the person has been a client of the advisor. I shouldn’t do that though, because it always makes me sad when I find out that they are long-time clients and the condition that disqualifies them has only been recently diagnosed. This means that for the past several years or more they could have set up a plan that would provide significant extra income to cover the additional expenses for care that they now most assuredly know are coming.

I really don’t understand what some people don’t get about a 70% chance of needing long-term care and why an advisor thinks his client can ignore it. Certainly it is very easy to say, “I/you can afford to self-insure” when one is healthy; but it is quite another when it’s time to “belly-up” to a $7,000 or $8,000 (or more) per month care bill. And write the entire check from estate assets for “I-don’t-know-how-long”.

For years we have been focusing on growing assets with a time line that is 10, 15, 20 years or more. Now each day we have clients who are focusing on living off of those assets and many advisors haven’t come to grips with the financial risks awaiting their clients that have little to do with market volatility. All that does is increase the consequences of not preparing. Then eventually, one-by-one the calls start coming in from clients and family asking us to look into some long-term care insurance, “Dad was just diagnosed with Parkinson’s disease”. That’s the call I got on Wednesday. What? All of sudden you don’t want to self-insure????

The same thing goes for income planning. The investment gurus tell us that we should be able to receive an inflation adjusted income from our assets of 2.5 – 4% that will last all of our lives. Sure, if we die at life expectancy (85 – 87). What about 93 – 94? What about the increased uncertainty that an 88 year old lady will endure if she has no guaranteed income? How comfortable is she with the economic news at that point?

If all of your clients have income generating assets in excess of $5million and have unremarkable lifestyles, annuities may not be necessary although the research tells us their lot can be improved if their portfolio includes them. But if you have some smaller clients with $1- 5million you should be moving assets into index annuities and SPIAS like crazy. It’s coming up on 7 years since the last major correction (oh wait, that was “the worst downturn since the Depression). Do you remember what it was like to deal with your clients then? You do know that they are 7 years older now. The 78 year old lady is now 85? Think she will be scared when the next one happens? How will her portfolio perform? How will her capacity to pay long-term care expenses hold up? What will you be telling her and her family about how you have prepared her portfolio to weather the times.

So my point is? Don’t ignore these facts, for yourself or your clients. Don’t let your clients brush you off too easily on these issues. They don’t want to think about the bad things any more than you do. But you know better; and it is your job to convince them to do the right thing.

We can help you.

Consider the retiring client with $1million in financial asset to provide additional retirement income in addition to their Social Security. 70% is in an IRA and 401k; and the rest non-qualified invested $200k in CDs & govt. bonds, and $100k in Blue Chip Stocks, The IRA is 60% stocks and 40% bonds and you will continue to manage that so that he can receive as much income as possible without outliving it. So we are talking about a retirement income her of $35,000 plus another $20k from Soc. Sec. for a total $55k. Hopefully, their home is paid for so their basic expenses are a couple thousand dollars a month less than they might be. If not, perhaps a reverse mortgage is in their future.

This will all work fine until
1. The market crashes
2. One or both of them gets very sick or takes a serious fall
3. Or dies

May 28, 2014

Thought for the day:
“It has long been my belief that the sight of a good-looking woman lowers a man’s IQ by at least 20 points. A man who doesn’t happen to have 20 points he can spare can be in big trouble.” Thomas Sowell

If you will read no further:

If I didn’t already have a paid up long-term care insurance program for me and my wife, I would allocate a $1million fund to provide extra tax free income to pay for our care, regardless of what kind it would be or where it would be provided.  (Since I have been doing this for over 20 years, I often see the kind of bills people are paying for care, so I am probably more sensitive to the incredible financial impact that homecare will have on our finances.)  I won’t have to reallocate that much all at once because I am leveraging some of my investments into a special tax free fund that instantly creates the $1million LTC fund. In the long run it won’t cost me anything to make an annual deposit from cash flow or just move assets from another investment.

