Tag Archives: Insurance

Financial Planning in the Shadow of Dementia

Alzheimer’s, the most common form of dementia, is an epidemic. More than 5 million Americans are living with Alzheimer’s. It’s irreversible and fatal although some may linger for up to 20 years. And the number is expected to soar.

The Alzheimer’s Association has created a list of the 10 warning signs. These range from memory loss, through confusion to severe mood changes.

Because of the widespread nature of this disease, for people with Alzheimer’s and their families there are a number of things that should be done. Plans should be in place well before the onset of the symptoms.

• Review your insurance policies, especially your Long Term Care policies.
• Talk with your family and your financial advisor to make your wishes known.
• Review your wills and trusts.
• Appoint an advocate who has the legal authority to act on your behalf.
• Make sure you have provided for an appropriate Power of Attorney.

Research shows that declining financial skills is one of the first symptoms of the early stages of Alzheimer’s. This includes anything from difficulty in balancing a checkbook to being victimized by criminals who prey on the elderly. This usually leaves family members to take responsibility for the individual’s finances.

In some cases, people assume these responsibilities without having experience handling money or dealing with financial issues. This is the time to bring in a trusted financial advisor. We can provide practical guidance on both day-to-day and long-term financial decisions.

For a report on this subject, contact Korving & Company – the Financial Planning and Investment Management experts.

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Preparing for the unexpected.

What happens if you have to live on less income because you lost your job or your spouse died? The economy has not been kind to many people and job loss can happen before we’re ready to retire. That’s when a financial advisor can help.

It can be tough to find a good paying job if you’re within a decade of retirement age.  Companies are reluctant to hire you.  You may be wondering what you should do when you realize that the best path is early retirement. Where can you cut back? How should your money be invested for an extra-long retirement? These are all questions that you should not tackle on your own because the wrong decision at this age can haunt you a few years down the road.

If the major breadwinner in your family dies how will the survivor cope? One 61-year-old woman left work to care for her dying husband. After his death she could not return to work but had a lot of decisions to make. Decisions about social security, insurance, where to cut back (fewer trips, sell the motorcycle and the RV), as well as decisions about her investments.

Each case is unique, but a financial advisor should be more than a money manager. He should advise his clients about all aspects of their lives that impact their financial well-being. Ideally you will have developed a good relationship with a financial advisor before an unfortunate event occurs. But if you have not, this is definitely the time to find one.


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Discussing the Inevitable With Retired Clients

The headline in a recent issue of Financial Planning addressed the issues that we face as we get older.

The typical 65 year-old will live another 19.2 years on average.  During that time they may be faced with increased expenses that could include a nursing home. Which is why many people buy long-term-care insurance.  But many of these policies were issued before the insurance companies had adequate data on the cost of care and the length of time people would live in nursing homes.  Many companies have dropped out of the market and others are increasing their premiums.  Consult with your investment advisor on whether and how you should insure.

But there is no question that whatever the journey our lives take, at some point it comes to an end.  At that point, those left behind have to take care of things, and they often wish they better information.  Which is why I strongly recommend that everyone should learn the most common things that are overlooked when planning for that moment.  It’s all found in “Before I Go.” 

Get a copy today.

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Do retirees need life insurance?

People who have been paying life insurance premiums for many years are reluctant to stop.  But often the need for a death benefit is gone once the kids are grown and there is enough money for the couple to live comfortably for the rest of their lives.

Keep in mind that the reason for purchasing life insurance in the first place is to protect the bread-winner and make it possible for the surviving spouse to put the kids through college. Since these factors are no longer in play once they retire, we have to ask out clients to reconsider whether the additional expense is still warranted.  This is especially true if the insurance is a term policy which often gets more expensive a people age.

Canceling one’s coverage shouldn’t be a casual decision. In some instances, clients have already paid a great deal of money into these policies, and given their advanced years will never be able to obtain another one for the same rate. So before dropping the coverage, people should think long and hard about any possible implications.

In any case, if you have life insurance policies it’s wise to review them on a regular basis, make sure that the beneficiaries are the ones you want to receive the proceeds and check the tax implications of policies outside of irrevocable life insurance trusts.

If you have questions, ask your financial advisor.

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Learning From Gandolfini’s Estate Plan ‘Disaster’

An article in Private Wealth calls James Gandolfini’s estate plan a disaster.

Tony Soprano may have been an expert at hiding his money from the feds, but actor James Gandolfini, the recently deceased actor who portrayed the fictional New Jersey mob boss on TV, apparently was not.

Moreover, advisors say that wealthy families can take some lessons from the mistakes the award-winning actor made in mapping out his estate plan.

Federal and state tax collectors will take more than $30 million of Gandolfini’s estimated $70 million estate, according to published reports. Gandolfini, who starred in the acclaimed HBO series The Sopranos from 1999 to 2007, died of a heart attack while vacationing in Rome last month at age 51. Estate attorney William Zabel, who reviewed Gandolfini’s will for the New York Daily News, called it “a disaster.”

People rarely plan well for their death.  That’s one of the reasons I wrote BEFORE I GO, to help people plan for the one thing that we can guarantee will happen to us all. 

The reason is psychological.  Planning for death forces us to realize that we are mortal and the end comes for all of us.  In addition, Gandolfini died in the prime of his life, illustrating perfectly that the assumption that we’re going to live to a ripe old age is not well founded.  We can be struck down by a heart attack, a bus, or some fatal disease.  That’s why once we have accumulated a modicum of wealth, we need to meet with a financial planner, an estate planner and a tax expert.  We should also be prepared to involve insurance professionals. 

