Monthly Archives: March 2015

Looking for a retirement edge? Get a financial advisor.

According to a report published by Empower Institute, retirement savers looking for an edge in achieving lifetime income security would be well advised to seek out an advisor.

The survey included roughly equal numbers of men and women, ranging in ages from 18 to 65. The educational level spanned the spectrum from high school to graduate school.

The study provides a Lifetime Income Score (LSI) and measures the impact of various factors including the use of an advisor, the use of planning tools and the savings rate

An LSI of 100 means that the retiree has replaced 100% of his or her pre-retirement income. Scoring under 100 means that your retirement income is less than your pre-retirement income. Over 100 means that your retirement income exceeds your pre-retirement income.

People who work with a paid advisor have a nearly 30 percentage point advantage in their “lifetime income score” (LIS) over those not currently receiving professional advice. Additionally, people with an LIS of 100 or more are three times more likely to be working with an advisor than those with an LIS less than 45.

The report, based on a survey of more than 4,000 respondents … found that with a formal, written action plan in place, LIS results improve significantly. The data show that people with a documented strategy are on track for a much higher LIS, and clearly advisors also play a key role in the development of a retirement planning strategy.

That rate at which individuals save has a major impact on their retirement income. Retirement savers who put away 10% or more are on track for an LSI of 106.

In addition to creating a plan and tracking how families are doing versus their goals, advisors help client make wise choices about ways to increase savings without impacting lifestyle. Advisors provide planning services which people without advisors often skip. When it comes time to apply for Social Security benefits, financial advisors can advise their clients on strategies that maximize their lifetime income.

The bottom line is that using a financial advisor as part of your pre-retirement strategy is a wise investment in your future.

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How to connect with your spouse about finances

Too many spouses don’t share enough information about family finances. It’s not unusual for one spouse to take care of investments and pay the bills. The other spouse may not be interested or may be too busy. It’s a fact that not everyone is interested in investing, budgeting or banking.

But this can lead to a bad outcome in case of death, divorce or separation. In fact, money is one of the top 10 reasons for marriage breakdown.

Money or anything related to finances can be a possible cause of disagreement between many people – including couples. Married couples, whether they are happy or not, may have disagreements over little financial issues to much bigger shared financial responsibilities or unequal monetary status. Money may not always be the principal cause but in fact is usually combined with other forms of reasons for divorce. In any case, it is still a significant contributor and should be managed with fairness from both sides, mutual understanding and a tiny dose of compromise.

But even couples that are financially compatible should sit down from time to time to review their financial situation. Our books: BEFORE I GO and BEFORE I GO WORKBOOK were written to help people do this.

If there is a difference in the financial mind-sets of a couple, a financial advisor may be able to act as a facilitator to reconcile the differences.

A financial advisor can educate the couple about investing, budgeting and retirement planning. Regular meetings with a couple’s financial advisor provide them with the opportunity to share critical family financial issues, keep everyone informed and help resolve issues before they lead to conflict.

Having a trusted financial advisor in place, one who is already familiar with a couple’s finances, can also help in case you find yourself “suddenly single.”

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What are the least expensive cars to insure.

When you get ready to buy that new car one of the issues you should consider is: how much is it going to cost to insure? Insurance rates vary widely by state, the age of the driver, the driver’s accident history and the kind of car her or she drives. All things being equal, cars that are less expensive to repair and have fewer claims cost less to insure.

Below is a list compiled by “” for a 40 year-old male with a good driving record. The premium is the average of premiums throughout the country.

10.Ford Escape S 2WD
$1,190 average annual premium

9.Smart FORTWO Pure
$1,186 average annual premium

8.Ford Edge SE 2WD
$1,176 average annual premium

7.Subaru Outback 2.5i (tie with No. 8)
$1,176 average annual premium

6.Jeep Compass Sport 2WD
$1,164 average annual premium

5.Honda Odyssey LX
$1,163 average annual premium

4.Dodge Grand Caravan SE Plus
$1,162 average annual premium

3.Honda CR-V LX 4WD
$1,160 average annual premium

2.Jeep Patriot Sport 2WD
$1,136 average annual premium

1.Jeep Wrangler Sport 4WD
$1,134 average annual premium

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Survivors’ Income

We are frequently asked to help people whose spouses have died to help settle the estate and plan for life as widows or widowers.  One of the big questions that they face is determining what it costs to live as a single instead of a couple and where the income is going to come from.

We wrote a book specifically designed to help answer those questions.

Below is from page 53 of BEFORE I GO – WORKBOOK

Keep in mind that it’s a lot easier to determine the answer to many of these questions ahead of time, while both husband and wife are still living, and access to information about survivors’ pension benefits, social security income and annuity income are easy to determine.