At our age and still in good health our annual deposit would be about $25,000.  That would assure that $1million would be available (tax free) if either or both of us were unfortunate enough to need care for a long time; or $500k would pass to our kids if we never needed it for our care.

I did something similar recently for a 72 year old gentleman whose daughter was on his case about making sure there was money available in case she needed to get care for him someday. We set him up with a $300k life policy with a long-term care rider.  He’s depositing $10,500 per year.  If he ever needs care his daughter can draw down up to $12,000 per month.  If things work out the way he plans and LTC is never major issue, any amount of the $300k not used for his care will be received by her upon his death.  All tax free and everyone is happy.

Thought for the week:
If you spent any time hanging around our offices you would notice how happy we are to see the annuity sales coming in.  It appears that advisors are finally recognizing the value of these interesting.  Clients who have limited assets to fund their retirement (not your fault, they obviously did not get with you until it was too late to really build their retirement assets to your typical level of expectation) need to get as much as they can out of the portfolio.  One of the best ways to do that is to annuitize a portion of the assets and realize a substantial improvement in after-tax cash flow.  So now we can let the rest of the money grow for a while and only tap it for special needs or to offset inflation. 

Most advisors who have been around for a while have a view of fixed annuities based on their original introduction to them 10 or 20 years ago. In fact, for many years, few advisors would ever recommend someone actually purchase annuity income. Today, the carrier’s ability to increase fixed interest rates and guarantee an increasing principal is enhanced by incorporating the addition of derivatives to the portfolio of bonds that back the annual interest. This raises the fixed return without adding risk. The income is determined and generated by combining life expectancy tables with amortization tables to provide the income guarantees without making the client commit his money forever; hence the Guaranteed Lifetime Income Rider.
Even the old style SPIA is enhanced by better actuarial accuracy, combined with the carriers ability to get better returns out of their portfolios while maintaining the same degree of security and predictability which is then passed on to the client.

If the client is still several years away before he needs to take income from his assets, you should definitely consider placing a portion of his portfolio into one of these amazing deferred income products. Call Josh (or email him joshvh@westlandinc.com) to have him take them. Trust me, by the time he finishes telling you how these things work, you will be setting one up for yourself. Once you place some of the client’s money into this unique plan, your client will no longer be bugging you about portfolio volatility. And finally, the ultimate (in my mind)…the ability for the advisor to continue to receive and asset based fee in addition to a one-time up front commission.

This is good stuff.

May 12, 2014

Thought for the day:

“As long as they are keeping score, we might as well try to win.”   -Geno Ariemma – Univ. Conn. Girls Basket Ball coach. 

 

If you will read no further:

Family Home Auto

Which of these three are the most important to you?

Which of them are the most adequately insured?

 

So your young new client with a family and a budding career wants to get serious about his retirement and needs your advice. He’s maxing out his 401k at work but knows he needs to do more. Are you going to tell him to invest each year in a taxable managed portfolio to build retirement assets that will incur more taxes each year as he gets nearer retirement? Or will you set him up with a personal security strategy that will accumulate a tax deferred non-qualified retirement fund that will instantly mature for $1million or more if he gets sick or dies before his family is grown and he reaches retirement age.

All of our carriers offer these new style products that will predictably perform better than the typical retirement strategy, particularly when you consider current taxes, market volatility and risk and ultimately provide predictable after-tax lifetime income. Begin by getting a case design from Nancy or Randy for your young clients and compare with other alternatives you might show them. See what a great foundation plan this can be to help build family and retirement security.  

It’s certainly not your father’s life insurance anymore.

 

Thought for the week:

How long will it take you to turn $150,000 into $329,000guaranteed and tax free?  That’s a 5.4% (6 -7% tax equivalent) rate of return over 15 years.  I just placed this life insurance policy on a 73 year old man who truly believes he will avoid ever needing long-term care; but he heard about these life insurance policies that he could leave for his daughter or use for his own care if it turns out he is wrong.