If 29-year-old Mark Zuckerberg doesn’t have a platoon of professionals looking into these issues, he’s making a big mistake.  His wealth just increased by $3.8 billion … today.



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Small business owners neglect retirement savings

Money Watch has an article that reviews one of the biggest financial mistakes made by business owners: failure to put money aside outside of their business.  Business owners seem to view their business not only as the source of their current income but also the source of their retirement income, and that is frequently a costly mistake.

For many small business owners, the golden years aren’t looking so shiny. Many have devoted so much time and money to their businesses that they have failed to plan for retirement. Catch-up plans for these owners usually consist of aggressively putting money aside, or taking another big risk: planning to sell their companies one day to fund their retirement.

[Kari Warberg] Block, 50, who has owned four companies over the years, didn’t start saving for retirement until she was unable to get a loan for Earth-Kind in 2003, three years after she started the company, based in Bismarck, N.D. Her bank asked for a statement showing her personal financial holdings, including savings and investments. She had only an annuity she had purchased when she was 18, and a family inheritance. She had never taken money for her retirement out of the companies she had previously owned, which included bookkeeping and delivery services.

“I looked at the personal finance statement and realized there’s nothing here,” Block says. Bankers want to see an owner’s personal finances because they believe that people who handle their savings and investments well will also do a good job running their companies and be a good credit risk.

 60% of small business owners surveyed by American Express say they are not prepared financially for retirement and 73% said they’re worried about their ability to save for the lifestyle they want in retirement.

Of course a financial downturn, competition or changes in demand can all work to make it impossible for owners to save or even maintain their business.  The recent economic downturn has forced many business owners to use personal assets to keep their companies running.  Some have cut or even eliminated their own salaries to keep their companies afloat.  A survey of small business owners by Pepperdine University and Dun & Bradstreet Credibility Corp. found that 42 percent had used personal assets to fund their companies in the first quarter of the year and nearly 80 percent of those owners dipped into their savings or investments. A year earlier, 46 percent used personal assets, and 68 percent turned to savings and investments.

Businesses in the housing and construction industry were particularly hard-hit.  In some cases a business that may have been valued at millions during the housing boom is worthless.   The owner, unless he has created a nest-egg outside of his business, is penniless.  Most business owners don’t recognize the risk they are taking or are too busy running tier business to prepare their personal financial safety net.  That’s where a good independent RIA (registered Investment Advisor) able to create a comprehensive investment, tax, insurance and estate plan can be worth his weight in gold.

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Trouble for Insurers

Misjudged Annuity Guarantees May Cost Life Insurers Billions was the headline in the Wall Street Journal.

Life insurers in the U.S. face charges against earnings potentially totaling billions of dollars from miscalculations about the number of customers who would exercise lifetime-income guarantees sold with the retirement products known as variable annuities, according to a new report from Moody’s Investors Service.

Variable annuities are a tax-advantaged way to invest in stock and bond funds, and these particular guarantees promise steady payouts if owners’ fund accounts become depleted.

What the article points out is that insurance companies misjudged the lapse rate (the rate at which customers would drop policies) of variable annuities that came with income guarantees that would continue even if the value of the assets in the contract dropped to zero.  Investors with these policies should check with their insurance company to make sure that they retain their guaranteed income benefits.


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Review Your Beneficiary Designations

From the law firm of Williams, Mullen.

The Supreme Court has ruled that if a former spouse is the named beneficiary of life insurance benefits under FEGLIA, the former spouse receives the proceeds.  Hillman v. Maretta, No. 11-1221 (June 3, 2013).  The Supreme Court held that FEGLIA (the Federal Employees’ Group Life Insurance Act of 1954) preempts Virginia Code Ann. § 20-111.1(A) and (D).  The Virginia statute was written to automatically revoke a beneficiary designation in any contract that provides a death benefit to a former spouse where there was a change in decedent’s marital status.  The statute also provided a separate cause of action against a former spouse if the former spouse received the proceeds as a named beneficiary.  Following the Hillman ruling, the Virginia statute will not operate to revoke or otherwise change a beneficiary designation under FEGLIA.


Cheapest Car to Insure

From March 2013 Financial Planning magazine.

Insure.com has released its annual ranking of the most and least expensive vehicles to insure. The least expensive 2013 vehicle to insure is the 4-cylinder Ford Edge SE, with an average annual premium of $1,128. Next best are the 6-cylinder Jeep Grand Cherokee Laredo ($1,148 per year) and the 4-cylinder Subaru Outback 2.5i premium ($1,150 per year).

Mercedes-Benz makes over half of the most costly cars to insure, beating other luxury car makers such as Porsche, Jaguar or BMW.


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The Cost of Getting Older

Maureen E. Hook at the Hook Law Center has a good article on Long Term Care insurance.

There is a definite appeal about long-term care insurance, especially since Medicare does not pay for things like extended stays in nursing homes or assisted living facilities. It only pays for skilled nursing care. Medicare also does not pay for in-home care like personal assistants who assist with dressing or cooking. The downside is that premiums can be extremely high, and everyone may not need that level of care. There are a few lucky ones who escape lengthy long-term illnesses.

Read the whole thing. 

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