For a copy of BEFORE I GO and BEFORE I GO – WORKBOOK contact us or order it from

My Survivors’ Income:

Social Security:         $__________________
Pension income #1: $__________________ Source:_____________________
Pension income #2: $__________________ Source:_____________________
Pension income #3: $__________________ Source:_____________________
Annuity #1:                $__________________ Source:_____________________
Annuity #2:               $__________________ Source:_____________________
Other Guaranteed:   $__________________ Source:_____________________
SUBTOTAL GUARANTEED: $__________________

Interest Income:       $__________________ Source:_____________________
Dividend Income:    $__________________ Source:_____________________
Rental Income:         $__________________ Source:_____________________
Business Income:     $__________________ Source:_____________________
Other:                         $__________________ Source:_____________________
Other:                         $__________________ Source:_____________________
SUBTOTAL PORTFOLIO: $__________________
GRAND TOTAL:                   $__________________


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Buy low and sell high

Remember the old adage about how to make money in the stock market? It’s “buy low and sell high.”

This is done over the long-term on a regular basis if you are disciplined and adhere to an asset allocation strategy.

Assume that your ideal portfolio is 50% stocks and 50% bonds. If stocks have a good run and the stock portion grows to 60% and bonds are now 40% you sell some of the stocks that have given you a nice profit and bring the portfolio back into the 50/50 balance.

Suppose the opposite happens: the stock market declines and the portfolio now consists of 40% stocks and 60% bonds. Now you sell some of the bonds to buy more cheap stocks, bringing the balance back to 50/50.

In this way it’s possible that you can make a fair return on your portfolio even if – over the long term – neither the stock or bond market actually rises but simply fluctuates.

For disciplined long-term investors, this shows “the importance of continuing to invest when the annual return stream is uneven and especially when stocks are down,” writes Carlson, an investment analyst at the Van Andel Institute in Grand Rapids, Mich. …

In plainer terms, a steady infusion of capital in good times and bad is better for portfolio performance than turning the spigot on and off in reaction to the inevitable ups and downs of the bourse. For Carlson, discipline in bear markets is more important than “optimizing” externals such as investment costs and tax efficiencies for separating “successful investors from the crowd.”

Interested in a disciplined approach to investing?

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Market volatility and the economy

The stock market is in one of its manic phases, with the Dow Jones Industrial Average moving 100 – 200 points daily, both up and down.  This makes people nervous.  Traders are reacting to headlines.  One day its the Euro, the next it’s Greece, or the Fed promising to raise rates.  All this noise obscures what’s really going on.  The economy is actually getting better.  Jobs are getting better.  Corporate America and Main Street America have shed lots of debt.

Statistics are hard to understand.  So here’s a story that may tell you more about the economy than all the talking heads on TV:  Domino’s Pizza.

The CEO of Domino’s is Patrick Doyle.  They employ 250,000 people and sales have climbed from  from about $2 billion to $9 billion in five years.

Mr. Doyle has helped take the company global, with stores operating in 80 nations and expansion plans throughout Asia. In sales, Domino’s is now the No. 1 restaurant chain in India. Sub-Saharan Africa is also among the company’s fastest-growing markets, with a billion people and a growing middle class. “We’ve discovered Africans love pizza,” he says. “They order them on their mobile phones.”

But here’s the point for Americans:

Mr. Doyle is unconditionally bullish on the U.S. economy. “The big story since the recession is that American households and businesses have become lean and efficient and have paid down debts. Consumers finally have money and they are starting to spend it,” he says.

Meanwhile, as the head of one of the nation’s biggest employers, Mr. Doyle sees the effects of what he calls a “tightening of the labor market” firsthand. “Frankly, right now, it’s getting harder and harder to hire. We have shortages of truck drivers and delivery people.”

Such real-world experience makes Domino’s a barometer of sorts. “My take is that the official statistics are underestimating the strength of the labor market. Look, it has been a long, slow recovery. We’re now six years into it and we’ve finally reached the point where there seems to be more demand for labor than there is trained supply.” For job seekers “that is great news, right?”

As for those who fret that only the rich are getting richer and upward mobility isn’t possible, Mr. Doyle says they should pay more attention to what happens at Domino’s. “Over 90% of our 900 franchisees started as an hourly worker in the store,” he says. “Most of them started as delivery drivers at minimum wage. They work their way up. They become a manager. Then they come in, they apply to buy a store.” So from earning $7 or $8 an hour, they now earn $80,000 to $100,000 by operating a franchise. Many have become millionaires. “This is absolutely a story of upward mobility in America.”

So if anyone tells you that jobs can’t be had, Domino’s is having trouble hiring.  And if someone tells you that you can’t achieve the American Dream, ignore them.  Start at the bottom of the ladder and climb to the top.  And don’t let naysayers discourage you.  The government may be an obstacle to economic growth, but so far it is not able to stifle American initiative.


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Estate taxes and you.

Have you reviewed your estate plans recently? If not, you may want to do so now. The reason is that there have been some big changes in the amount of money you can leave to your heirs free of estate taxes.

For the 2014 tax year, the estate tax exclusion amount is $5.34 million. It increases to $5.43 million for 2015.

That’s good news, right?  Maybe not.