What will you say when your good client calls?

“Hey John, this is Roger.  Helen had a stroke a few weeks ago and it looks like she is not going to rebound as we had hoped.  She is home now but needs a lot of care and that’s just not what I do well.  I have hired a caregiver but it looks like it’s going to cost about $4,000 per month. Do we have insurance for that?”

“No, Roger.  Remember, we agreed you could afford to pay for it yourself?” 

“Hmmm, I don’t remember that; but if you say so….  The problem is the doctors say she is going to get progressively less capable and I’ll probably have to have someone here at least 16 hours a day.  That’s going to bump the cost up to over $8000 per month.  I don’t want to put her in a nursing home.  Are you sure we can’t find some insurance for her?”

“Unfortunately, not.  We’ll just have to start liquidating your portfolio.  Hopefully it will be enough to last longer than she does.”

Had Advisor John worked with Westland to reposition a portion of Roger’s portfolio several years earlier while Helen’s health was still good, his response could have been more like….

“Oh, I’m so sorry to hear that, Roger.  But yes, we do have a plan in place.  Remember we moved those two CDs into the insurance contract several years ago?  So we can begin by submitting a claim and collect as much as $6,200 per month.  By the way, if you need some help coordinating her care, the insurance company will provide that for free.  One call and we can take care of everything.”

We have been hearing of a lot positive stories as advisors tell us of the claims they are making on the MoneyGuard and TLC policies they placed in their clients’ portfolios a few years back.

Now we have several different linked-benefit products to fit a variety of circumstances from Single Premium plans to multiple deposits to lifetime “investments”….all of which will create an impressive return to your client whether or not long-term care is actually needed some day. 

You should never have to tell your client there is no plan to help pay for their long-term care. 

April 28, 2014

Thought for the day:

“You can’t have a better tomorrow if you are thinking about yesterday all the time.”                                                                                                Industrialist Charles Kettering

 

If you will read no further:

At Westland Financial we have always promoted win/win solutions to clients’ financial planning challenges. Like introducing Universal Life providing current value to the client, profitability to the carrier and fair compensation to the advisor; creating and promoting MoneyGuard which provides a win, win, win for Client, carrier and advisor. For almost 10 years I have been calling for an annuity that would provide the lifetime guaranteed income guarantees of SPIAs while compensating the fee-based advisor with annual asset-based fees instead of one time commissions. And now we have it. 

Now you can provide your retired client with greater income, increasing with inflation, guaranteed for life and include it into his managed portfolio without affecting your own cash flow. Read on for more details; then call Josh at 800.238.8144 for specifics and case design assistance.

PS You might as well read it now. Ultimately, you will be embracing this concept. Sooner is better.

 

Thought for the week:

A revolutionary (non)Variable Annuity

Most VAs since the late 90’s have been purchased because of the income riders that guarantee an acceptable lifetime income regardless of the performance of the underlying securities portfolio. The client gets the advantage of participating in market returns but is assured that when it’s time to receive a lifetime retirement income, he can count on the value of his investment (for purposes of establishing the size of that monthly check) having appreciated at no less than 5% (or something close). This is the most popular annuity product ever. Why? Because the clients can indulge their desire for stock market gains while assuring their guaranteed income.

In most cases however, the growth in the investment account has been less than impressive. In the best of markets it’s difficult to grow the account at anything over the rates guaranteed by the income riders when you subtract various fees that can exceed 3% from the returns achieved by the required asset mix. All of that and the client’s principal (for liquidation purposes) is still at risk.

Introducing the latest innovation in Personnel Pension strategies!

For the client, the product provides:

1. Protection of principal
2. Respectable growth in all market scenarios
3. Guaranteed Lifetime Income (if desired) that can offset inflation.

For the Advisor, it provides a way to:

1. Reduce portfolio volatility and uncertainty
2. Provide clients with assured income for life, if desired
3. Receive asset based compensation

The oldest and largest producer of Equity Index products has developed the next generation of retirement products and is making it available only to licensed investment advisors and high end professionals with professional designations. The sophisticated nature of these products is immediately evident and clearly must be presented by knowledgeable individuals.

• Imagine a product that uses the Barkleys Strategic Bond Index in combination with the S&P index to increase upside potential while guaranteeing NO LOSSES.
• Imagine if your client could receive each year, the total upside appreciation of their investment less a 2.9% spread, but for future income purposes that annual realized rate of return is increased by 50%.
• Imagine if you can assure them that their principal is 100% safe from any market correction.
• Imagine the client’s lifetime income will increase each year by the same rate as their account value. For example:
  • The index increases by 6.9%, their account value increases by 4% (6.9 -2.9 spread = 4%)
  • Their retirement income increases by 4% the following year and will continue to receive like increases in subsequent years.
  • Imagine earning an asset-based fee the same as your AUM.

Check out this Sample Case 

My client is 67 and has $150k in a variable annuity with a GLWB rider. Because the carrier requires that 40% of his assets must be in bonds it is difficult to receive much over a 9% combined ROR, even in a very good year. Subtract the fees of 2.5 – 3% and his “up year” maxes out at a little north of 6% with no guarantee it won’t go south next year.

Since time is getting short for my client to take income (about 7 more years) I suggest that he lock in his gains to date by “1035ing” his balance into this State-of-the-Art product,, continue to increase the value for retirement income purposes and never see his cash balance recede; no matter how badly the next bubble may burst.

He ends up with a less expensive and more predictable retirement plan, protection from loss of principal and a more robust pension strategy going forward…and I get a raise in income. 

Call Josh. You have his number.    

April 15, 2014

Thought for the day:
Ability is what you’re capable of, motivation determines what you do and attitude determines how well you do it.” Lou Holtz

If you will read no further:
You are correct when it occurs to you that everywhere you look today is seems like financial advisers are discussing Social Security strategies, retirement planning and the inclusion of annuities as a part of their recommended strategies. No one is a better resource than our own Josh Ver Hoeve the human annuity encyclopedia. Call Josh (800)238-8144, for help with a retirement plan design or a second opinion on an existing annuity recommendation. You cannot rely on product information that is more than a week or two old as changes occur daily. In fact, lately Josh has had to refresh his knowledge each time when he returns from lunch. So when you call Josh, you know you are getting the best.

Important announcement:
Please welcome Mikah Fitzpatrick, our newest addition to Westland. She will be responsible for making sure you are properly licensed and contracted with each carrier as needed. She will also be working with Cynthia to make sure your business is processed as quickly and accurately as possible. Which reminds me; make sure you have your insurance license(s) in force and your CEs for LTCi and Annuities are current. Do not forget to take carrier specific product training prior to writing an annuity application. This is required in just about every state and for every carrier. If you are not sure, send a note to Mikah at Mikahf@westlandinc.com and she can quickly check it out for you.

Thought for the week:
You know how occasionally you wake up in the morning with a fresh idea, significant revelation or remembering an important item? This morning when I opened my eyes it occurred to me that this is the 40th anniversary of Westland Financial Services, Inc. In April 1974 the month of Fools Days (1st and 15th) we created a company that would ultimately play important roles in the development of the financial services industry. And over the years we have in fact, created an impressive record.
• We were the first insurance marketing company to form a vendor relationship with a securities broker dealer to provide insurance and annuity education and products to their representatives. That broker dealer was Private Ledger; now LPL Financial, one of the largest in the industry.
• We played a prominent role in the national rollout of Universal Life which, because of us, caught hold with Financial Planners well before it was accepted by life insurance agents.
• We were the first to create single premium polices using Universal Life to store Legacy Assets, accumulate them at competitive rates of return without taxes, with substantial liquidity and pass income tax free to the heirs. It was three years before the rest of the industry embraced SPWL.
• And most significantly, we developed the concept of Linked-Benefit Life in the form of Assured Care which became MoneyGuard which became the granddaddy of an entirely new product segment to address long-term care and has consistently increased yearly sales, currently exceeding $2Billion.
• We continue to lead the country in our knowledge, understanding and access to the best of these products like TLC from Genworth, Asset Care from State Life, Asset Preserver from New York Life and the Life Care rider from John Hancock.
• We provide leading edge services for conventional LTCi insurance as well, keeping the financial advisors current and exceptional in their recommendations to their clients.
• And now the latest innovation in life insurance is the accelerated benefit rider. No one should be paying for life insurance with a death benefit they cannot access early for chronic illness, critical illness or terminal illness. Our life department is unexcelled in the inventory and knowledge of the best of these products.