There may be a problem if your estate plan was drafted in 2001 when the exemption was $675,000. Since then, the exemption has fluctuated wildly from 2001 though 2011. During this time, many people had wills and trusts drafted that would double the exemption by creating “family” trusts.

It’s possible that the formula for determining how much of the couple’s assets will go to the “family” trust will now cause all of the assets go into the trust rather than to the surviving spouse. This may not be the result that most people want.

For added information about estate planning, get a copy of our book “Before I Go” and the accompanying workbook.

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GE Retirees health insurance

GE is one of the companies that are working hard to reduce the amount it must spend on retiree health care. As people live longer, the cost of lifetime health care coverage for retired employees becomes a larger part of a company’s bottom line. GE recently offloaded the supplemental insurance coverage for salaried retirees to another company that specializes in employee benefits.

With that in mind, here is what a member of the GE employee family had to say about this. Even if you are not a GE retiree, the analysis is very worthwhile.  (edited)

When you turn 65, Medicare becomes your primary health insurance even (I think) if you are still working for GE, and definitely if you are retired from GE. … [But] one needs to sign up for Medicare within 3 months before or after their 65th birthday month, or face a lifetime late enrollment penalty.

You can either purchase a Medigap plan on the open market using to search the available plans, or you can use OneExchange the same way. Or, if you’re feeling lucky/healthy, one can just use the 80% coverage of Medicare Part B and go without a Medigap plan – after all, Medicare Part B pays 80% of Dr. visits…The Medigap plans basically cover the 20% of OV’s that Medicare doesn’t – plus a few other things, but that’s their primary role. A person could do a simple break-even analysis and figure out how many OV’s they would have to have in a year to equate to the premiums they will pay for a Medigap plan. A healthy person would actually be better off financially (in the short term anyway) without a Medigap plan, as most people are paying at least $100 per month per person for that coverage, I believe. Of course, it is insurance, so what you really hope for is that you pay the premiums and don’t need it, right?

Since you also would be losing your GE drug coverage, you very much would want to enroll in Medicare Part D, drug coverage, or you will be paying the retail price for drugs, without the coverage of the Part D plan, and also without the negotiated drug prices the insurance carriers receive – a bad proposition all around. If one’s prescription drug needs are modest, there are very low-cost plans available like Humana/Walmart, which provide good protection at very low cost. If one’s prescription drug needs are a little more exotic, then it would pay to explore which plan would be best, using the plan selector engine at or OneExchange. My experience using both plan selector engines was they came up with a very closely matching answer. In my case, even with one Tier 3 drug that costs $250 per month retail, Humana/Walmart was the least costly plan, but several others were very close.

Or, if this person was OK with using a managed care plan, there is also the option of going with a Medicare Advantage Plan, or a managed care plan, aka Medicare Part C. Those are the plans for which we get the flyers every Annual Enrollment period. I think generally these are very cost effective, often covering Medicare Parts A, B and D with a premium of zero dollars, but you have to be prepared for the restrictions on where you can go and who you can use, you generally need a visit with a Primary Care Physician (PCP) in the HMO before seeing a specialist, etc. My view on these plans is that you give up some choice and control in exchange for saving quite a bit of money on premiums. But watch out for the geographical and network restrictions.

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Apple Joins the Dow

From the Wall Street Journal


Apple will join the Dow Jones Industrial Average this month, a long-anticipated change that adds the world’s most-valuable company to the 119-year-old blue-chip index.

The move is the latest milestone for Apple, which has emerged in recent years as the standard-bearer for a resurgent U.S. technology sector. The Cupertino, Calif., company in January reported latest-quarter net income of $18 billion, the largest quarterly profit on record, fueled by roaring sales of iPhones.

Apple will replace telecommunication giant AT&T, according to S&P Dow Jones Indices, the unit of McGraw Hill Financial Inc. that owns the Dow.

This will affect the Dog of The Dow since AT&T is currently the highest yielding DJIA stock.

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How safe is your long-term-care policy?

A guarantee is only as good as the people who stand behind the product. It turns out that when long term care policies were introduced, insurers misjudged a number of issues.

Executives misjudged everything from how much elder care would cost to how long people would live. Result: these policies are costing insurers billions.

Today those problems are a financial headache for insurers who are losing billions. Tomorrow they could be a problem for the insured. Long-term care Insurance premiums are already rising steeply and several insurers including MetLife Inc. and Prudential Financial Inc. are no longer offering new policies.

“I was mad as hell,” says Arthur Mueller, an 83-year-old former real estate executive who lives in Dallas. Over the past 15 years, his annual Genworth premium has roughly doubled to $6,879.

As the cost of insurance has risen, the number of people buying these policies has decreased. Price is one reason. If long-term care insurance is relatively cheap, people will pay for it. As it becomes more expensive, they will explore other options for the elderly. Family members are going back to providing care and government programs cover much of the rest.

Meanwhile, seniors who have long-term care policies generally continue to pay the premiums, having invested years in these policies and hope that the coverage will be there when they need it.

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