I tell you all this for two reasons: first, because I am proud of Westland’s people and our rich history; and second because I want to emphasize the leading edge nature of our unique company.

In an industry where all competitors have the same products paying the same commissions requiring the same administration to consummate business, Westland has consistently demonstrated a level of sophistication and professionalism that excels among our competitors. Who you rely on for assistance in recommending and placing your insurance business should be someone you would hire If you were creating your own “in house” insurance department. That is the caliber of knowledge and service we provide.

With the constant changes and innovations coming from the insurance industry now and in the years ahead, Westland Financial Services will continue as the leader in insurance and retirement planning.

March 31, 2014

Thought for the day: 

“Government, like fire, is a dangerous servant and a fearful master” 

                                                                                    George Washington

 

Just a Thought:

If you like this BLOG, why not share it with other professionals who might enjoy it.  Forward it to them and encourage them to sign up; or send us their email address and we will forward this issue to them and encourage them to become a regular reader.  While you are at it, go on and sign up yourself so you can receive these automatically and respond with timely comments.

 

If you will read no further:

Many financial advisors who read this BLOG do not consider Insurance and Annuities their strongest area of expertise. But their clients rely on them to make sure they have the insurance products they need and that they are suitable. If your clients have to die for their loved ones to collect they will not be happy when they find out you did not tell them about the kind of product that would have paid them while still alive had they become permanently disabled, critically ill, or terminal-but-not-yet-dead.

It’s time for all of your clients to get an insurance check-up because most of them have the wrong kind of life insurance. To make sure they don’t continue to pay for insurance that is yesterday’s news and grossly inadequate, collect their policies or pull their information from your client files and let us take a look. We will provide a current evaluation, tell you if improvements can be made and offer alternatives that are more like the I-phone then that clunker from 20 years ago. Call Nancy Woo or Randy Masciarelli to help, 800.238.8144

 

 

Thought for the week:

The economy that we have been experiencing since 2008 involving historically low interest rates and five years to recover what has been lost has some implications of which we should all be aware, or the impact on many of our clients and perhaps even on our practices will be tragic.

Think about it;

• We have an ageing Bull Market that is pushing the historical limits and looking at the next Bear.
• Our clients are retiring and are expecting us to help them support a comfortable lifestyle.
• Our clients no longer have the singular goal of building their wealth for future use.
• Our clients expect us to position their assets to provide income they won’t outlive, additional income when needed to help pay the increased cost-of-living when they become infirm; and pass a legacy to heirs who are facing an even more uncertain future and can use all the financial help they can get.

As investment advisors, we have historically faced one most significant risk….Market Risk. With diversification, asset allocation and intelligent strategies we help our clients overcome Market Risk and successfully build their wealth.

But now there are many more risks that must be addressed once the client retires and must live on the wealth you have helped him create; Inflation Risk, Deflation Risk, Withdrawal Rate Risk, Sequence of Returns Risk, Long-term Care Risk, Regulatory Risk, Taxation Risk and the granddaddy of them all, Longevity Risk.

Longevity Risk… the risk of outliving our income. But that’s not all. The longer we live, the more opportunities for market losses, the greater the possibilities of running out of money, the more significant the Sequence of Return issue and the greater the likelihood of needing long-term care.

The most important strategy therefore is to remove the Longevity Risk from a retiree’s portfolio so that you can eliminate, or significantly reduce most or all the rest; and concentrate on continuing to earn them a respectable return on their investments.

Stock markets and other investment instruments are never expected to specifically address these issues. And many successful individuals will die poor when their investments are unable to meet all of their requirements in an environment of volatility and uncertainty. Only insurance companies are able to eliminate Longevity Risk. They can do this successfully because they also deal with Mortality Risk. They win when people with life insurance live a long time and they win when annuitants die too soon. Everything in the middle is just a calculated profit. No other investment or institution can do that.

Some clients have so much money they cannot possibly out live it if you simply stuff it in the mattress. But most need you to help them position their assets, take the Longevity Risk off the table and cover the extra cost needed when they require long-term care.

I’m not suggesting that investment portfolios should be replaced with insurance policies. But there is no doubt that your retired clients will be much better off when their portfolios include a guaranteed Pension Income floor that eliminates Longevity Risk and insurance strategies that increase income when needed to protect their portfolio from decimation due to excessive health care costs and even provide a more efficient and predictable solution for leaving a financial legacy.

Most planners admit to modest knowledge of the insurance industry, its unique products and the many sophisticated strategies that can be employed to address these retirement-based concerns. So they continue to rely on the investment concepts they have employed for years to grow assets; when what is really needed are concepts for their retired clients to spend assets sufficient to provide the best possible life style without running out of money before they die.

Let us help you take clients’ Longevity Risk off the table, increase the security and predictability of their retirement income, and reduce their stress. Call Josh or email him at  Joshvh@westlandinc.com.

March 17, 2014

Thought for the day:

“I think it is just terrible and disgusting how everyone has treated Lance Armstrong, especially after what he achieved, winning seven Tour de France races while on drugs.  When I was on drugs, I couldn’t even find my bike”….  Willie Nelson

 

If you will read no further:

We talk a lot in these weekly presentations about the importance of providing retirees with a dependable retirement paycheck in the form of a life annuity that places a monthly income directly into their bank accounts.  There are many reasons for including an annuity in the portfolio including the high rate of tax free income and the peace of mind one gets from knowing it will last as long as they do, regardless of market conditions or world events. 

But here is one very important feature of a SPIA that hasn’t occurred to me in years.  SPIA income provides maximum protection from fraud, financial abuse by children, friends or relatives and from other financial choices gone wrong. 

The 83 year old lady whose son keeps asking her for $100,000 to start his business would be much better off if she had a SPIA that paid her a lifetime monthly income that prevented her from making an unwise investment decision and moving money into the “dark whole” in the first place.

 

Interesting Stats:

A recent poll of financial planners and clients rated the top four risks in retirement.  They were:

            Planners                       Clients

1. Longevity                      Healthcare
2. Volatility                       Inflation
3. Healthcare                    Volatility
4. Inflation                        Longevity

…which bears out our experience talking with clients about long-term care planning and the reactions to our workshops on LTCi and linked-benefit plans.  Eventually all clients want to talk about how to get an insurance company to pay their long-term care bills.  The conversation will be worthwhile only if it occurs before they get too old or too sick.

Then there are the claim numbers.  In 2013, over $7.5billion in long-term care claims were paid to over 273,000 individuals, according to the AALTCI.  But we have another indicator of the scope of this issue.  The number of calls we receive from advisors trying to get insurance for their clients who have serious health issues and are facing a long-term care event is rising significantly.  Many of these are from advisors who have ignored the issue, believing the client could pay the cost themselves.  But when the time comes to face these costs, everyone wants to have them paid by an insurance company.

 

Thought for the week:

My associates are telling me that I have failed to emphasize enough, the availability of Annuity Care from State life.  While I believe a life insurance based long-term care strategy is the best way to go for folks who have sufficient resources to commit to it, the annuity-based version is simple and easy to understand.  It’s just an interest baring account that does as well as a CD but much better when the time comes to pay for long-term care.

You have clients with money in banks or money market accounts that clearly would be the first resource their family would turn to if they need to pay long-term care bills.  Their money is safe and available and they are earning a modest taxable rate of interest.  What if you could tell them that account could double or triple instantly if they ever needed to tap it for long-term care?  Using Annuity Care from State Life, they can continue to hold the money in a safe depository that pays a modest interest rate.  But now, they will no longer receive that pesky 1099 on that pitiful amount of interest and if they need care, they will have access to as much as two or three times the account value.  Call us at (800) 238-8144 and tell Peggy you want to talk to someone about Annuity Care.  She will put you on the right track.

March 3, 2014

Thought for the day:

Some of the world’s greatest feats were accomplished by people not smart enough to know they were impossible.                                                              Doug Larson

If you will read no further:

From Harvard Professor Dan Gilbert:

As Retirees age, those with annuitized income are more satisfied then others living exclusively off Social Security and their financial portfolio.  Retirees who rely solely on a defined contribution plan to fund retirement are significantly less satisfied with retirement. The importance of automatic retirement income is consistent with my own studies on declining cognitive abilities in advanced age as well as the simple intuition that managing an investment portfolio and deriving an appropriate income takes work that might be better delegated to a pension manager or automated through the purchase of an annuity.

Read his entire paper, “What Makes A Successful Retirement”  here.

Important Trivia:

Bernie Madoff’s victims are beginning to receive reimbursements for their losses from the Madoff Victim Fund which, in addition to liability settlements from major investment banks, includes funds from auctioning off Madoff belongings such as luxury homes, boats and 14 pairs of boxer shorts. Madoff’s underwear fetched $200.

Thought for the week:

For the past week now I have been participating in a discussion on a LinkedIn interest group on the legitimacy of suggesting that a client purchase life insurance on his/her parents so that when they die, the client will receive a huge lump sum that can go far in enhancing their own retirement. Many of the participants expressed disapproval of someone actively attempting to benefit from their parents demise. I have my thoughts on that, but am not interested in discussing the morality of it.

What does interest me however, is the planning sense that is made out of insuring ones parents. Look at any insurance illustration and you can see the predictable rate of return generated by “investing” in premiums for a policy on a healthy senior’s life. The only unknown is when the person will die so that the actual ROR can be calculated. Click here to see illustration. No one objects to receiving an inheritance. No one objects to parents investing money to grow that inheritance. Investing in insurance that grows the inheritance definitely has merit. And for sure, it is a good idea to protect the inheritance by using life insurance to pay for long-term care costs or for estate transfer costs.

I have had a large insurance policy on my mother for many years. It can be tapped to pay long-term care cost if she needs it, or it will pay a respectable return to me if she doesn’t. The bottom line, my sister and I have not had to worry about paying to take care of Mom should the worst happen. Mom is 91 now and each year she lives is a joy. The fact that my rate of return on her policy is going down is a small price to pay for having her with us that much longer. Another example of how life insurance is a win-win.

 

And finally:

The “January Predictor” says, how stocks finish in January determines how the market will finish the year. Well, the Dow ended 5.3% lower than it was at year-end and the other major indices were also down, so 2014 will end on a down note…or will it? In the last 115 years the Dow finished up 74% of the time when January was up, but it also finished up 52% of the time when January finished down. It appears the January Predictor is no better than a coin flip, so we need to use science.

The “Super Bowl Indicator” says when the NFC team wins, the market will be up and if the AFC team wins the market will be down. Football science says since Seattle won the market will go up. However, this indicator has more loopholes than a Congressional budget bill. Indeed, when the Rams beat the Titans in 2000 the Dow lost 6%; even though the Giants won in 2008 the Dow dropped 34%.

Maybe you should buy an index annuity and wait for baseball?